M/s. Bodhisattva Estates Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 1448/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3390 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 17-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVI KANT GUPTA SENIOR
• Assessee Lawyers: SAURABH DEV KARNA SINGH
• Keywords: Earning of tax free income
• Section: 14A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE HONBLE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1448/DEL./2016 (ASSESSMENT YEAR : 2011-12) M/S. BODHISATTVA ESTATES PVT. LTD., VS. ITO, WARD 3(1), C 41, MAYFAIR GARDEN, NEW DELHI. NEW DELHI 110 016. (PAN : AAFCA6740D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SAURABH DEV KARNA SINGH, ADVOCA TE REVENUE BY : SHRI RAVI KANT GUPTA, SENIOR DR DATE OF HEARING : 07.02.2018 DATE OF ORDER : 19.02.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, M/S. BODHISATTVA ESTATES PVT. LTD. (HEREINAFTER REFERRED TO AS THE ASSESSEE COMPANY) BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED OR DER DATED 29.12.2015 PASSED BY LD. CIT(APPEALS)-2, NEW DELHI QUA THE ASSESSMENT YEAR 2011-12 ON THE GROUNDS INTER ALIA T HAT :- 1) THAT ORDER MADE U/S 250 OF THE INCOME TAX ACT D ATED 29/12/2015 BY THE LEARNED CIT (APPEALS)-2 IS ERRONE OUS IN NATURE AS HE HAS CONFIRMED THE ORDER OF LD. AO WHO MADE AD DITIONS U/S 14A IN THE TOTAL INCOME OF THE ASSESSEE COMPANY. 2) THAT THE ADDITION U/S 14A OF THE ACT WAS MADE B Y MAKING IS ALLOWANCE OF RS.3,71,410/- WHICH IS QUITE UNJUST IFIED AND IS BAD IN LAW. ITA NO.1448/DEL./2016 2 3) THAT THE LEARNED CIT (A) HAS ERRED IN LAW BY AFF IRMING THE IS ALLOWANCE MADE BY AO AMOUNTING TO RS.3,71,41 0/- OVER AND ABOVE THE DISALLOWANCE ALREADY MADE BY THE ASSE SSEE COMPANY UNDER SECTION 14A OF THE ACT, IGNORING THE BASIC FACT THAT NO EXPENSES HAD BEEN INCURRED FOR EARNING EXEM PT INCOME. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN VALUE OF INVESTMENT IN SHARES AT RS.14,82,91,405/- AS ON 31.03.2010 AND AT RS.2,46,5 42/- AS ON 31.03.2011 AND UNSECURED LOAN AS ON 31.03.2010 AT RS.114,29,69,315/- AND AS ON 31.03.2011 AT RS.114,2 3,60,000/-. IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, INTEREST ON UNSECURED LOAN WAS CLAIMED AT RS.1,30,72,192/- AND IN THE YEA R UNDER CONSIDERATION AT RS.797/-. ASSESSEE CLAIMED THAT I N THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS INCURRED ADMINISTRA TIVE EXPENSES OF RS.8,14,689/- INCLUSIVE OF PROFESSIONAL CHARGES OF RS.4,54,450/-, AUDIT FEE OF RS.1,65,000/-, VEHICLE REPAIR AND MAIN TENANCE EXPENSES OF RS.92,871/-, INSURANCE EXPENSES OF RS.91,963/-, BANK CHARGES OF RS.1,379/- AND NOMINAL FINANCE CHARGES OF RS.797/- AND CLAIMED THE SAME AS EXEMPT U/S 37(1) OF THE INCOME-TAX ACT, 9161 (FOR SHORT THE ACT). HOWEVER, AO BY DECLINING THE SUB MISSIONS RAISED BY THE ASSESSEE PROCEEDED TO INVOKE PROVISIONS CONT AINED U/S 14A READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962 (FO R SHORT THE RULES) AND DETERMINED THE OTHER INDIRECT EXPENDITUR E UNDER SUB- ITA NO.1448/DEL./2016 3 RULE (2) AND (3) OF RULE 8D AT RS.3,71,345/- BEING % OF THE AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH SHAL L NOT BE PART OF THE TOTAL INCOME UNDER THE ACT AND THEREBY MADE AN ADDITION OF RS.3,71,410/-. 