ACIT, New Delhi V. M/s. India Lease Development Ltd., New Delhi

ITA 1660/DEL/2012

• Counselvise Citation: 166020114 RSA 2012
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-11-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 09-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIS GILL
• Assessee Lawyers: ARTA TRANA
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C: NEW DELHI BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTAN T MEMBER ITA NOS. 1660, 1661,1662/DEL/2012 ASSESSMENT YEARS: 2002-03, 2005-06, 2006-07 ASSTT. COMMISSIONER OF VS. M/S. INDIA LEASE DEVELOPMENT LTD. INCOME TAX, 4/17B, MGF H OUSE, ASAF ALI ROAD, CENTRAL CIRCLE 7, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RIS GILL, CIT DR RESPONDENT BY : SHRI ARTA TRANA PANDA, ADVOCATE DATE OF HEARING : 06/11/2012 DATE OF PRONOUNCEMENT : ORDER PER I.C. SUDHIR, JUDICIAL MEMBER IN AL THESE APPEALS REVENUE HAS QUESTIO NED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS :- 1. THE ORDER OF LD. CIT (A) IS NOT C ORRECT IN LAW AND FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN DIRECTING T HE ASSESSING OFFICER TO RE-COMPUTE THE DISALLOWANCE U/S 14A ON A REASONA BLE BASIS AND FURTHER ERRED IN HOLDING THAT RULE 8D CANNOT BE APP LIED RETROSPECTIVELY. 3. THE ASSESSING OFFICER HAS MADE DI SALLOWANCE ON REASONABLE BASIS ONLY UNDER SECTION 14A AND APPLICABILITY OF RULE 8D OF INCOME TAX RULES, 1962 DOES NOT MAKE IT UNREASONABLE. SIMULTAN EOUSLY RULE 8D OF INCOME TAX RULES, 1962 WAS NOTIFIED ON 24.3.2 008 AND THE ITA NOS. 1660,1661,1662/DEL/12 2 SAME BEING PROCEDURAL AND CLARIFICATORY IN NATURE, IS APPLICABLE TO ALL PENDING ASSESSMENTS ALSO. 4. THE ORDER OF LD. CIT(A) IS PERVER SE IN LAW AND ON FACTS. 2. THE RELEVANT FACTS ARE THAT ASSESSEE HA D EARNED DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION AND CLAIMED THE SAME AS EXEMPT U/S 10(33) OF THE ACT. THE AO NOTED THAT THE ASSESSEE HAD NOT DISALLO WED ANY EXPENSES AGAINST THE ABOVE INCOME. THE ASSESSEE WAS ASKED BY THE AO AS TO WHY PROPORTIONATE AMOUNT OF EXPENSES SHALL NOT BE DISALLOWED U/S 14A OF THE ACT BEING INCURRED FOR EARNING INCOME WHICH IS EXEMPT UNDER THE ACT. THE A SSESSEE SUBMITTED THAT NO DISALLOWANCE UNDER RULE 8D IS ATTRACTED IN CASE OF ASSESSEE, AS THE ASSESSEE HAS NO DIRECT / INDIRECT EXPENSES IN RELATION TO EQUITY INVESTMENTS. IT WAS CONTENDED THAT ASSESSEE WAS HAVING SUFFICIENT CAPITAL AND RES ERVES / SURPLUS AND THAT RULE 8D HAS BEEN NOTIFIED IN MARCH, 2008 ONLY. THE AO D ID NOT AGREE WITH THE ASSESSEE AND HE CALCULATED THE AMOUNT OF DISALLOWAN CE AS PER THE PROVISION OF RULE 8D OF THE INCOME TAX RULE 1962. HE OBSERVED TH AT THE ASSESSEE HAS ITS ADMINISTRATIVE SET UP WHICH TAKES CARE OF THE INVES TMENTS BY MAKING NECESSARY EFFORTS. THE STAFFS EMPLOYED FOR DOING THE GENERAL DAY TODAY BUSINESS OF THE ASSESSEE COMPANY DO DEVOTE CERTAIN TIME AND RESOURC E FOR INVESTING, MANAGING THE FUNDS ETC. THUS HE HELD THAT IT WOULD NOT IMPRO PER TO DISALLOW PROPORTIONATE AMOUNT OF EXPENDITURE MADE TO EARN THE DIVIDEND INC OME. THIS ACTION OF THE AO WAS QUESTIONED BY THE ASSESSEE BEFORE THE LD. CIT(A ). THE LD. CIT(A) KEEPING IN VIEW THE DECISIONS OF HONBLE DELHI HIGH COURT IN T HE CASE OF MAXOPP INVESTMENT ITA NOS. 1660,1661,1662/DEL/12 3 LTD. VS. CIT , EICHER GOODEARTH LTD. VS. CIT AND CH EMINVEST LTD. VS. CIT (2011) 5 TAX CORP (DT) 49842 (DELHI) SET ASIDE THE MATTER TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH AS PER OBSERVATION OF HONB LE DELHI HIGH COURT IN THE ABOVE CITED CASES. AGGRIEVED REVENUE HAS IMPUNGED THIS ACTION OF THE LD. CIT(A) BEFORE THE TRIBUNAL ON THE ABOVE GROUNDS. 3. IN SUPPORT OF THE GROUNDS LD. DR TRIED TO JUSTIFY THE ASSESSMENT ORDER ON THE ISSUE. HE CONTENDED THAT THE AO HAD MADE DIS ALLOWANCE ON REASONABLE BASIS ONLY U/S 14A AND APPLICABILITY OF RULE 8D OF I.T. RULES DOES NOT MAKE IT UNREASONABLE. HE SUBMITTED FURTHER THAT RULE 8D WAS NOTIFIED ON 24.3.2008 AND THE SAME BEING PROCEDURAL AND CLARIFICATORY IN NATU RE IS APPLICABLE TO ALL PENDING ASSESSMENT. 4. THE LD. AR ON THE OTHER HAND SUBMITTED THAT THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT ON THE ISSUE IS BINDING U PON, THE AUTHORITIES BELOW AS WELL AS UPON THE TRIBUNAL HENCE THE LD. CIT(A) HAS RIGHTLY SET ASIDE THE MATTER TO THE FILE OF THE AO FOR HIS FRESH ADJUDICATION IN VIEW OF THE DECISIONS OF HONBLE HIGH COURT ON THE ISSUE. 5. CONSIDERING THE ABOVE SUBMISSIONS AND HAVI NG GONE THROUGH THE AFORESAID DECISIONS OF DELHI HIGH COURT WE FULLY CO NCUR WITH THE SUBMISSION OF THE LD. AR THAT RESPECTFULLY FOLLOWING THE DECISIO NS OF THE HON;BLE HIGH COURT OF DELHI, LD. CIT(A) HAS RIGHTLY SET ASIDE THE MATTER TO THE AO FOR HIS FRESH CONSIDERATION ON THE ISSUE AS PER THE DECISIONS OF HONBLE HIGH COURT. WHILE SETTING ASIDE THE ISSUE BEFORE THE AO THE LD. CIT ( A) HAS REPRODUCED RELEVANT ITA NOS. 1660,1661,1662/DEL/12 4 PORTION OF THE DECISIONS OF HONBLE DELHI HIGH COUR T ON THE ISSUE IN PARA NO. 4.4 AND 5.5 OF THE FIRST APPELLATE ORDER. FOR A READY R EFERENCE THE SAID PARA IS BEING REPRODUCED HEREUNDER : 4.4. KEEPING IN VIEW THE DECISION AS CITED ABOVE, THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE DISALLOWANCE U/S 14A ON A REASONABLE BASIS FOR RULE 8D CANNOT BE APPLIED RETROSPECTIVELY. THE HON BLE DELHI HIGH COURT IN THE COMBINED CASES OF MAXOPP INVESTMENT LTD. VS CIT , EICHER GOODEARTH LTD. VS. CIT AND CHEMINVEST LTD. VS. CIT (2011) 5 T AXCORP (DT) 49842 (DELHI) HAS OBSERVED THAT SO, EVEN FOR THE PRE-RUL E 8D PERIOD, WHENEVER THE ISSUE OF SECTION 14A ARISES BEFORE AN ASSESSING OFFICER, HE HAS, FIRST OF ALL, TO ASCERTAIN THE CORRECTNESS OF THE CLAIM OF T HE ASSESSEE IN RESPECT OF THE EXPENDITURE INCURRED IN RELATION TO INCOME WHIC H DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT. EVEN WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INC OME WHICH DOES NOT FORM PART OF TOTAL INCOME THE ASSESSING OFFICER WIL L HAVE TO VERIFY THE CORRECTNESS OF SUCH CLAIM. IN CASE, THE ASSESSING O FFICER IS SATISFIED WITH THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPEND ITURE OR NO EXPENDITURE, AS THE CASE MAY BE, THE ASSESSING OFFI CER IS TO ACCEPT THE CLAIM OF THE ASSESSEE INSOFAR AS THE QUANTUM OF DIS ALLOWANCE U/S 14A IS CONCERNED. IN SUCH EVENTUALITY, THE ASSESSING OFFIC ER CANNOT EMBARK UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE FOR TH E PURPOSES OF SECTION 14A(1). IN CASE, THE ASSESSING OFFICER IS NOT, ON T HE BASIS OF OBJECTIVE CRITERIA AND AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY, SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, HE SHALL HAVE TO REJECT THE CLAIM AND STATE THE REASONS FOR DOING SO. HAVIN G DONE SO, THE ASSESSING OFFICER WILL HAVE TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT. HE IS REQUIRED TO DO SO, ON THE BASIS OF A REASONABLE AND ACCEPTABLE METHOD OF APPORTIONMENT. 5.5. KEEPING IN VIEW THE DECISION AS CITED ABOVE, THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE DISALLOWANCE U/S 14A ON A REASONABLE BASIS FOR RULE 8D CANNOT BE APPLIED RETROSPECTIVELY. 6. IN VIEW OF THE ABOVE DISCUSSION WE ARE N OT INCLINED TO INTERFERE WITH THE FIRST APPELLATE ORDER ON THE ISSUE. THE SAME IS UPH ELD. THE GROUNDS ARE ACCORDINGLY REJECTED. ITA NOS. 1660,1661,1662/DEL/12 5 7. CONSEQUENTLY APPEALS ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT O N 21.12.2012. SD/- SD/- (B.C. MEENA) ( I .C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 21.12.2012 VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR, ITAT