VIC Enterprises Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 2105/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7230 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Earning of tax free income; Rule 8D; Capital Gains
• Section: 14A; 44AB; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. KULDIP SINGH, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 2104/DEL/2017 : ASSTT. YEAR : 2010-11 ITA NO. 2105/DEL/2017 : ASSTT. YEAR : 2011-12 ITA NO. 2106/DEL/2017 : ASSTT. YEAR : 2012-13 ITA NO. 2107/DEL/2017 : ASSTT. YEAR : 2013-14 VIC ENTERPRISES PVT. LTD., 4 TH FLOOR, PUNJABI BHAWAN, 10, ROUSE AVENUE, NEW DELHI-110002 VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-26(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A AACV0132B ASSESSEE BY : SH. M. P. RASTOGI REVENUE BY : MS. ASHIMA NEB, SR. DR DATE OF HEARING: 21.01.2020 DATE OF PRONOUNCEMENT: 29.01.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDERS OF LD. CIT (A)-33, NEW DELHI DATED 19.01 .2017 AND THE ORDERS OF LD. CIT (A)-9, NEW DELHI DATED 20.02.2017 . 2. IN ITA NO. 2104/DEL/2017, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: 1. THE LD. CIT (APPEALS) OF INCOME TAX ERRED IN DI SALLOWING THE INTEREST PAYMENT OF RS.3,05,12,745/- KEEPING IN VIE W THE INTEREST FREE ADVANCES GIVEN BY THE APPELLANT COMPANY. FULL ARGUMENTS WILL BE ADVANCED AT THE TIME OF HEARING. 2. THE LD. CIT (APPEALS) OF INCOME TAX ERRED IN IGN ORING THE FACT THAT THE APPELLANT HAD ADVANCED THE LOANS AND ADVAN CES FROM ITS OWN FUNDS AND NOT OUT OF THE BORROWED FUNDS. ITA NO. 2340/DEL/2017 DEEPAK DHAR GUPTA 2 3. IN ITA NO. 2105/DEL/2017, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: 1. THE LD. CIT (APPEALS) OF INCOME TAX ERRED IN DI SALLOWING THE INTEREST PAYMENT OF RS.69,73,346/- KEEPING IN VIEW THE INTEREST FREE ADVANCES GIVEN BY THE APPELLANT COMPANY. FULL ARGUM ENTS WILL BE ADVANCED AT THE TIME OF HEARING. 2. THE LD. CIT (APPEALS) OF INCOME TAX ERRED IN IGN ORING THE FACT THAT THE APPELLANT HAD ADVANCED THE LOANS AND ADVAN CES FROM ITS OWN FUNDS AND NOT OUT OF THE BORROWED FUNDS. 4. IN ITA NO. 2106/DEL/2017, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: 1. THE LD. CIT (APPEALS) OF INCOME TAX ERRED IN DI SALLOWING THE INTEREST PAYMENT OF RS.68,81,215/- KEEPING IN VIEW THE INTEREST FREE ADVANCES GIVEN BY THE APPELLANT COMPANY. FULL ARGUM ENTS WILL BE ADVANCED AT THE TIME OF HEARING. 2. THE LD. CIT (APPEALS) OF INCOME TAX ERRED IN IGN ORING THE FACT THAT THE APPELLANT HAD ADVANCED THE LOANS AND ADVAN CES FROM ITS OWN FUNDS AND NOT OUT OF THE BORROWED FUNDS. 5. IN ITA NO. 2107/DEL/2017, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: 1. THE LD. CIT (APPEALS) OF INCOME TAX ERRED IN DI SALLOWING THE INTEREST PAYMENT OF RS.16,31,794/- KEEPING IN VIEW THE INTEREST FREE ADVANCES GIVEN BY THE APPELLANT COMPANY. FULL ARGUM ENTS WILL BE ADVANCED AT THE TIME OF HEARING. 2. THE LD. CIT (APPEALS) OF INCOME TAX ERRED IN IGN ORING THE FACT THAT THE APPELLANT HAD ADVANCED THE LOANS AND ADVAN CES FROM ITS OWN FUNDS AND NOT OUT OF THE BORROWED FUNDS. 3. THE LD. CIT (APPEALS) OF INCOME TAX ERRED IN NOT ACCEPTING THE DISALLOWANCE AMOUNTING TO RS.4,10,947/- U/S 14A MAD E BY THE APPELLANT AND ALLOWED THE ENHANCEMENT OF DISALLOWAN CE BY RS.40,79,583/- MADE BY THE ASSESSING OFFICER. THE I NCREASE IN DISALLOWANCE U/S 14A IS NOT AT ALL JUSTIFIED AND RE QUIRES REVISION. FULL ARGUMENTS AND DETAILED SUBMISSIONS WILL BE MADE AT THE TIME OF HEARING. ITA NO. 2340/DEL/2017 DEEPAK DHAR GUPTA 3 6. THE ISSUES INVOLVED IN THESE APPEALS TO BE ADJUD ICATED ARE, I. DISALLOWANCE OF INTEREST PAYMENT ON THE INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE. II. DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 196 1 MORE THAN THE DISALLOWANCE MADE BY THE ASSESSEE SUO MOTO . 7. THE ASSESSMENT YEAR 2012-13 IS TAKEN AS THE LEAD CASE FOR THE SAKE OF CONVENIENCE ON THE ISSUE OF INTEREST PAYMENTS. 8. BRIEF FACTS OF THE CASE TAKEN FROM THE RECORD AR E THAT, DURING THE RELEVANT FINANCIAL YEAR, THE ASSESSEE EARNED INTERE ST INCOME OF RS.8,73,13,968/- AND ALSO DEBITED INTEREST EXPENSES OF RS. 16,31,794/-. FROM THE DETAILS OF INTEREST PAID FURNISHED DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, IT IS SEEN THAT A TOTAL AMOUNT OF RS.1 6,31,794/- HAS BEEN PAID TO VARIOUS ENTITIES AGAINST THE TOTAL UNSECURED LOANS TAKEN AMOUNTING TO RS.1.20 CRORES DURING THE YEAR. A PERUSAL OF THE BALANCE SH EET OF THE ASSESSEE ALSO SHOWS THAT AN AMOUNT OF RS.268.74 CRORES HAS BEEN S HOWN AS LOANS AND ADVANCES GIVEN AS AT 31.03.2013. THE CORRESPONDING FIGURE AS AT 31.03.2012 WAS RS.255.05 CRORES. DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE DETAILS OF INTEREST PAID WERE CALLED FOR TO JUSTIFY THAT THE LOANS AND ADVANCES HAVE BEEN MADE FOR THE PURPOSE OF BUSINESS ACTIVITI ES ONLY. THE ASSESSING OFFICER EXAMINED WHETHER ANY INTEREST HAS BEEN CHAR GED ON THE ADVANCE. THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS USING I NTEREST BEARING FUNDS BY GIVING ADVANCES TO VARIOUS OTHER GROUP CONCERNS AND INDIVIDUALS WITHOUT CHARGING ANY INTEREST FROM THEM. THEREFORE, A PROPO RTIONATE DISALLOWANCE OUT OF THE INTEREST EXPENSES CLAIMED BY THE ASSESSEE WA S MADE BY THE ASSESSING OFFICER OF RS. 16,31,794/-. 9. IT WAS ARGUED BEFORE THE REVENUE AUTHORITIES THA T THE ASSESSING OFFICER HAS MADE A NOTIONAL COMPUTATION OF INTEREST @ 15% O N LOANS AND ADVANCES OF RS 268.74 CRORES. IT WAS ARGUED THAT THERE CAN BE N O NOTIONAL ADDITION OF INTEREST ON INTEREST FREE LOAN AND ADVANCES HAS BEE N DECIDED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF SHIVNANDAN BUILDCON PVT. LTD. V CIT 2015 (5) ITA NO. 2340/DEL/2017 DEEPAK DHAR GUPTA 4 TMI 192. THE LD. CIT (A) CONFIRMED THE ADDITION HOL DING THAT THE BURDEN LIES ON THE ASSESSEE THAT INTEREST FREE LOANS AND ADVANC ES WERE GIVEN FROM OWN FUNDS AND NO NEXUS HAS BEEN PROVED. 10. BEFORE US DURING THE ARGUMENT, THE LD. AR SUBMI TTED THAT THE DETAILS OF THE OWN FUNDS AVAILABLE WITH THE ASSESSEE. THE LD. DR SUPPORTED THE ORDER OF THE LD. CIT (A). THE DETAILS OF OWN FUNDS AND LOANS GIVEN ARE AS UNDER: DETAILS OF INTEREST FREE RESERVES AVAILABLE WITH TH E APPELLANT STATUTORY RESERVE CAPITAL REDUMPTION RESERVE SHARE PREMIUM ACCOUNT GENERAL RESERVE SURPLUS IN PROFIT ARID LOSS ACCOUNT TOTAL OWN FUNDS TOTAL LOANS AND ADVANCES INCLUDING INTEREST FREE ADVANCES AY 2009-10 AY 2010-11 AY 2011-12 AY 2012-13 AY 2013-14 514,875,000 3,290,000 7,750,000 8,345,000 2,276,216,422 2,810,476,422 2,432,503,976 578,625,000 3,290,000 7,750,000 8,345,000 2,531,129,296 3,129,139,296 2,230,416,670 648,000,000 3,290,000 7,750,000 8,345,000 2,808,554,199 3,475,939,199 2,563,334,206 711,950,000 3,290,000 7,750,000 8,345,000 3,065,216,748 3,796,551,748 2,550,497,117 791,409,000 3,290,000 7,750,000 8,345,000 3,383,048,545 4,193,842,545 2,687,485,465 11. WE FIND THAT THE LOANS AND ADVANCES INCLUDING I NTEREST FREE ADVANCES ARE FAR LESS THAN THE OWN FUNDS. AND HENCE, THE PRE SUMPTION THAT THE OWN FUNDS HAVE BEEN UTILIZED FOR EXTENDING THE LOANS AN D ADVANCES SETS IN. WHEN THE ASSESSEE HAS GOT OWN FUNDS AVAILABLE AT THEIR D ISPOSAL, NO DISALLOWANCE IS CALLED FOR AS ENUNCIATED IN VARIOUS JUDGMENTS. THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BRIGHT ENTERPRI SES PVT. LTD. VS. CIT IN ITA NO. 224/2013, DATED 24.07.2015, IT WAS HELD THAT IF THERE ARE INTEREST FREE FUNDS AVAILABLE THEN IT WILL BE PRESUMED THAT THESE HAVE BEEN MADE OUT OF INTEREST FREE FUNDS. SIMILAR VIEW WAS HELD IN THE C ASE OF CIT VS. KAPSONS ASSOCIATES INVESTMENT PVT. LTD. (2015) 381 ITR 204 (P&H) WHEREIN, THE HON'BLE COURT HAS HELD THAT INTEREST ON INVESTMENT IN OTHER PROPERTIES NOT FOR BUSINESS PURPOSE CANNOT BE DISALLOWED IF THE ASSESS EE IS HAVING SUFFICIENT INTEREST FREE FUNDS AT ITS DISPOSAL. SIMILAR VIEW W AS TAKEN BY THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES PVT. LTD. 63 TAXMAN 308 HELD THAT NO DISALLOWANCE IS CALLED FOR IF THE ASSESSEE HAS G OT OWN SURPLUS FUND. ITA NO. 2340/DEL/2017 DEEPAK DHAR GUPTA 5 12. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE JUDICIAL PRONOUNCEMENTS AND KEEPING IN VIEW THE FACT THAT TH E ASSESSEE HAS GOT SUFFICIENT OWN FUNDS TO EXTEND THE LOANS INTEREST F REE, WE HEREBY DIRECT THAT THE DISALLOWANCE MADE UNDER SECTION 36(1)(III) BE D ELETED. 13. THE OTHER GROUND RELATES TO DISALLOWANCE U/S 14 A R.W.R 8D(2)(III). THE FACTS MENTIONED BY THE AO ARE THAT THE REVENUE ENQU IRED VIDE QUERY LETTER DATED 26.06.2015 TO PROVIDE THE BASIS ON WHICH RS.4 ,10,947/- HAS BEEN DISALLOWED U/S 14A. THE ASSESSEE VIDE LETTER DATED 23.04.2015 STATED THAT WHILE CALCULATING THE DISALLOWANCE, THE ASSESSEE CO MPANY HAS NOT CONSIDERED INCOME OF THOSE INVESTMENT, WHICH ARE NOT CHANGED L AST YEAR. SINCE, NO ACTIVITY HAS BEEN DONE ON THESE INVESTMENTS, THE AL LOCATION OF EXPENSES OR DISALLOWANCE OF EXPENSES ON THESE INVESTMENTS IS NO T AT ALL JUSTIFIED. THE ASSESSING OFFICER OBSERVED THAT THE AUDITOR HAS GIV EN THE NOTE IN THE YEAR UNDER CONSIDERATION AND IN THE ASSESSMENT YEAR 2012 -13, THAT EXPENSES WERE DISALLOWED @ 0.5% IN CLAUSE 17(1) OF THE AUDIT REPO RT U/S 44AB IN FORM 3CB/3CD. HENCE, 0.5% OF AVERAGE VALUE OF INVESTMENT S WHICH COMES TO RS.44,90,230/- WAS DISALLOWED AS AGAINST RS.4,10,94 7/-. THE ASSESSING OFFICER RELIED ON THE JUDGMENT OF HONBLE SUPREME C OURT IN THE CASE OF CIT VS. UNITED TRUST LTD 200 ITR 488 ON PREPOSITION THA T PROPORTIONATE MANAGEMENT EXPENSES SHOULD BE DEDUCTED FROM GROSS D IVIDEND FOR THE PURPOSE OF THE DEDUCTION. 14. THE LD. CIT (A) FINDS THAT THE ASSESSEE DURING THE AY 2013-14 HAD EARNED TAX FREE DIVIDEND OF RS.33,34,17,195/- ON TH E VARIOUS INVESTMENTS MADE BY IT IN THE EQUITY SHARES AND UNITS. DURING T HE YEAR, THE ASSESSEE HAD NET LOSS ON ACCOUNT OF SALE OF LONG TERM EQUITY SHA RES ON WHICH NO STT IS PAID OF RS.2,03,21,156/-. THIS LOSS IS ALLOWED TO BE CAR RIED FORWARD AS LONG TERM CAPITAL GAINS ON WHICH NO STT IS PAID IS TAXABLE. W HEREAS, THERE WAS GAIN ON SALE OF LONG TERM SHARES OF RS 21,18,743/-, ON WHIC H LOSS IS NOT ALLOWED TO BE CARRIED FORWARD. BESIDES, THE ASSESSEE HAD TAKEN A POSITION THAT ANY INVESTMENT IN EQUITY SHARES OVER A PERIOD OF LESS T HAN ONE YEAR SHALL BE TAKEN ITA NO. 2340/DEL/2017 DEEPAK DHAR GUPTA 6 AS INCOME FROM BUSINESS AND HENCE WILL BE TAXED AT FULL RATE OF 30%. THE LD. CIT (A) AFTER DUE DELIBERATION HELD THAT AS PER RUL E 8D(2)(III), THE DISALLOWANCE OF RS.44,90,230/- IS JUSTIFIED. 15. BEFORE US, THE LD. AR ARGUED THAT THE DISALLOWA NCE U/S 14A SHOULD ONLY WITH RESPECT TO ACTUAL EXPENDITURE AND SUCH EXPENSE S SHOULD BE DIRECTLY CO- RELATED WITH THE EXEMPT INCOME. THE ONLY DISPUTE OF THIS GROUND IS 0.5% HAS APPLIED ON THE AVERAGE INVESTMENTS. THE LD. AR ARGU ED THAT EARNING DIVIDENDS IS NOT AN ASSURED ACTIVITY, NO BUSINESS MAN WILL EV ER INCUR A RECURRING IN ANTICIPATION OF NON-ASSURED RETURNS ESPECIALLY DIVI DENDS. HE FURTHER ARGUED THAT THE DIVIDEND EARNING WAS NEVER THE OBJECTIVE O F THE COMPANY AND THUS FINDING HAS NOT BEEN GIVEN BY THE ASSESSING OFFICER AS TO WHAT WAS MOTIVE OF THE COMPANY OF THE INVESTS RS. 111 CRORES. THE LD. AR ARGUED THAT KEEPING IN VIEW THE JUDGMENT OF THE SPECIAL BENCH OF ITAT IN T HE CASE OF VIREET INVESTMENT PVT. LTD. IN ITA NO. 502/DEL/2012 VIDE O RDER DATED 16.06.2017, THE NON-DIVIDEND YIELDING INVESTMENTS OUGHT TO HAVE BEEN EXCLUDED. 16. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PER USED THE MATERIAL AVAILABLE ON RECORD. 17. THE CLOSING VALUE OF OPENING VALUE OF INVESTMEN T AND AVERAGE INVESTMENT ARE AS UNDER:- CLOSING VALUE OF INVESTMENTS RS.99,12,68,846 OPENING VALUE OF INVESTMENTS RS.80,48,23,266 AVERAGE VALUE OF INVESTMENTS RS.89,80,46,056 18. THE ASSESSEE HAS DISALLOWED THE EXPENSES U/S 14 A OF RS.4,10,947/-. SINCE, THE ASSESSEE HAS NOT GIVEN ANY BASIS SO ASSE SSING OFFICER APPLIED RULE 8D(2)(III) AND WORKED OUT DISALLOWANCE OF RS.44,90, 230/-. 19. THE DETAILS OF THE INVESTMENTS DIVIDEND YIELD ING AND NON-EXEMPT INCOME IS AS UNDER: ITA NO. 2340/DEL/2017 DEEPAK DHAR GUPTA 7 VIC ENTERPRISES PRIVATE LIMITED NON CURRENT INVESTMENT AS AT 31ST MARCH 2013 PARTICULARS QUANTITY AS AT 31.3.13 QUANTITY AS AT 31.3.12 DIVIDEND INCOME LONG TERM INVESTMENT IN BONDS 6.70% INDIAN RAILWAYS FINANCE CORPORATION LTD. TAX RS.L LAC EACH 1,000 100,000,0 00 1,000 100,000,000 8.20% POWER FINANCE CORPORATION BOND 8,544 8,544,000 8,544 8,544,000 NATIONAL HIGHWAY AUTHORITY OF INDIA 8.20% 10 YEARS 7,417 7,417,000 7,417 7,417,000 8% INDIA RAILWAY FINANCE CORPORATION LTD. TAX FREE EACH 63,244,37 7.93% RURAL ELECTRIFICATION CORPORATION LTD.TAX FRE E RS.1000/- EACH 146,366,7 91 325,572,1 115,961,000 IN EQUITY SHARES IL& FS DEMAT - NO.10033578 QUOTED AND FULLY PAID UP ASIAN HOTELS (EAST) LTD. OF RS.10/ - EACH 54,000 18,486,41 54,000 18,486,414 243,000 ASIAN HOTELS (NORTH ) LTD. OF RS.10/ - EACH 109,975 34,440,71 109,975 34,440,719 264,963 ASIAN HOTELS (WEST) LTD. OF RS.10/ - EACH 71,608 22,215,77 71,608 22,215,771 308,632 BALRAMPUR CHINI MILLS LIMITED - - 10,000 538,968 CROMPTON GRAVES 100,000 12,261,01 30,000 4,896,475 52,000 CAIRN INDIA LTD. 30,000 9,137,003 32,500 DABUR INDIA LTD OF RS.1 / - EACH 217,734,0 25,773,59 217,734,000 25,773,596 304,827,600 DECCAN CHRONCILE 25,000 463,869 EAST INDIA HOTEL OF RS.2/- EACH - - 290,909 26,656,609 320,000 FUTURE CAPITAL HOLDING - 50,000 9,109,139 75,600 FRESENIUS KABI ONCOLOGY 27,083 2,838,646 GVK POWER & INFRASTRUCTURE 500,000 6,248,577 250,000 3,176,500 HDFC BANK LTD.OF RS.10/ - EACH 873,500 46,032,37 912,500 48,087,628 3,923,750 HENKEL INDIA LTD. 40,000 1,701,683 40,000 1,701,683 HINDUSTAN CONSTRUCTION 100,000 3,064,250 100,000 3,064,250 INDIA CO VENTURE LTD.OF RS.2/ - EACH 244,000 13,7.51,84 244,000 13,751,840 INDIAN HOTELS OF RS.L/ - EACH 100,000 4,283,068 100,000 4,283,068 INDORAMA SYNTHETIC LTD. - - 360,000 23,350,483 439,008 KARNATAKA BANK LTD. 950,000 123,280,4 950,000 123,280,420 3,325,000 LAKSHMI VILAS BANK 100,000 10,458,97 92,850 9,913,955 324,975 MANGLORE CHEMICAL & FERTILIZERS LTD. OF RS.10/ - EACH 1,000,000 39,514,48 1,000,000 39,514,482 1,912,921 MEGA CORP. LTD. OF RS.1 / - EACH 100,000 67,823 100,000 67,823 MOIL LTD. 3,785 1,419,375 3,785 1,419,375 18,925 NHPC LTD. OF RS.10/ - EACH 150,000 5,424,595 150,000 5,424,595 105,000 PANTALOON RETAIL 60,000 18,533,69 60,000 18,533,699 PUNJ LLYOD LTD. - - 85,000 10,578,443 25,950 PVP VENTURE LTD. OF RS.L0/ - EACH 500,000 8,837,193 500,000 8,837,193 SHREE RENUKA SUGAR LTD. 60,000 3,026,429 60,000 3,026,429 SJVN LTD. 3,224,074 83,825,92 3,224,074 83,825,924 3,030,630 TATA COMMUNICATION 20,000 4,569,494 20,000 4,569,494 40,000 VOLTAS LTD. 80,000 7,106,192 - - ZUARI AGRO INDUSTRIES LTD. OF RS.10/ - EACH 90,147 18,713,53 29,990 9,546,806 89,970 ZUARI GLOBAL LTD.OF RS.10/- EACH 29,990 4,339,023 - - 59,980 529,815,9 85 558,071,781 KOTAK MAHINDRA BANK DEMAT-NO. 10553664 QUOTED AND FULLY PAID UP ASIAN HOTELS (EAST) LTD. 3,050 728,525 3,050 728,525 13,725 ASIAN HOTELS (NORTH) LTD. OF RS.10/ - EACH 5,050 1,249,744 5,050 1,249,744 7,575 ASIAN HOTELS (WEST) LTD. 5,550 1,270,758 5,550 1,270,758 DHAMPUR SUGAR 114,261 3,612,601 114,261 3,612,601 142,826 DLF LTD 1,000 271,523 1,000 271,523 2,000 ELDECO HOUSING FINANCING LTD. 14,843 2,991,497 11,832 2,388,240 GVK POWER & INFRASTRUCTURE 174,600 2,827,561 174,600 2,827,561 HINDUSTAN CONSTRUCTION CO. LTD. 42,500 1,566,024 42,500 1,566,024 HINDUSTAN PETROLIUM LTD. OF RS.10/ - EACH 3,500 1,227,767 3,500 1,227,767 29,750 IDBI BANK LTD. 5,500 712,933 5,500 712,933 8,250 IL & FS INVESTMART LTD. OF RS.2/-EACH 42,845 645,021 42,845 645,021 64,268 ITA NO. 2340/DEL/2017 DEEPAK DHAR GUPTA 8 VIC ENTERPRISES PRIVATE LIMITED INDIA OVERSEAS BANK INDIAN OIL CORPORATION LTD. OF RS.10/-EACH INDORAMA SYNTHETIC LTD. J.P. HYDRO J.P. INFRATECH LTD. MAHINDRA FORGEING LTD. OF RS.10/-EACH MANGLORE CHEMICAL & FERTILIZERS LTD. OF RS.10/- EAC H MIRC ELECTRONICS LTD. OF RS.1/- EACH NETWORK 18 MEDIA AND INVESTMENT LTD. OF RS.5/-EACH POLY PLEX CORPORATION LTD. RSWM LTD. OF RS. 10/-EACH SJVN LTD. STATE BANK OF BIKANER & JAIPUR VOLTAS LIMITED ZUARI AGRO INDUSTRIES LTD. OF RS.10/-EACH ZUARI GOLBAL LTD. OF RS.10/- EACH 1,500 4,070 84,001 27,000 386 611,601 13,243 8,846 46,950 5,000 50,101 750 1,250 2,604 2,604 187,547 1,011,515 4,482,650 1,049,364 - 85,280 18,117,649 306,788 1,328,971 8,064,379 566,314 1,185,386 371,520 126,117 495,034 412,453 1,500 4,070 66,501 27.000 - 386 574,101 13,243 8,846 40,700 5,000 50,000 750 1,250 2,604 187,547 1,011,515 4,106,190 1,049,364 - 85,280 16,586,306 306,788 1,328,971 7,087,260 566,314 1,183,350 371,520 126,117 907,487 6,750 20,350 230,299 47,000 10,875 2,000 7,812 5,208 54,894,918 51,404,704 BARCLAYS SECURITIES INDIA PVT. LTD. DEMAT A/C 10006282 QUOTED AND FULLY PAID UP ANDHRA SUGAR CITI UNION BANK OF RS.1/- EACH - - - - IN EQUITY SHARES UNQUOTED AND FULLY PAID- UP IN SUBSIDIARIES :- BETTEROPTION ESTATE PVT. LTD. OF RS.10/- EACH BUMAN RESORTS PVT. LTD. OF RS.10/- EACH HILLGROW INFRACON PVT. LTD. OF RS.10/ EACH NEWAGE CAPITAL SERVICES PVT. LTD. OF RS.10/- EACH S2 PROPERTY PVT. LTD. OF RS. 10/- EACH SUNSHINE INDIA PVT. LTD. OF RS.10/- EACH TOUCHSTONE FUND ADVISORS PVT. LTD. 9,000 8,000 10,000 17,101 - 340,010 10,000 90,000 80,442 100,000 233,285 - 2,190,032 100,000 9,000 8,000 10,000 17,101 - 340,010 90,000 80,442 100,000 233,285 - 2,190,032 IN OTHERS:- A.V.B. FINANCE PVT. LTD. OF RS.10/- EACH AYURVET LTD. OF RS. 10/- EACH BONJOUR INVESTMENT CO. PVT. LTD. OF RS.10/- EACH DA BUR AYURVEDIC SPC. LTD. OF RS. 10/- EACH DABUR PHARMACEUTICALS LTD. OF RS. 10/- EACH DABUR SECURITIES PVT. LTD. DR. FRESH REAL ESTATE VENTURE PVT. LTD. OF RS.10/- GARNER FINANCE & SECURITIES PVT. LTD. MANESWARI TRADING CO. OF RS.100/- EACH NUMRO UNO INTERNATIONAL LTD. OF RS.10/-EACH SUNEHARI EXPORTS LIMITED OF RS. 10/- EACH SONAKASHI MARKET PVT. LTD .OF RS.10/- EACH 10% NCD MG BURMAN CAPITAL ADVISORS PVT.LTD.10/- EAC H LESS :- PROVISION FOR DIMUNITION IN VALUE OF INVEST MENT 3,450,010 16,665 184,750 12,415 13,500 789,370 50,000 66,000 6,150 26,000 55,000 10,500 9,000,000 30,807,508 166,790 1,847,500 124,268 45,040 7,895,4000 500,000 29,040,000 615,515 5,201,300 550,000 2,100,000 90,000,000 -5,201,300 3,450,010 16,665 184,750 12,415 13,500 789,370 50,000 66,000 6,150 26,000 55,000 10,500 9,000,000 30,807,508 166,790 1,847,500 124,268 45,040 7,895,400 500,000 29,040,000 615,515 5,201,300 550,000 2,100,000 90,000,000 -5,201,300 41,662 166,485,780 166,385,780 INVESTMENT IN PMS KAIZEN TRUST_DOMESTIC SCHEME-1 4,500,000 3,000,000 4,500,000 3,000,000 OTHER INVESTMENT IN MOVABLE PROPERTIES:- JEWELLERY * 1,355,129 1,355,129 PAINTING 22,140,500 22,140,500 ARTIFACTS OF RUBY STONE 3,175,000 3,175,000 TOTAL IN 1,107,939,475 921,493,895 921,493,895 320,060,154 ITA NO. 2340/DEL/2017 DEEPAK DHAR GUPTA 9 VIC ENTERPRISES PRIVATE LIMITED VIC ENTERPRISES PRIVATE LIMITED DETAILS OF NON CURRENT INVESTMENT FROM WHICH NO EXEMP T INCOME HAS BEEN EARNED IN AY 2013 - 14 AS AT 31.3.2011 AS AT 31.3.2010 TOTAL INVESTMENTS OTHER THAN JWELLERY, PAINTING, AR TIFACT & NCD 991,268,846 804,823,266 LESS:- INVESTMENT FROM WHICH NO DIVIDEND RECEIVED D URING THE YEAR 6.70% INDIAN RAILWAYS FINANCE CORPORATION LTD. TAX FREE BOND OF RS. 1 LAC EACH 100,000,000 100,000,000 8.20% POWER FINANCE CORPORATION BOND 8,544,000 8,544,000 NATIONAL HIGHWAY AUTHORITY OF INDIA 8.20% 10 YEARS BONDS 7,417,000 7,417,000 8% INDIA RAILWAY FINANCE CORPORATION LTD. TAX FREE BONDS OF 1000/- EACH 63,244,372 - 7.93% RURAL ELECTRIFICATION CORPORATION LTD. TAX FREE BONDS OF RS.1000/ - EACH 146,366,791 - BALRAMPUR CHINI MILLS LIMITED - 538,968 DECCAN CHRONCILE 463,869 - FRESENIUS KABI ONCOLOGY 2,838,646 - GVK POWER & INFRASTRUCTURE 6,248,577 3,176,500 HENKEL INDIA LTD. 1,701,683 1,701,683 HINDUSTAN CONSTRUCTION 3,064,250 3,064,250 INDIA CO VENTURE LTD. OF RS.2/ - EACH 13,751,840 13,751,840 INDIAN HOTELS OF RS.1 / - EACH 4,283,068 4,283,068 MEGA CORP. LTD. OF RS.1 / - EACH 67,823 67,823 PANTALOON RETAIL 18,533,699 18,533,699 PVP VENTULE LTD. OF RS.L0/-EACH 8,837,193 8,837,193 SHREE RENUKA SUGAR LTD. 3,026,429 3,026,429 VOLTAS LTD. 7,106,192 - ASIAN HOTELS (WEST) LTD. 1,270,758 1,270,758 ELDECO HOUSING FINANCING LTD. 2,991,497 2,388,240 GVK POWER & INFRASTRUCTURE 2,827,561 2,827,561 HINDUSTAN CONSTRUCTION CO. LTD. 1,566,024 1,566,024 INDORAMA SYNTHETIC LTD. 4,482,650 4,106,190 J.P. HYDRO 1,049,364 1,049,364 J.P. INFRATECH LTD. - - MAHINDRA FORGEING LTD. OF RS.10/-EACH 85,280 85,280 MANGLORE CHEMICAL & FERTILIZERS LTD. OF RS.10/- EAC H 18,117,649 16,586,306 MIRC ELECTRONICS LTD. OF RS.1 / - EACH 306,788 306,788 NETWORK 18 MEDIA AND INVESTMENT LTD. OF RS.5/-EACH 1,328,971 1,328,971 RSWM LTD. OF RS. 10/ - EACH 566,314 566,314 BARCLAYS SECURITIES INDIA PVT. LTD. DEMAT A/C 10006282 - - ANDHRA SUGAR - - CITI UNION BANK OF RS.1 / - EACH - - BETTEROPTION ESTATE PVT. LTD. OF RS.10/ - EACH 90,000 90,000 BUMAN RESORTS PVT. LTD. OF RS.10/ - EACH 80,442 80,442 HILLGROW INFRACON PVT. LTD. OF RS.10/ - EACH 100,000 100,000 NEWAGE CAPITAL SERVICES PVT. LTD. OF RS.10/- EACH 233,285 233,285 S2 PROPERTY PVT. LTD. OF RS. 10/- EACH - - SUNSHINE INDIA PVT. LTD. OF RS.10/- EACH 2,190,032 2,190,032 TOUCHSTONE FUND ADVISORS PVT. LTD. 100,000 - A.V.B. FINANCE PVT. LTD. OF RS.10/- EACH 30,807,508 30,807,508 BONJOUR INVESTMENT CO. PVT. LTD. OF RS.10/- EACH 1,847,500 1,847,500 DABUR AYURVEDIC SPC. LTD. OF RS. 10/- EACH 124,268 124,268 DABUR PHARMACEUTICALS LTD. OF RS. 10/ - EACH 45,040 45,040 DABUR SECURITIES PVT. LTD. 7,895,400 7,895,400 DR.FRESH REAL ESTATE VENTURE PVT. LTD. OF RS.10/ - 500,000 500,000 GARNER FINANCE SI