3. ASSESSEE COMPANY CARRIED THE MATTER BY WAY OF FI LING APPEAL BEFORE THE LD. CIT (A) WHO HAS CONFIRMED THE ADDITI ON BY DISMISSING THE APPEAL. FEELING AGGRIEVED, THE ASSE SSEE COMPANY HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING TH E PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. AO NOTICED FROM MEMORANDUM OF ASSOCIATION OF THE ASSESSEE COMPANY THAT ITS MAIN OBJECT IS REAL ESTAT E PROMOTERS, DEVELOPERS AND PROJECT MANAGEMENT ASSOCIATION INCLU DING CIVIL, MECHANICAL, ELECTRICAL ETC. AND EVEN IN THE TAX AUD IT REPORT, THE NATURE OF BUSINESS HAS BEEN SHOWN AS BUILDER AND PR OPERTY DEVELOPERS, BUT NO BUILDING CONSTRUCTION ACTIVITIES HAVE BEEN RECORDED IN THE P&L ACCOUNT. IT IS ALSO NOT IN DIS PUTE THAT UNDER THE PROVISIONS CONTAINED U/S 14A READ WITH RULE 8D, OUT OF EXPENDITURE INCURRED TO EARN EXEMPT INCOME, DIRECT OR INDIRECT ITA NO.1448/DEL./2016 4 EXPENDITURE OF RELEVANT PREVIOUS YEARS HAS TO BE CO NSIDERED FOR THE PURPOSE OF DISALLOWANCE. 6. IN THE INSTANT CASE, THE ASSESSEE HAS UNDISPUTED LY EARNED DIVIDEND INCOME AMOUNTING TO RS.200/-. LD. AR FOR THE ASSESSEE CONTENDED THAT SINCE NO DIVIDEND INCOME HAS BEEN EA RNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, NO EX PENDITURE HAS BEEN INCURRED IN RELATION THERETO AND AS SUCH NO DI SALLOWANCE CAN BE MADE AND RELIED UPON THE DECISION RENDERED BY TH E HONBLE DELHI HIGH COURT IN JOINT INVESTMENTS (P.) LTD. VS. CIT (2015) 59 TAXMANN.COM 295 (DELHI) AND ALSO RELIED UPON THE JUDGMENT IN THE CASE OF CIT VS. TAIKISHA ENGG. INDIA LTD. (2015) 370 ITR 338 . 7. WHILE DECIDING THE IDENTICAL ISSUE HONBLE HIGH COURT IN CIT VS. TAIKISHA ENGG. INDIA LTD. (SUPRA) HAS HELD AS UNDER :- THUS, S. 14A(2) OF THE ACT AND R. 8D(1) IN UNISON AND AFFIRMATIVELY RECORD THAT THE COMPUTATION OR DISALL OWANCE MADE BY THE ASSESSEE OR CLAIM THAT NO EXPENDITURE WAS IN CURRED TO EARN EXEMPT INCOME MUST BE EXAMINED WITH REFERENCE TO TH E ACCOUNTS, AND ONLY AND WHEN THE EXPLANATION/CLAIM OF THE ASSE SSEE IS NOT SATISFACTORY, COMPUTATION UNDER SUB-R. (2) OF R. 80 OF THE RULES IS TO BE MADE. 13. WE NEED NOT, THEREFORE, GO ON TO SUB-R. (2) OF R. 8D OF THE RULES UNIT AND UNLESS THE AO HAS FIRST RECORDED THE SATISFACTION, WHICH IS MANDATED BY SUB-S. (2) OF S. 14A OF THE AC T AND SUB-R. (1) OF R. 8D OF THE RULES.' 8. IN THE INSTANT CASE, THE AO HAS NOT RECORDED ANY DISSATISFACTION AS TO THE CLAIM OF THE ASSESSEE TH AT NO EXPENDITURE ITA NO.1448/DEL./2016 5 WAS INCURRED TO EARN EXEMPT INCOME AS PER ITS ACCOU NT AND IN SUCH CIRCUMSTANCES, THE COMPUTATION UNDER SUB-RULE (2) O F RULE 8D CANNOT BE MADE. IN THIS CASE, UNDISPUTEDLY, THE AS SESSEE HAS EARNED DIVIDEND INCOME TO THE TUNE OF RS.200/- BUT DISALLO WANCE U/S 14A READ WITH RULE 8D HAS BEEN MADE TO THE TUNE OF RS.3 ,71,410/-. 9. HONBLE DELHI HIGH COURT IN JOINT INVESTMENTS (P.) LTD. (SUPRA) CASE ALSO DECIDED THE IDENTICAL ISSUE THAT DISALLOWANCE U/S 14A IS TO BE MADE ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EXE MPT INCOME. SO, WE ARE OF THE CONSIDERED VIEW THAT IN ANY CASE, DIS ALLOWANCE CANNOT BE MADE MORE THAN EXEMPT DIVIDEND INCOME EARNED BY THE ASSESSEE. SO, IMPUGNED ORDER PASSED BY THE LD. CIT (A) IS NOT SUSTAINABLE IN THE EYES OF LAW, HENCE THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) BY INVOKING THE PR OVISIONS OF SECTION 14A AND RULE 8D IS TO BE RESTRICTED TO THE EARNED EXEMPT INCOME I.E. RS.200/-. CONSEQUENTLY, PRESENT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 19 TH DAY OF FEBRUARY, 2018. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) PRESIDENT JUDICIAL MEMBER DATED THE 19 TH DAY OF FEBRUARY, 2018 TS ITA NO.1448/DEL./2016 6 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-7, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.