ACIT, New Delhi V. M/s. International Hospital Ltd., New Delhi

ITA 1359/DEL/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1909 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 06-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSHMA SINGH
• Assessee Lawyers: R M MEHTA
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI C BEN CH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI KULDIP SINGH, JUDICIAL MEM BER ITA NO. 1359/DEL/2017 [A.Y 2011-12] THE A.C.I.T VS. M/S INTERNATIONAL HOSPITAL LTD CIRCLE 12(2) C/O ESCORTS HEART INSTITUTE & NEW DELHI RESEARCH CENTRE, OKHLA ROAD NEW DELHI PAN: AAACI 9712 A (APPLICANT) ( RESPONDENT) ASSESSEE BY : SHRI R.M.MEHT A, CA DEPARTMENT BY : MS. SUSHMA SINGH, SR. DR DATE OF HEARING : 09.12.2019 DATE OF PRONOUNCEMENT : 10.12.2019 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] - 19, NEW DELH I DATED 13.12.2016 PERTAINING TO ASSESSMENT YEAR 2011-12. 2 2. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT TH E LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 13,65,85,862/- MADE U/S 14A OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'T HE ACT' FOR SHORT] READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY OPERATES IN HOSPITAL AND HEALTH CARE INDUST RY AND IS ENGAGED IN THE BUSINESS OF RUNNING A MULTI-SPECIALITY HOSPI TAL UNDER THE BRAND NAME OF FORTIS HOSPITAL. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEED INGS, THE ASSESSEE WAS ASKED TO GIVE CALCULATION OF DISALLOWA NCE U/S 14A OF THE ACT R.W.R 8D OF THE RULES. IN ITS REPLY, THE ASSES SEE EMPHATICALLY STATED THAT NO DIVIDEND INCOME HAS BEEN EARNED, THE REFORE, DISALLOWANCE U/S 14A OF THE ACT WAS MADE. 5. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THI S REPLY OF THE ASSESSEE AND WAS OF THE FIRM BELIEF THAT THE PROVIS IONS OF SECTION 14A OF THE ACT R.W.R. 8D OF THE RULES SQUARELY APPLY ON THE FACTS OF THE CASE. 3 6. DRAWING SUPPORT FROM THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S CHEMINVEST LTD 317 ITR 86 [AT], THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE AND MAD E ADDITION OF RS. 13,65,85,862/-. 7. THE ASSESSEE AGITATED THE MATTER BEFORE THE LD. CIT(A) AND VEHEMENTLY CONTENDED THAT SINCE THERE WAS NO EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR, THERE IS NO QUESTI ON OF ANY DISALLOWANCE U/S 14A OF THE ACT. 8. AFTER CONSIDERING THE FACTS AND SUBMISSIONS, THE LD. CIT(A) DELETED THE ADDITION OBSERVING THAT THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF CHEMINVEST LTD [SUPR A] HAS BEEN REVERSED BY THE HON'BLE HIGH COURT OF DELHI IN 61 T AXMANN 118 AND FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT, T HE LD. CIT(A) DELETED THE DISALLOWANCE. 9. BEFORE US, THE LD. DR STRONGLY SUPPORTED THE FI NDINGS OF THE ASSESSING OFFICER AND PLACED RELIANCE ON THE DECISI ON OF THE HON'BLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD 402 ITR 640. 4 10. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE RE ITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 11. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT DURI NG THE YEAR UNDER CONSIDERATION, NO EXEMPT INCOME WAS EARNED BY THE A SSESSEE. IT IS EQUALLY TRUE THAT THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF CHEMINVEST LTD [SUPRA] HAS BEEN REVERSE D BY THE HON'BLE HIGH COURT OF DELHI [SUPRA] WHEREIN THE HON'BLE HIG H COURT HAS HELD THAT THE EXPRESSION DOES NOT FORM PART OF TOTAL IN COME IN SECTION 14A OF THE ACT ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWANCE OF ANY EXPENDI TURE INCURRED IN RELATION TO THE SAID INCOME. 12. IN OTHER WORDS THE HON'BLE HIGH COURT HELD THAT SECTION 14A OF THE ACT WILL NOT APPLY IF NO EXEMPT INCOME IS RECEI VED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. SIMILAR VIEW HA S BEEN TAKEN BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CORRTECH ENERGY (P) LTD 372 ITR 97. 5 13. THE DECISION OF THE HON'BLE SUPREME COURT IN TH E CASE OF MAXOPP INVESTMENT LTD [SUPRA] HAS NOT CONSIDERED WHETHER T HERE CAN BE ANY DISALLOWANCE IF NO EXEMPT INCOME IS EARNED. THEREF ORE, THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD WOULD DO NO GOOD TO THE REVENUE. 14. RESPECTFULLY FOLLOWING THE DECISION OF THE HON 'BLE HIGH COURT OF DELHI, WE DECLINE TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 15. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 1359/DEL/2017 IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10.12. 2019. SD/- SD/- [ SHRI KULDIP SINGH ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 10 TH DECEMBER, 2019 VL/ 6 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER