Beltek Canadian Waters Limited , Delhi V. DCIT Circle-4(2), Delhi

ITA 1496/DEL/2022

AI Insights

The case involves Beltek Canadian Waters Ltd., the appellant, contesting the decisions made by the CIT(A), National Faceless Appeal Centre, which confirmed additions made under section 14A and section 36(1)(iii) of the Income Tax Act, 1961. The primary contention was regarding the disallowance of expenses related to exempt income and the notional interest charged on advances made to a subsidiary. The Tribunal's decision reversed the CIT(A)'s findings, acknowledging the absence of exempt income and the sufficiency of the assessee's own funds to cover the advances made.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131720 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-02-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 26-06-2022
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL DELHIBENCH ‘A’, NEW DELHI Before Sh. C. M. Garg, Judicial Member Dr. B. R. R. Kumar, Accountant Member ITA No. 1496/Del/2022 : Asstt. Year: 2017-18 Beltek Canadian Waters Ltd., A-37, Mayapuri Industrial Area, Phase-II, New Delhi-110064 Vs. DCIT, Circle-4(2), New Delhi (APPELLANT) (RESPONDENT) PAN No. AAACB3948D Assessee by : Sh. Rakesh Kumar, CA Revenue by : Sh. Kanv Bali, Sr. DR Date of Hearing: 08.02.2023 Date of Pronouncement: 16.02.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi dated 27.04.2022. 2. The assessee has raised the following grounds of appeal: “1. That the Ld. Commissioner, Appeals (“CIT-A”) was not justified in confirming the addition of Rs. 3,00,756/- made under section 14A of the Income Tax Act, 1961 (‘the Act’), read with Rule 8D of the Income Tax Rules, 1962 (‘the Rules’) ignoring the fact that no exempt income had been earned/received or declared during the year and no corresponding expenses have been claimed or can be said to be attributable to such income being NIL and ignoring the judicial precedents laid down in this regard and also the amendment made to section 14A by the Finance Act, 2022 which is made effective 01.04.2022, i.e. AY 2022-23. 2. The Ld. CIT-A was not justified in rejecting the appeal of the appellant and confirming the addition of Rs. ITA No. 1496/Del/2022 Beltek Canadian Waters Ltd 2 22,69,198 made under section 36(1)(iii) of the Act, ignoring the fact that there is no direct nexus between the borrowed funds and the advances made by the appellant to its subsidiary company and the fact that the said advances were made out of interest free funds and the judicial precedents laid down by the Hon’ble Supreme Court in this regard.” Disallowance u/s 14A: 3. It is an undisputable fact that the assessee has neither earned nor claimed any exempt income during the year. Hence, in the absence of any exempt income, we hold that no disallowance is called for. Disallowance u/s section 36(1)(iii): 4. The assessee granted loan to M/s Accomplish Electronics Pvt. Ltd., a wholly own subsidiary of an amount of Rs. 1.68 crores on which the Revenue charges a notional interest of Rs.22.96 lacs. We find that the assessee had own funds to the tune of Rs.4.04 crores which is more than the investments made of Rs.1.68 crores and hence no disallowance on the interest is called for as the assessee has proven to have sufficient funds at their disposal. 5. In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 16/02/2023. Sd/- Sd/- (C. M. Garg) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 16/02/2023 *Subodh Kumar/AK, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR