M/s. Prime Cellular Ltd., New Delhi V. ITO, New Delhi

ITA 156/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7667 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 12-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 08-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAKHI BIM AL
• Section: 244A; 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI C.M. GARG: JUDICIAL MEMBER ITA NO. 156/DEL/2014 ASSTT. YR: 2009-10 PRIME CELLULAR LTD., VS. INCOME-TAX OFFICER, 401, WORLD TRADE TOWER, WARD 14(4), NEW DELHI. BARAKHAMBA LANE, NEW DELHI.-110001. PAN: AACCP 1015 H ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI K.V.S. R. KRISHNA CA RESPONDENT BY : MS. RAKHI BIMAL SR DR. DATE OF HEARING : 12/05/2016. DATE OF ORDER : 27/05/2016. O R D E R PER S.V. MEHROTRA, A.M: THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 01.11.2013, PASSED BY THE LD. CIT(A)-XVII, NEW DELHI, RELATING TO A.Y . 2009-10. 2. BRIEF FACTS OF THE CASE ARE THAT DURING THE PREV IOUS YEAR THE ASSESSEE COMPANY HAD EARNED INCOME ON FUNDS GIVEN ON LOAN TO ITS JOINT VENTURE COMPANY M/S KUJJAL BUILDERS PVT. LTD. ASSESSEE HAD FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 17,67,393/-. AO NOTIC ED FROM THE BALANCE- SHEET OF THE ASSESSEE COMPANY THAT IT HAD MADE SUBS TANTIAL INVESTMENTS 2 AMOUNTING TO RS. 40.00 CRORES AS ON 01.4.2008 AS WE LL AS ON 31.3.2009.HE NOTICED THAT ASSESSEE HAD MADE NO DISALLOWANCE U/S 14A OF THE I.T. ACT. ACCORDINGLY, ASSESSEE WAS SHOW CAUSED AS TO WHY DIS ALLOWANCE U/S 14A/RULE 8D BE NOT MADE. THE ASSESSEE IN ITS REPLY, INTER ALIA, POINTED OUT AS UNDER: . THE FUNDS RECEIVED ON ACCOUNT OF SHARE CAPITAL HAD BEEN INVESTED IN 4,00,00,000 FULLY PAID UP EQUITY SHARES OF RS.10/- EACH OF JOINT VENTURE COMPANY I.E. KUJJAL BUILDERS PVT. LTD. IN THE EARLIER FINANCIAL YEARS .... .NO DIVIDEND HAS B EEN RECEIVED BY THE ASSESSEE COMPANY FROM THE DATE OF INVESTMENT TI LL DATE. ALSO NO EXPENSES HAS PROXIMATE RELATIONSHIP WITH THE AMO UNT OF INVESTMENTS MADE EVEN IN THE ABSENCE OF DIVIDEND IN COME ..... THE PROPORTIONATE EXPENDITURE TO BE DISALLOWED AS P ER RULE 8D IS TO BE CALCULATED ONLY WHEN THERE IS AN EXPENSES INCURRED IN, RELATION TO THE INVESTMENTS, MADE IRRESPECTIVE OF T HE FACT WHETHER EXEMPTED INCOME IS, DERIVED FROM SUCH INVES TMENTS OR NOT. HOWEVER, DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2009-10, NO SUCH EXPENDITURE HAS BE EN INCURRED BY THE ASSESSEE WHICH CAN BE SAID TO BE DI RECTLY OR INDIRECTLY RELATABLE TO THE INVESTMENTS OF THE ASSE SSEE COMPANY. IN VIEW OF ABOVE IT IS RESPECTFULLY SUBMITTED THA T THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT 196 1 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 ARE NOT AT ALL APPLICABLE TO THE ASSESSEE COMPANY. 3. AO, HOWEVER, DID NOT ACCEPT THE ASSESSEES CONTE NTION AND COMPUTED THE DISALLOWANCE U/S 14A AT RS. 20 LACS AND LIMITED THE SAME TO PERSONNEL AND OPERATING AND OTHER EXPENSES TO THE EXTENT OF R S. 7,88,713/-. 4. LD. CIT(A) DISMISSED THE ASSESSEES APPEAL, INTE R ALIA, RELYING ON THE DECISION OF THE ITAT DELHI SPECIAL BENCH IN THE CAS E OF CHEMINVEST V. ITO. 3 5. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL AND H AS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHO LDING THE DISALLOWANCE OF RS. 7,88,713/- U/S 14A READ WIT H RULE 8D. THE DISALLOWANCE IS MADE WITHOUT APPRECIATING THE A SSESSEE'S EXPLANATION THAT THE INVESTMENTS WERE MADE BY THE A SSESSEE COMPANY IN THE FINANCIAL YEAR 2006-07 RELEVANT TO T HE ASSESSMENT YEAR 2007-08, OUT OF ITS OWN FUNDS WHICH ARE NON- INTEREST BEARING, AND THE ASSESSEE COMPANY HAS NOT RECEIVED ANY DIVIDEND FROM THE DATE OF INVESTMENT TILL DATE. HEN CE, NO EXPENDITURE HAS BEEN INCURRED FOR EARNING TAX FREE INCOME. THE DISALLOWANCE MADE SHOULD BE DELETED. 2. THE APPELLANT CONTENDS THAT IT HAS GIVEN ALL EVI DENCES TO THE A.O. AND CIT(A) TO PROVE THAT NO EXPENDITURE HA S BEEN INCURRED WHICH WOULD SUFFER ANY DISALLOWANCE U/S 14 A. CONSEQUENTLY, THE ORDER OF THE CIT(A) UPHOLDING THE AO'S ORDER IS WRONG AND BAD IN LAW ON SURMISES AND CONJE CTURES, THE DISALLOWANCE OF RS 7,88,713/- WOULD BE DELETED. 3. THE APPELLANT CONTENDS THAT INTEREST U/ S 244A A ND 234D OF INCOME TAX, 1961 HAVE BEEN WRONGLY CHARGED. 6. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS I S EVIDENT FROM THE SUBMISSIONS MADE BEFORE AO, THE ASSESSEE DID NOT EA RN ANY DIVIDEND INCOME DURING THE YEAR AND, THEREFORE, NO DISALLOWANCE WAS CALLED FOR U/S 14A. HE RELIED ON THE RATIO OF DECISION OF HONBLE DELHI H IGH COURT IN THE CASE OF CHEMINVEST VS. CIT 378 ITR 33. 7. HAVING HEARD BOTH THE PARTIES, WE FIND THAT SINC E NO DIVIDEND INCOME HAS BEEN EARNED DURING THE YEAR, THEREFORE, IN VIEW OF THE DECISION OF 4 HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST, SUPRA, NO DISALLOWANCE U/S 14A IS CALLED FOR. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCEMENT IN OPEN COURT ON 27/05/2016. SD/- SD/- (C.M. GARG) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27/05/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.