Addl. CIT, Special Range- 2, New Delhi V. C.L. Educate Ltd., New Delhi

ITA 170/DEL/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3188 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 05-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAKESH K SEHGAL
• Keywords: Earning of tax free income; Proportionate interest; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.- 170 /DEL/ 2018 (ASSESSMENT YEAR: 2014-15) ADDL CIT, SPECIAL RANGE-2 NEW DELHI. VS. C L EDUCATE LTD R-90, GREATER KAILASH-1, NEW DELHI. PAN NO. AAACC3885C APPELLANT RESPONDENT REVENUE BY SH. MAHESH THAKUR, SR. DR ASSESSEE BY SH. RAKESH K SEHGAL, CA DATE OF HEARING: 8/4/2021 PRONOUNCEMENT ON 15/6/2021 ORDER PER K. NARASIMHA CHARY, JM. CHALLENGING THE ORDER DATED 7/9/2017 IN APPEAL NO. 10478/16-17 OF CIT (A)-2 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, NEW DELHI (LD. CIT(A)), IN THE CASE OF M/S CL EDUCATE LTD (THE ASSESSEE), FOR THE ASSESSMENT YEAR 2014-15, REVENUE PREFERRED THIS APPEAL ON THE FOLLOWING GROUNDS:- 1. WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION MADE UNDER SECTION 14 A OF THE I T ACT, NEW DELHI TUNE O F RS. 1, 27, 35, 364/-. 2 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E DISALLOWANCE OF UNEARNED INTEREST ON ADVANCES WRITT EN OFF TO THE TUNE OF RS. 1, 54, 88, 025/-WITHOUT ANY DEFINIT E FINDING ON THE ISSUE. 3. THE APPELLANT CRAVES LEAVE TO FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, ADDED OR FOREGO ANY GROUND (I S) OF APPEAL AT ANY TIME BEFORE OR DURING A HEARING OF TH IS APPEAL. 2. INSOFAR AS GROUND NO. 1 IS CONCERNED IT COULD BE SEEN FROM THE RECORD THAT THE ASSESSEE SUBMITTED BEFORE THE LEARN ED ASSESSING OFFICER THAT THE ASSESSEE HAD NOT BEEN EARNING ANY INCOME F ROM THE SUBSIDIARY COMPANY, OUT OF INVESTMENT. LEARNED ASSESSING OFFIC ER, HOWEVER, RECORDED THAT THE AMOUNT OF PROPORTIONATE INTEREST AS BEARING TO THE AMOUNT OF INVESTMENT IN THE SUBSIDIARY COMPANY HAS TO BE DISALLOWED AND WHILE WORKING OUT THE SAME UNDER RULE 8D OF THE INCOME TAX RULES1962 (THE RULES) HE MADE AN ADDITION OF RS. 1, 27, 35, 364/-UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) READ WITH RULE 8D OF THE RULES. 3. TO THESE FACTS, LD. CIT(A) APPLIED THE LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASES OF CIT VS. H OLCIM INDIA PRIVATE LIMITED (2015) 57 TAXMANN.COM 28 (DELHI) AND CHEMIN VEST LTD VS. CIT (2015) 61 TAXMAN.COM 118 (DELHI) WHEREIN IT HAS BEE N HELD THAT NO DISALLOWANCE UNDER SECTION 14 A OF THE ACT CAN BE M ADE IN A YEAR IN WHICH NO EXEMPT INCOME WAS EARNED ARE RECEIVED BY T HE ASSESSEE. 