Asrani Inns and Resorts Private Limited, Mumbai, Mumbai V. DCIT, Circle-1(1), Hyderabad, Hyderabad

ITA 1691/HYD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2719 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 14-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Keywords: Earning of tax free income; Reasonable cause; Condonation of delay
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B BENCH: HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA. NO.1691/HYD/2016 ASSESSMENT YEAR: 2011 - 12 ASRANI INNS & RESORTS PRIVATE LIMITED, 6 TH FLOOR, JMJ HOUSE, ORCHARD AVENUE, HIRANANDANI, POWAI, MUMBAI 400 076. PAN: AACCA 9781 D VS. DCIT, CIRCLE - 1(1), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI K.C. DEVDAS FOR REVENUE : SMT. N. SWAPNA, DR DATE OF HEARING : 05 .07.2018 DATE OF PRONOUNCEMENT : 10 .08.2018 ORDER PER SMT. P. MADHAVI DEVI , JM. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 1, HYDERABAD DATED 24.08.2016. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED MAKING DISALLOWANCE U/S. 14A, WHERE THE APPELLANT HAS NEITHER EARNED ANY EXEMPT INCOME (IN ANY YEAR) NOR THE APPELLANT HAS INCURRED ANY EXPENDITURE IN RELATION TO EXEMPT IN COME. THE LEARNED AO HAS FAILED TO DISCHARGE THE BURDEN OF SHOWING THAT THE APPELLANT HAS INCURRED EXPENDITURE DIRECTLY / INDIRECTLY RELATED TO THE EARNING TAX FREE INCOME, IT BEING A SINE QUA NON FOR INVOKING DISALLOWANCE UNDER RULE 8D. 2. THE LEARNED AO HAS ERRED BY RELYING ON THE CIT VS. GODREJ BOYCE MFG. CO. LTD (2010) 328 ITR 81 AS THE ASSESSEE IN THAT CASE HAD EARNED DIVIDEND I.E. TAX EXEMPT INCOME. HOWEVER, IN THE INSTANT CASE IT IS UNDISPUTED AND ACCEPTED FACT THAT THE APPELLANT HAS NOT EARNED ANY EXEMPT INCOME IN ANY FINANCIAL YEAR. 2 3. THE LEARNED AO IGNORED THE FACT THAT THE INVESTMENT HAS BEEN MADE OUT OF OWN FUNDS AND RESERVES (AS IS EVIDENT BY THE CASH FLOW STATEMENT) BY THE ASSESSEE IN THE GROUP CONCERN AND NOT IN THE SHARES OF ANY UN - RELATED PARTY. THEREFORE, THE PRIMARY OBJECT OF INVESTMENT IS HOLDING CONTROLLING STAKE IN THE GROUP CONCERN AND NOT EARNING ANY INCOME OUT OF INVESTMENT. FURTHER THE INVESTMENT WERE MADE IN THE PREVIOUS YEAR PRECEDING TO THE RELEVANT PREVIOUS YEAR AND NOT IN THE YEAR UNDER CONSIDERATION. 4. THE LEARNED AO HAS ERRED BY DISALLOWING INTEREST WHICH WAS SPECIFICALLY INCURRED FOR CAR LOAN AND FOR PROVISION OF COUNTER BANK GUARANTEE TO DELHI DEVELOPMENT AUTHORITY AND CUSTOMS DEPARTMENT, AND THE SAME HAD NO CONNECTION D IRECT / INDIRECTLY TO THE INVESTMENTS. 5. THE LEARNED AO HAS ERRED BY INVOKING RULE 8D AND DISALLOWING HALF PERCENT OF AVERAGE INVESTMENT WHEN SECTION 14A ITSELF WAS NOT APPLICABLE. 6. THE LEARNED AO HAS ERRED BY RELYING ON CBDT CIRCULAR NO. 5/2014 DATED 11.02.2014. 7. THE LEARNED AO HAS ERRED BY TAXING THE APPELLANT ON A FUTURE CONTINGENT POSSIBILITY OF EARNING MINISCULE TAX FREE INCOME. WHEREAS THE LEARNED AD HAS IGNORED THE FACT THE GOING BY THE SAME LOGIC THE SALE OF INVESTMENTS WOULD HAVE GENERATED TAXABLE CAPITAL GAINS. 8. YOUR APPELLANT CRAVES LEAVE TO AMEND, ALTER, VARY, MODIFY, OMIT OR SUBSTITUTE THE AFORESAID GROUNDS OF APPEAL OR ADD NEW GROUND(S) OF APPEAL, AT ANY TIME BEFORE OR AT THE TIME OF HEARINGS. 2. AT THE OUTSET, IT IS SEEN THAT THE APPEAL IS BARRED BY LIMITATION OF 2 DAYS. THE ASSESSEE HAS FILED THE CONDONATION OF DELAY PETITION. FOR THE REASONS STATED THEREIN, WE ARE SATISFIED THAT THE ASSESSEE WAS PREVENTED BY A REASONABLE CAUSE IN FILING OF T HE APPEAL WITHIN THE PRESCRIBED TIME LIMIT BEFORE THE TRIBUNAL. THE DELAY IS ACCORDINGLY CONDONED. 3. AS FAR AS THE MERITS OF THE ISSUE BEFORE US ARE CONCERNED, WE FIND THAT THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME / EXEMPT INCOME DURING THE REL EVANT YEAR AND THEREFORE THERE IS NO CASE FOR MAKING DISALLOWANCE U/S 14A READ WITH RULE 8D AS HELD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CHE MI NVEST LIMITED [2015] 378 ITR 33. RESPECTFULLY FOLLOWING THE SAME, WE DELETE THE DISALLOWANCE MADE BY TH E 3 A.O. U/S 14A READ WITH RULE 8D . ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 4. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2018 SD/ - SD/ - (S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 10 TH AUGUST , 2018. OKK, SR.PS COPY TO 1. ANI INNS & RESORTS PRIVATE LIMITED, 6 TH FLOOR, JMJ HOUSE, ORCHARD AENUE, HIRANANDANI, POWAI, MUMBAI 400 076. 2. DCIT, CIRCLE 1(1), 4 TH FLOOR, AAYAKAR BHAVAN, HYDERABAD. 3. CIT (A) - 1, HYDERABAD. 4. PR. CIT - I, HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE