DCIT, New Delhi V. PTC India Financial Services Ltd, New Delhi

ITA 1267/DEL/2015

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2955 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 04-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Depreciation; Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 192; 32

Judgement Text

1 ITA NO. 1267/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO.1267/DEL/2015 (A.Y 2010-11) (THROUGH VIDEO CON FERENCING) DCIT CIRCLE-19(2), NEW DELHI (APPELLANT) VS PTC INDIA FINANCIAL SERVICES LTD.2 ND FLOOR, NBCC TOWER, 15 BHIKAJI CAMA PLACE NEW DELHI AAECP0501C (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST ORDER D ATED 29/12/2014 PASSED BY CIT(A)-7, NEW DELHI FOR ASSESSMENT YEAR 2 010-11. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF RS. 4,24,88,156/- MADE BY THE A.O U/S 14A IN ACCORDANCE WITH RULE 8D OF THE INCOME TAX RULE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF RS. 17,39,69,513/- MAD E BY AO BY DISALLOWING DEPRECIATION CLAIMED ON WIND MILLS BY ADMITTING FR ESH EVIDENCE IN VIOLATION OF RULE 46(3) OF THE IT RULES. APPELLANT BY SMT. SUSHMA SINGH, CIT(DR) RESPONDENT BY SH. SALIL KAPOOR, ADV AND SH. SUMIT LAL CHANDANI, ADV DATE OF HEARING 21.01.2021 DATE OF PRONOUNCEMENT 19 .02.2021 2 ITA NO. 1267/DEL/2015 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 27,83,426/- MADE U/ S 36(1) (III) BY HOLDING THAT THE APPELLANT HAD BORROWED FUNDS WHICH WAS USED FOR BUSINESS PURPOSES AND WAS PAYING INTEREST ON THESE FUNDS. 3. THE ASSESSEE COMPANY IS A LISTED PUBLIC COMPANY INC ORPORATED UNDER THE COMPANIES ACT, 1956 AND IS REGISTERED WITH THE RESERVE BANK OF INDIA (RBI) AS A NON BANKING FINANCIAL COMPANY (NBFC) . THE ASSESSEE COMPANY IS PROMOTED BY PTC INDIA LIMITED AND CURRENTLY, 60% OF THE SHARE CAPITAL OF THE ASSESSEE COMPANY IS HELD BY PTC INDIA LIMITED. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MAKING PRINCIPAL INVESTM ENTS IN, AND PROVIDING FINANCING SOLUTIONS FOR, COMPANIES WITH PROJECTS AC ROSS THE ENERGY VALUE CHAIN. DURING THE PREVIOUS YEAR RELEVANT TO THE AS SESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY FILED ITS RETU RN OF INCOME ON 15 OCTOBER 2010. THE ASSESSEE COMPANY HAD DECLARED A TOTAL INC OME OF RS.14,48,95,236 UNDER NORMAL PROVISION OF THE ACT AND BOOK PROFIT O F RS. 32,21,91,829 IN THE RETURN OF INCOME. THE CASE WAS SELECTED FOR SCRUTIN Y ASSESSMENT AND THEREAFTER THE ASSESSING OFFICER VIDE ASSESSMENT OR DER DATED 12 TH MARCH 2013, ISSUED UNDER SECTION 143(3) OF THE ACT, ASSE SSED THE TOTAL INCOME AT RS. 39,26,69,458 BY MAKING FOLLOWING ADDITIONS/DISA LLOWANCES: S. NO. PARTICULARS OF ADDITION/DISALLOWANCE AMOUNT (RS.) 1 ADDITIONAL DISALLOWANCE U/S 14A OF THE ACT 47,488,156 2 DISALLOWANCE U/S 32 OF THE ACT. 193,969,533/ - 3 DISALLOWANCE U/S 35 D OF THE ACT. 3,533,107/ - 4 DISALLOWANCE U/S 36(1) (III) OF THE ACT. 2,783,426/ - 247,774,222/- 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE A SSESSEE ON THE LEGAL ISSUE AS WELL AS ON THE MERITS. 3 ITA NO. 1267/DEL/2015 5. THE LD. DR SUBMITTED THAT SECTION 14A OF THE ACT WAS INSERTED INTO THE INCOME TAX ACT, 1961 VIDE FINANCE ACT, 2001 WITH RE TROSPECTIVE APPLICATION FROM 1/4/1962. IT PROVIDES FOR DISALLOWANCE OF EXP ENDITURE IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME. OVER A PERI OD OF TIME VARIOUS HIGH COURTS AND THE HONBLE APEX COURTS HAVE DECIDED THI S ISSUE. THE LD. DR RELIED UPON THE CIRCULAR NO. 5 OF 2014 DATED 11 TH FEBRUARY, 2014 ISSUED BY CBDT. THE LD. DR FURTHER SUBMITTED THAT THE MAIN PURPOSE FOR WHICH THE INVESTMENT INTO SHARES IS MADE BY THE ASSESSEE MAY NOT BE RELA TING AS SECTION 14A APPLIES IRRESPECTIVE OF WHETHER SHARE ARE HELD TO GAIN CONT ROL OR AS STOCK-IN-TRADE. EXPENDITURE WHICH IS IN RELATION TO EARNING DIVIDEN DS CAN BE DISALLOWED U/S 14A AND RULE 8D AS HELD IN APEX COURTS