M/s. HBN Dairies & Allied Ltd., New Delhi V. DCIT, New Delhi

ITA 2064/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3617 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 13-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: AAKASH CHUGH
• Keywords: Earning of tax free income
• Section: 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SH. R.S.SYAL, VICE PRESIDENT AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO. 2064/DEL/2016 (ASSESSMENT YEAR: 2011-12) HBN DAIRIES & ALLIED LTD. 527B, 5 TH FLOOR, HBN OFFICE, D-MALL DISTT. CENTRE, PASCHIM VIHAR, NEW DELHI PAN : AAACH7852C VS. D CIT CENTRAL CIRCLE-29 NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. AAKASH CHUGH, CA REVENUE BY : SH. S.R.SENAPATI, SR. DR DATE OF HEARING : 25.01.2018 DATE OF PRONOUNCEMENT : 31.1.2018 O R D E R PER BEENA A. PILLAI, J.M : THE PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAIN ST ORDER DATED 30/01/16 PASSED BY LD. CIT (A)-30 FOR ASSESSM ENT YEAR 2011-12 ON FOLLOWING GROUNDS OF APPEAL: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, ID . FIRST APPELLATE AUTHORITY HAS GROSSLY ERRED IN CONFIRMING THE DISAL LOWANCE AMOUNTING TO 17,37,368/- MADE BY THE ID. ASSESSING AUTHORITY U/S 14A OF THE ACT READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962 WHICH IS HIGHLY INJUDICIOUS, UNWARRANTED, AGAINST THE FACTS OF THE CASE AND BAD AT LAW. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, ID. FIRST APPELLATE AUTHORITY HAS GROSSLY ERRED IN CONFIRMING THE DISAL LOWANCE MADE BY THE ID. 2 ITA NO. 2064.DEL.2016 ASSESSING AUTHORITY U/S 14A R.W. RULE 8D DISREGARDI NG THE FACT THAT THE SAID DISALLOWANCE WAS MADE BY THE ID. ASSESSING AUT HORITY WITHOUT ARRIVING AT ANY SPECIFIC FINDING TO THE EXTENT THAT THE ASSESSEE HAS ACTUALLY INCURRED ANY EXPENDITURE RELATABLE TO THE EARNING O F EXEMPT INCOME., WHICH IS A PRE-CONDITION FOR INVOKING THE PROVISIONS OF S EC. 14A R.W. RULE 8D. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, ID. FIRST APPELLATE AUTHORITY HAS GROSSLY ERRED IN CONFIRMING THE DISAL LOWANCE MADE BY THE ID. ASSESSING AUTHORITY U/S 14A R.W. RULE 8D DISREGARDI NG THE SUBMISSION OF THE APPELLANT THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING THE EXEMPT INCOME AND CONCLUDING THAT EXPENDITURE INCUR RED IN RELATION TO EXEMPT INCOME HAS TO BE DETERMINED AS PER RULE 8D O F THE INCOME TAX RULES, 1962. 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, ID. FIRST APPELLATE AUTHORITY HAS GROSSLY ERRED IN CONFIRMING THE DISAL LOWANCE OF 17,37,368/- MADE BY THE ID. ASSESSING AUTHORITY U/S 14A R.W. RU LE 8D AS AGAINST THE DIVIDEND INCOME OF 1,54,660/- EARNED BY THE APPELLA NT DURING THE YEAR UNDER CONSIDERATION WITHOUT APPRECIATING THE SUBMIS SIONS OF THE APPELLANT THAT DISALLOWANCE U/S 14A R.W. RULE - 8D CANNOT EXC EED EXEMPT INCOME. 5. THE DISALLOWANCE U/S. 14A R.W.RULE 8D MADE BY THE LD. ASSESSING AUTHORITY AND AFFIRMED BY THE LD. FIRST APPELLATE A UTHORITY IS GROSSLY ARBITRARY, BASED ON SURMISE AND CONJECTURE, AGAINST THE FACTS OF THE CASE AND BAD AT LAW. 2. BRIEF FACTS OF THE CASE ARE AS UNDER : ASSESSEE FILED ITS RETURN OF INCOME ON 30/09/11 DEC LARING RS. 9,25,77,023/-. THE CASE WAS SELECTED FOR SCRUTI NY AND NOTICE UNDER SECTION 143 (2) WAS ISSUED AND SERVED UPON AS SESSEE. SUBSEQUENTLY, NOTICE UNDER SECTION 142 (1) ALONG WI TH A DETAILED QUESTIONNAIRE WAS ISSUED TO ASSESSEE. IN RESPONSE T O STATUTORY NOTICES, REPRESENTATIVES OF ASSESSEE APPEARED BEFO RE LD. AO AND FILED ALL REQUISITE DETAILS AS CALLED FOR. 3. DURING THE YEAR UNDER CONSIDERATION ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING OF MILK, MILK PRODUCTS, CATERING, SPICES, 3 ITA NO. 2064.DEL.2016 TEA AND OTHER FOOD ITEMS THROUGH MORE THAN HUNDRED BRANCHES SPREAD ACROSS VARIOUS PARTS OF THE COUNTRY. LD. AO OBSERVED THAT ASSESSEE HAS RECEIVED A SUM OF RS.1,54,660/- AS DIV IDEND FROM INVESTMENTS WHICH HAS BEEN OFFERED TO TAX. THE LD. AO WAS OF THE OPINION THAT ASSESSEE OFFERED IT TO TAX IN ORDER TO CIRCUMVENT PROVISIONS OF SECTION 14A READ WITH RULE 8D. HE ACC ORDINGLY COMPUTED DISALLOWANCE AS PER THE FORMULA PROVIDED U NDER RULE 8D AT RS.17,37,368/-. 4. AGGRIEVED BY THE ORDER OF LD. AO, ASSESSEE PREFE RRED APPEAL BEFORE LD. CIT (A) WHO CONFIRMED THE ADDITION MADE BY LD. AO WITH A DIRECTION TO EXCLUDE THE EXEMPT INCOME FROM TAXABLE TOTAL INCOME. AGGRIEVED BY THE ORDER OF LD. CIT (A) ASSES SEE IS IN APPEAL BEFORE US NOW. 5. THE ONLY ISSUE RAISED BY ASSESSEE IS IN RESPECT OF DISALLOWANCES COMPUTED BY LD. AO UNDER SECTION 14A READ WITH RULE 8D OF THE ACT. LD.AR SUBMITTED THAT ASSESSEE H AD OFFERED EXEMPT INCOME FOR TAXATION, ON WHICH LD.AO FURTHER COMPUTED DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. H E SUBMITTED THAT ASSESSEE HAS NOT CONSIDERED THE DIVIDEND RECEI VED TO BE EXEMPT INCOME UNDER SECTION 10 (38) AND HAS OFFERED IT TO TAX. ALTERNATIVELY LD. AR PROPOSED ; THAT DIVIDEND RECEIVED MAY BE CONSIDERED AS EXEMPT INCOME; AND DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D MA Y BE RESTRICTED TO THE EXEMPT INCOME EARNED. LD. DR SUPPORTED THE ORDER PASSED BY THE AUTHORITIE S BELOW. 6. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH TH E SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 4 ITA NO. 2064.DEL.2016 7. IT IS OBSERVED THAT ASSESSEE HAS OFFERED THE DIVIDE ND RECEIVED TO TAXATION. UNDER SUCH CIRCUMSTANCES WE D O NOT SEE ANY VIOLATION OF SECTION 14A AS THERE IS NO EXEMPT INCO ME CLAIMED BY ASSESSEE. SECTION 14A COMES INTO ACTION ONLY IF ASS ESSEE HAS EARNED INCOME WHICH IS EXEMPT AND HAS NOT BEEN INCL UDED IN THE TOTAL INCOME. 8. WE ARE THEREFORE INCLINED TO GRANT RELIEF TO THE AS SESSEE AND DELETE THE DISALLOWANCE COMPUTED BY THE AUTHORITIES BELOW UNDER SECTION 14A READ WITH RULE 8D OF THE ACT. ACCORDING LY GROUNDS RAISED BY ASSESSEE STANDS ALLOWED. 9. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.01.20 18. SD/- SD/- (R.S.SYAL) (BEENA A. PILLAI) VICE PRESIDENT JUDICIAL MEMBER DATE: 31.01.2018 BINITA COPY OF ORDER TO: - 1) THE APPELLANT; 2) THE RESPONDENT; 3) THE CIT; 4) THE CIT(A)-, NEW DELHI; 5) THE DR, I.T.A.T., NEW DELHI; TRUE COPY BY ORDER ITAT, NEW DELHI 5 ITA NO. 2064.DEL.2016 S.NO. DETAILS DATE 1 DRAFT DICTATED ON 24 .0 1 .201 8 2 DRAFT PLACED BEFORE AUTHOR 2 9 .0 1 .201 8 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 2 9 .01.2018 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR. PS/PS 6 KEPT FOR PRONOUNCEMENT ON 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE A.R. 10 DATE OF DISPATCH OF ORDER 6 ITA NO. 2064.DEL.2016