DCIT, New Delhi V. M/s. Hero Fincorp Ltd., New Delhi

ITA 1374/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3647 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 11-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SH.G.D.AGRAWAL, HONBLE PRESIDENT AND SH.K.N.CHARY, JUDICIAL MEMBER ITA NO. 1374/DEL/2016 (ASSESSMENT YEAR: 2012 -13) ORDER PER K.N.CHARY, JUDICIAL MEMBER AGGRIEVED BY THE ORDER DATED 01.12.2015 IN APPEAL NO.208/15-16 PASSE D BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) [IN SHORT CIT(A)]-16, NEW DELHI FOR THE AY 2012-13, THE REVENUE FILED THIS APPEAL O N THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHE R LD.CIT(A) WAS CORRECT IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE U/S 14A. 2. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 2. RELEVANT FACTS FOR THE DISPOSAL OF THIS APPEAL A RE THAT THE ASSESSEE DERIVES INCOME FROM THE BUSINESS OF LEASING, FINANCING AND BILL DISCOUNTING. FOR THE AY 2012-13, THEY HAVE FILED RETURN OF INCOME ON 28.09. 2012 DECLARING A TOTAL INCOME OF RS.22,04,49,080/- AND DURING THE SCRUTINY PROCEE DINGS, THE AO FOUND THAT THE ASSESSEE INVESTED A SUM OF RS.4,55,41,000/- TO EARN A DIVIDEND INCOME OF DC I T, CIRCLE-11(1), NEW DELHI. VS HERO FINCORP LTD. 34, COMMUNITY CENTRE, BASANT LOK, VASANT VIHAR, NEW DELHI-110057. PAN-AAACH0157J (APPELLANT) (RESPONDENT) APPELLANT BY SH. GAURAV JAIN, ADV. & MS. DEEPIKA AGRAWAL, CA RESPONDENT BY SH. AMIT JAIN, SR.DR DATE OF HEARING 14 . 11 .2017 DATE OF PRONOUNCEMENT 16 . 11 .2017 ITA NO. 1374/DEL/2016 2 RS.91,350/- AND THE ACCOUNTS OF THE ASSESSEE REVEAL ED THAT THE ASSESSEE PAID INTEREST OF RS.24,06,37,000/-. IN THESE CIRCUMSTAN CES, BY INVOKING THE PROVISIONS U/S 14A R.W. RULE 8D OF THE INCOME TAX ACT, 1961 (I N SHORT ACT) THE AO MADE AN ADDITION OF RS.51,07,410/- WHICH, IN APPEAL, THE LD.CIT(A) DELETED BY OBSERVING THAT THE ASSESSEE HAD SUFFICIENT FUNDS OF ITS OWN, THEREFORE, THERE WAS NO NEED OF UTILIZING ANY INTEREST BEARING FUNDS. NE XTLY, LD. CIT(A) CONSIDERED THE ARGUMENT THAT SINCE THERE WAS NO FRESH INVESTMENT D URING THE YEAR AND ONLY SOLE THE CURRENT INVESTMENT HOLDING MUTUAL FUNDS AS SUCH NO ADMINISTRATIVE EXPENSES WERE INCURRED. ULTIMATELY, LD.CIT(A) DELET ED THE ENTIRE ADDITION OF RS.51,07,410/-, HOLDING THAT THERE WAS NO DIRECT E XPENDITURE NOR ANY INTEREST IS ATTRIBUTABLE TO THE INVESTMENT AND AT THE SAME TIME , NO ADMINISTRATIVE EXPENDITURE COULD BE ATTRIBUTED INASMUCH AS NO ACTI VITY WAS THERE DURING THE YEAR. HENCE, THE ASSESSEE IS BEFORE US IN THIS APP EAL. 3. LD.DR SUBMITTED THAT THOUGH THE OWN FUNDS OF THE ASSESSEE ARE EXCEEDING THE INVESTMENT, IT CANNOT BE SAID THAT NO EXPENDITU RE WAS INCURRED BY THE ASSESSEE ON ACCOUNT OF THE ADMINISTRATIVE FUNCTION S INASMUCH AS MAKING INVESTMENT, MAINTAINING OR CONTINUING WITH ANY INVE STMENT IN A PARTICULAR SHARE/MUTUAL FUND ETC. AND THE TIME WHEN TO EXIT FR OM ONE INVESTMENT TO ANOTHER ARE ALL THE ACTIVITIES REQUIRING WELL COORD INATED AND WELL INFORMED MANAGEMENT DECISIONS, INVOLVING NOT ONLY INPUTS FRO M VARIOUS SOURCES BUT IT ALSO INVOLVES ACUMEN OF SENIOR MANAGEMENT FUNCTI ONARIES, AS SUCH THE DECISION TO CONTINUE THE INVESTMENT OR NOT TO INVES TMENT ANY FURTHER ALSO REQUIRE SOME MANAGEMENT DECISIONS AS SUCH LD.CIT(A) IS NOT JUSTIFIED IN DELETING THE TOTAL AMOUNT. ITA NO. 1374/DEL/2016 3 4. PER CONTRA, IT IS THE ARGUMENT OF THE LD.AR THAT IN THE EARLIER YEARS, THE ADDITION ON ACCOUNT OF SECTION 14A OF THE ACT WAS D ELETED AND FOLLOWING THE SAME IN THIS YEAR ALSO, LD.CIT(A) DELETED IT. IT IS HIS ARGUMENT THAT WHEN NO INTEREST COMPONENT IS INVOLVED AND THERE WAS NO FINANCIAL TR ANSACTIONS IN RESPECT OF THE INVESTMENT, NO ADDITION COULD BE MADE. HOWEVER, IN VIEW OF THE SMALLNESS OF THE AMOUNT OF RS.91,350/- EARNED AS DIVIDEND IN THIS YE AR, HE SUBMITS THAT WITHOUT PREJUDICE TO HIS OTHER LEGAL CONTENTIONS, SUCH AN A MOUNT MAY BE DISALLOWED. HE PRAYS THAT LIBERTY MAY BE GRANTED FOR HIM TO RAISE THESE CONTENTIONS IN RESPECT OF OTHER YEARS INVOLVING ADDITION U/S 14A OF THE ACT. 5. WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS ON OTHER SIDE AND PERUSED THE MATERIAL PAPERS ON RECORD. IN VIEW OF THE SUBMISSI ONS OF THE LD.AR THAT THE DISALLOWANCE MAY BE CONFINED TO THE AMOUNT OF DIVID END EARNED IN THIS MATTER, WE ARE NOT PROPOSING TO ENTER INTO THE MERITS OF THE C ASE AND WHILE RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH C OURT IN JOINT INVESTMENT PVT.LTD. VS CIT [2015] 372 ITR 694 WHERE IT WAS HELD THAT DISALLOWANCE OF EXPENDITURE U/S 14A OF THE ACT CANNOT EXCEED THE AMOUNT OF TAX EXEM PT INCOME, WE LIMIT THE DISALLOWANCE TO RS.91,350/- THAT COULD BE MADE U/S 14A OF THE ACT. LIBERTY IS GRANTED TO THE ASSESSEE TO RAISE ALL THE AVAILABLE LEGAL CONTENTIONS IN CASE OF OTHER ASSESSMENT YEARS. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED IN PART. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 16 TH OF NOVEMBER, 2017. SD/- SD/- (G.D.AGRAWAL) (K.N.CHARY) PRESIDENT JUDICIAL MEMBER DATE:-16 TH NOVEMBER, 2017 *AMIT KUMAR* ITA NO. 1374/DEL/2016 4 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSIS TANT REGISTRAR ITAT NEW DELHI