DECISION IN CASE OF MAXOPP INVESTMENT LTD. (2018) 91 TAXMAN.COM 154 ORDER DATE D 12/2/2018. THE LD. DR FURTHER SUBMITTED THAT RULE 8 IS PROSPECTIVE IN NATURE AND COULD NOT HAVE BEEN MADE APPLICABLE IN RESPECT OF ASSESSMENT YEAR S 2007 WHEN THIS RULE WAS INSERTED. THE LD. DR HAS GIVEN A WRITTEN SUBMISSI ON THEREBY GIVING THE VARIOUS ASPECT OF SECTION 14A AND THE VARIOUS DECIS IONS SUCH AS:- CIT V. WALFORT SHARE & STOCK BROKERS (P.) LTD. [201 0] 192 TAXMAN 211/326 ITR 1 (SC), CIT V. WALFORT SHARE & STOCK BROKERS (P.) LTD. (SUP RA) STANDS FOLLOWED IN GODREJ & BOYCE MFG. CO. LTD. V. DY. CIT [2017] 81 T AXMANN.COM 111 (SC) CIT V. RAJENDRA PRASAD MOODY [1978] 115 ITR 519 (SC ). MAXOPP INVESTMENT LTD. REPORTED IN [2018] 91 TAXMAN N.COM 154 HELD VIDE ORDER DATED 12.02.2018 HONBLE SUPREME COURT INDIABULLS FINANCIAL SERVICES LTD. VS DCIT [2016] 76 TAXMANN.COM 268 (DELHI) PUNJAB TRACTORS LTD VS CIT [2017-TIOL-353-HC-P&H-IT] 6. AS REGARDS GROUND NO. 2, THE LD. DR SUBMITTED TH AT THE CIT(A) ERRED IN DELETING THE ADDITION IN RESPECT OF DISALLOWANCE OF DEPRECIATION CLAIMED A WIND 4 ITA NO. 1267/DEL/2015 MILLS BY ADMITTING FRESH EVIDENCE IN VIOLATION OF R ULES 46(3) OF THE INCOME TAX RULES. 7. AS REGARDS GROUND NO. 3, THE LD. DR SUBMITTED TH AT THE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 27,83,426/- MADE U/S 3 6(1)(3) BY HOLDING THAT THE ASSESSEE HAD BORROWED FUNDS WHICH WAS USED FOR BUSI NESS PURPOSES AND WAS PAYING INTEREST ON THESE FUNDS. 6. THE LD. AR IN ALL THE GROUNDS WHICH WERE CONTEST ED BY THE DEPARTMENT RELIED UPON THE FINDINGS OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. AS REGARDS GROUND NO. 1 OF THE REVENUES A PPEAL, THE ASSESSEE MADE A SUO MOTO DISALLOWANCE OF RS. 16,05,000/-. THE INVES TMENTS WERE OUT OF ASSESSEES OWN FUNDS AND NO BORROWED FUNDS WERE USE D TO ACQUIRE INVESTMENTS. THERE WAS NO INTEREST EXPENDITURE WHIC H COULD BE DIRECTLY OR INDIRECTLY ATTRIBUTABLE TO THE EXEMPT INCOME. THE C IT(A) FURTHER OBSERVED THAT THE INVESTMENTS WERE STRATEGIC INVESTMENT AS PER TH E ASSESSEE AND THE SAME SHOULD BE EXCLUDED FOR CALCULATING DISALLOWANCE UND ER RULE 8D. AS PER RULE 8D(2)(I), THE ASSESSEE MADE DISALLOWANCE OF RS. 16, 05,000/- UNDER THE HEAD STRATEGIC INVESTMENT AND HAS TAKEN 20% OF EMPLOYEE COST AND 5% OF ADMINISTRATIVE COST. THUS, THE FINDINGS GIVEN BY TH E CIT (A) IS JUST AND PROPER. THEREFORE, GROUND NO. 1 IS DISMISSED. AS REGARDS G ROUND NO. 2, THE DETAILS WERE SUBMITTED BY THE ASSESSEE DURING THE ASSESSMEN T PROCEEDINGS AS PER THE REPLY/SUBMISSIONS DATED 11.12.2012 WHICH IS MENTIO NED ON PAGE 1 OF THE ASSESSMENT ORDER ITSELF. THERE WAS NO NEW EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE AND AFTER THE VERIFICATION OF THE EVIDENCE THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. IN FACT, THE ASSESSING OFFICER HAS T OTALLY IGNORED THE REPLY DATED 11.12.2012 SUBMITTED BY THE ASSESSEE. THUS, CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE ASSETS WERE OWNED BY THE ASSESSEE AND WERE PUT TO USE FOR THE PURPOSES OF ITS BUSINESS DURING THE YEAR. HENCE, TH ERE IS NO NEED TO INTERFERE 5 ITA NO. 1267/DEL/2015 WITH THE DETAILED FINDINGS OF THE CIT(A). HENCE, G ROUND NO. 2 IS DISMISSED. AS REGARDS GROUND NO.3, THE ASSESSEE HAD BORROWED FUND S WHICH WAS USED FOR BUSINESS PURPOSES AND WAS PAYING INTEREST ON THESE FUNDS AND THIS FACT WAS NOT CONTROVERTED THROUGH ANY OF THE DOCUMENTS ON TH E RECORD BY THE ASSESSING OFFICER AS WELL AS BY THE REVENUE AT THE TIME OF HE ARING BEFORE US. HENCE, THE FINDINGS GIVEN BY THE CIT(A) IS PROPER AND THERE I S NO NEED TO INTERFERE WITH THE FINDINGS OF THE CIT(A). GROUND NO. 3 IS DISMISSED. 8. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19TH D AY OF FEBRUARY, 2021 SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 19/02/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NO. 1267/DEL/2015