4. THERE IS NO DISPUTE AS TO THE FACT THAT IN THIS PARTICULAR ASSESSMENT YEAR THE ASSESSEE DID NOT EARN OR RECEIVE ANY DIVID END INCOME. LD. CIT(A) HAS RIGHTLY APPLIED THE LAW LAID DOWN BY THE HONBL E JURISDICTIONAL HIGH 3 COURT TO THE FACTS OF THE CASE AND DELETED THE ADDI TION MADE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RUL ES. WE, THEREFORE, DO NOT FIND ANY GROUND TO INTERFERE WITH SUCH FINDINGS AND CONSEQUENTLY CONFIRM THE SAME. GROUND NO. 1 OF THE REVENUES APP EAL IS ACCORDINGLY DISMISSED. 5. NOW COMING TO THE 2 ND GROUND, ACCORDING TO THE LEARNED ASSESSING OFFICER, DURING THE YEAR, THE LOAN BALANCE OF RS. 1 , 54, 88, 0 25/- DUE FROM CARRIER LAUNCHER EDUCATION FOUNDATION (CLEF) WAS WR ITTEN OFF AND ACCORDING TO THE ASSESSEE CLEF WAS IN THE BUSINESS OF PROVIDING MBA EDUCATION AND HAD SUFFERED HUGE FINANCIAL LOSS AND, THEREFORE, DISCONTINUED ITS BUSINESS; THAT IN THE VIEW OF THE MANAGEMENT, THE OUTSTANDING INTEREST RECEIVABLE WAS DOUBTFUL OF REC OVERY AND THEREFORE, IT WAS DECIDED TO WRITE OF THE INTEREST OF RS. 1.54 CR ORES RECEIVABLE FROM CLEF. IT WAS FURTHER PLEADED THAT THE WRITTEN OFF W AS IN THE NATURE OF LOAN GIVEN BY THE ASSESSEE AND A DIFFERENT FROM A TRADE RECEIVABLE. 6. LEARNED ASSESSING OFFICER HOWEVER, HELD THAT SUC H A LOAN AND ADVANCES AS GIVEN TO CLEF SOUGHT TO BE WRITTEN OFF WAS OF CAPITAL IN NATURE AND THEREFORE THE SAME WAS NOT ALLOWABLE. IN THE APPEAL, LD. CIT(A), AS A MATTER OF FACT FOUND FROM THE LEDGER A CCOUNT OF INTEREST INCOME OF THE EARLIER YEARS THAT THE ASSESSEE HAD D ECLARED THE AMOUNT WRITTEN OFF DURING THIS ASSESSMENT YEAR, AS INTERES T INCOME IN THE EARLIER YEARS AND PAID IN TAXES THEREON. SINCE THE ASSESSEE HAD DECLARED THE AMOUNT IN QUESTION AS INCOME IN THE EARLIER ASSESSM ENT YEARS AND PAID IN TAXES THEREON, LD. CIT(A) HELD THAT THE CONDITIONS REQUIRED UNDER SECTION 36(1)(VII) READ WITH SECTION 36 (2) OF THE ACT. 4 7. IT IS NOT THE CASE OF THE REVENUE THAT IN THE EA RLIER ASSESSMENT YEARS THE ASSESSEE DID NOT DECLARE THE IMPUGNED AMO UNT AS INCOME. IT GOES UNCHALLENGED THAT THE ASSESSEE DECLARED THIS A MOUNT AS INCOME IN EARLIER ASSESSMENT YEARS AND ALSO PAID THE TAXES. I N VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TRS LTD VS. CIT 323 ITR 327, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE; AND THAT,IT IS ENOUGH IF THE DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THER E IS NO DOUBT THAT THE CONDITIONS UNDER SECTION 36(1)(VII) READ WITH SECTI ON 36 (2) OF THE ACT ARE SATISFIED. THE DELETION OF THIS ADDITION BY THE LD. CIT(A), THEREFORE, DOES NOT SUFFER ANY ILLEGALITY OR IRREGULARITY. WE, THER EFORE, CONFIRMED THE SAME AND DISMISS THE OTHER GROUND OF THE APPEAL OF THE R EVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 15 TH DAY OF JUNE, 2021. SD/- SD/- (O.P.KANT) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15/6/2021