JINDAL DYECHEM INDUSTRIES PVT. LTD., NEW DELHI V. DCIT, CIRCLE- 13(2), NEW DELHI

ITA 1225/DEL/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2787 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 21-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAILESH KUMAR
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DLEHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.1225/DEL/2018 ASSESSMENT YEAR: 2014-15 JINDAL DYECHEM INDUSTRIES PVT. LTD. VS. DCIT, CIRCL E 13(2), 110, JINDALS, BABAR ROAD, NEW DELHI. NEW DELHI PAN :AAACJ0719Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MADHUR AGGARWAL, ADV. RESPONDENT BY: SH. SHAILESH KUMAR, SR. DR DATE OF HEARING: 25.02.2021 DATE OF ORDER : 25.02.2021 ORDER PER K. NARASIMHA CHARY, J.M. CHALLENGING THE ORDER DATED 25.01.2018 PASSED BY TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-5, NEW DELHI ( THE LD. CIT(A), FOR THE ASSESSMENT YEAR 2014-15, JINDAL DYECHEM INDUSTR IES PVT. LTD., PREFERRED THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING OF BULLION & OTHER COMMO DITIES, TOYS AND STATIONERY ITEMS, MANUFACTURING OF MEDALLION AND WI ND MILL. FOR THE ASSESSMENT YEAR 2014-15, THE ASSESSEE FILED ITS RET URN OF INCOME ON 20.11.2014 DECLARING LOSS OF RS.7,85,86,265/- UNDER NORMAL PROVISIONS OF 2 THE INCOME-TAX ACT (THE ACT FOR SHORT) AND A LOSS OF RS.8,30,01,461/- AS BOOK LOSS. WHILE PASSING THE ORDER DATED 29.12.2016 U/S. 143(3) OF THE ACT, ASSESSING OFFICER MADE AN ADDITION OF RS.4,89, 380/- BY MAKING DISALLOWANCE U/S. 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES. 3. AGGRIEVED BY SUCH AN ADDITION, THE ASSESSEE PREF ERRED APPEAL BEFORE THE CIT(A) AND ARGUED THAT THE REQUISITE DIS SATISFACTION AS TO THE CLAIM MADE BY THE ASSESSEE WAS NOT RECORDED BY THE ASSESSING OFFICER AND THEREFORE, THE ADDITION IS BAD UNDER LAW. LEARN ED CIT(A) RECORDED THAT THE SATISFACTION RECORDED BY THE ASSESSING OFF ICER, THOUGH NOT VERY ELABORATE, IS SUFFICIENT TO INVOKE RULE 8D. LEARNED CIT(A), THEREFORE, DISMISSED THE APPEAL OF THE ASSESSEE. 4. WHILE REFERRING TO THE IMPUGNED ASSESSMENTORDER, IT IS ARGUED BY THE LD. AR THAT BY LOOKING AT THE EXEMPT INCOME, TH E ASSESSING OFFICER STRAIGHTWAY PROCEEDED TO SEEK EXPLANATION OF THE AS SESSEE AS TO WHY DISALLOWANCE U/S. 14A READ WITH RULE 8D SHOULD NOT BE MADE IN RESPECT OF INVESTMENTS WITHOUT HIS RECORDING THAT THE EXPLANAT ION OF THE ASSESSEE WAS NOT SATISFACTORY IN RESPECT OF EXPENSES TO EARN EXEMPT INCOME. HE PLACED RELIANCE ON THE DECISION IN THE CASE OFGODRE J & BOYCE MANUFACTURING COMPANY LTD. V. DCIT [2017] 394 ITR 4 495 AND MAXOPP INVESTMENT LTD. V. CIT [2018] 402 ITR 640. 5. PER CONTRA, IT IS THE SUBMISSION OF THE LD. DR THAT THE VERY ACT OF THE ASSESSING OFFICER SEEKING EXPLANATION OF THE AS SESSEE AS TO WHY THE DISALLOWANCE U/S. 14A READ WITH RULE 8D SHOULD NOT BE MADE, ITSELF SHOWS THAT THE ASSESSING OFFICER FORMED THE REQUISITE SAT ISFACTION AND THEREFORE, 3 THE ASSESSEE CANNOT CONTEND THAT THERE WAS NO SATIS FACTION FORMED BY THE LD. ASSESSING OFFICER. 6. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF SUBMISSIONS MADE ON EITHER SIDE. IN THE ASSESSMENT ORDER, LD. ASSESS ING OFFICER RECORDED THAT THE ASSESSEE FURNISHED ALL THE REQUISITE INFOR MATION/DETAILS INCLUDING THE BOOKS OF ACCOUNT. BUT THE ASSESSMENT ORDER DOES NOT POINT OUT SPECIFICALLY AS TO WHY, HAVING REGARD TO THE BOOKS OF ASSESSEE, THE EXPLANATION OF THE ASSESSEE CANNOT BE ACCEPTED. ASS ESSMENT ORDER REFERS TO THE EXPLANATION OF THE ASSESSEE THAT THE ASSESSE E COMPANY EARNED DIVIDEND INCOME OF RS.8,47,139/- ON SHARES DURING T HE YEAR UNDER CONSIDERATION AND IN RELATION TO SUCH EARNINGS, THE Y HAVE NOT INCURRED ANY EXPENDITURE. 7. LAW THIS ASPECT IS NO LONGER RES INTEGRA AND HAS BEEN SETTLED BY THE HONBLE JURISDICTIONAL HIGH COURT AND ALSO THE HONBLE APEX COURT. IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LT D. V. DEPUTY COMMISSIONER OF INCOME-TAX [2017] 394 ITR 449, ANAL YZING THE CURRENT PROVISIONS OF SECTION 14A AND THE EARLIER PREVAILIN G PROVISIONS OF THIS SECTION, HONBLE APEX COURT OBSERVED THAT THE LANGU AGE OF SECTION 14A(2) MAKES IT CLEAR THAT BEFORE APPLYING THE THEORY OF A PPORTIONMENT, LEARNED ASSESSING OFFICER NEEDS TO RECORD ITS SATISFACTION THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, THE STATEMENT OF THE ASSE SSEE THAT NO EXPENSES WERE INCURRED TO EARN THE EXEMPT INCOME WAS NOT COR RECT. SIMILAR WAS THE VIEW TAKEN BY THE HONBLE APEX COURT IN THE CAS E OF IN THE CASE OF MAXOPP INVESTMENT LTD. V. COMMISSIONER OF INCOME TA X [2018] 402 ITR 640. IT WAS HELD THAT THE SUB-SECTIONS (2) AND (3) OF SECTION 14A READ 4 WITH RULE 8D OF THE RULES DEAL WITH THE PRESCRIPTIO N OF FORMULA FOR DETERMINATION OF EXPENDITURE INCURRED IN RELATION T O INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT, IN A SITUATION WHERE LEARNED ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM OF ASSESSEE; THAT THE LEARNED ASSESSING OFFICER, BASING ON THE RECORD AVAILABLE BEFORE HIM, HAD TO SATISFIED HIMSELF THAT THE DETERMINATION OF DISALLOWANCE HAS TO BE MADE ON APPLICATION OF FORMULA PRESCRIBED UNDER RUL E 8D; THAT WHAT ALL THE LAW REQUIRES IS THE SATISFACTION OF THE LEARNED ASSESSING OFFICER THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IT I S NOT POSSIBLE TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. IT WAS CONCLUDED THAT IT IS ONLY SUBSEQUENT THERETO THE PROVISIONS OF SECTION 14A(2) AND (3) READ WITH RULE 8D OF THE RULES OR A BEST JUDGMENT DETERMINATION, AS EARLIER PREVAILIN G, WOULD BECOME APPLICABLE. 8. IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX V. VEDANTA LTD. [2019] 102 TAXMANN.COM 95, WHILE REFERRING TO THE DECISION OF APEX COURT IN GODREJ & BOYCE MANUFACTURING COMPANY LTD. (SUPRA), THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT RULE 8D CANNOT BE INVOKED AND APPLIED UNLESS THE LEARNED ASSESSING OFFICER RECORD S HIS DISSATISFACTION REGARDING THE CORRECTNESS OF CLAIM MADE BY ASSESSEE IN RELATION TO EXPENDITURE INCURRED TO EARN EXEMPT INCOME. 9. IN THE CIRCUMSTANCES, WE ARE OF THE CONSIDERED O PINION THAT WITHOUT RECORDING DISSATISFACTION WITH REFERENCE TO THE BOOKS OF ASSESSEE, THE ADDITION CANNOT BEMADE. HENCE, THE AUTHORITIES BELOW ARE DIRECTED TO DELETE THE ADDITION. 5 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT IMMEDIATELY ON C ONCLUSION OF THE HEARING OVER VIRTUAL MODE ON THIS THE 25 TH DAY OF FEBRUARY, 2021. SD/- SD/- (R.K. PANDA) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25/02/2021 AKS