SECURITIES PVT. LTD. 29,040,000 29,040,000 MANESWARI TRADING CO. OF RS.100/ - EACH 615,515 615,515 NUMRO UNO INTERNATIONAL LTD. OF RS.L0/ - EACH 5,201,300 5,201,300 SUNEHARI EXPORTS LIMITED OF RS. 10/- EACH 550,000 550,000 SONAKASHI MARKET PVT. LTD. OF RS.10/ - EACH 2,100,000 2,100,000 10% NCD MG BURMAN CAPITAL ADVISORS PVT.LTD.10/ - EACH 90,000,000 90,000,000 LESS :- PROVISION FOR DIMUNITION IN VALUE OF INVEST MENT (5,201,300) (5,201,300) INVESTMENT IN PMS - KAIZEN TRUST _DOMESTIC SCHEME - 1 4,500,000 3,000,000 TOTAL INVESTMENTS ON WHICH NO DIVIDEND WAS RECEIVED 600,907,279 374,243,239 BALANCE INVESTMENTS 390,361,568 430,580,026 AVERAGE OF BALANCE INVESTMENTS 410,470,797 0.5% OF AVERAGE INVESTMENT 2,052,354 ITA NO. 2340/DEL/2017 DEEPAK DHAR GUPTA 10 20. THE HONBLE DELHI HIGH COURT PRIMARILY DECIDED THE ISSUE REGARDING APPLICABILITY OF SECTION 14A EVEN IF NO DIVIDEND IN COME WAS EARNED. THE HONBLE HIGH COURT IN ITS DECISION OBSERVED AS UNDE R: 14. ON THE ISSUE WHETHER THE RESPONDENT-ASSESSEE C OULD HAVE EARNED DIVIDEND INCOME AND EVEN IF NO DIVIDEND INCO ME WAS EARNED, YET SECTION 14A CAN BE INVOKED AND DISALLOW ANCE OF EXPENDITURE CAN BE MADE, THERE ARE THREE DECISIONS OF THE DIFFERENT HIGH COURTS DIRECTLY ON THE ISSUE AND AGA INST THE APPELLANT-REVENUE. NO CONTRARY DECISION OF A HIGH C OURT HAS BEEN SHOWN TO US. THE PUNJAB AND HARYANA HIGH COURT IN COMMISSIONER OF INCOME TAX, FARIDABAD VS. MIS. LAKH ANI MARKETING INCL., ITA NO. 970/2008, DECIDED ON 02.04 .2014, MADE REFERENCE TO TWO EARLIER DECISIONS OF THE SAME COUR T IN CIT VS. HERO CYCLES LIMITED, [2010]323 ITR 518 AND CIT VS. WINSOME TEXTILE INDUSTRIES LIMITED, [2009] 319 ITR 204 TO H OLD THAT SECTION 14A CANNOT BE INVOKED WHEN NO EXEMPT INCOME WAS EARNED. THE SECOND DECISION IS OF THE GUJARAT HIGH COURT IN COMMISSIONER OF INCOME TAX-I VS. CORRTECH ENERGY (P .) LTD. [2014] 223 TAXMANN 130 (GUJ.). THE THIRD DECISION I S OF THE ALLAHABAD HIGH COURT IN INCOME TAX APPEAL NO. 88 OF 2014, COMMISSIONER OF INCOME TAX (II) KANPUR, VS. MIS. SH IVAM MOTORS (P) LTD. DECIDED ON 05.05.2014. IN THE SAID DECISIO N IT HAS BEEN HELD:- 'AS REGARDS THE SECOND QUESTION, SECTION 14A OF THE ACT PROVIDES THAT FOR THE PURPOSES OF COMPUTING THE TOT AL INCOME UNDER THE CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. HENCE, WHAT SECTION 14A PROVIDES IS THAT IF THERE I S ANY INCOME WHICH DOES NOT FORM PART OF THE INCOME UNDER THE AC T, THE EXPENDITURE WHICH IS INCURRED FOR EARNING THE INCOM E IS NOT AN ALLOWABLE DEDUCTION. FOR THE YEAR IN QUESTION, THE FINDING OF FACT IS THAT THE ASSESSEE HAD NOT EARNED ANY TAX FREE IN COME. HENCE, IN THE ABSENCE OF ANY TAX FREE INCOME, THE CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT F OR DISALLOWANCE.. THE COURTS FURTHER HELD THAT THE INCOME EXEMPT UNDE R SECTION 10 IN A PARTICULAR ASSESSMENT YEAR, MAY NOT HAVE BEEN EXEMPT EARLIER AND CAN BECOME TAXABLE IN FUTURE YEARS. FUR THER, WHETHER INCOME EARNED IN A SUBSEQUENT YEAR WOULD OR WOULD N OT BE TAXABLE, MAY DEPEND UPON THE NATURE OF TRANSACTION ENTERED INTO IN THE SUBSEQUENT ASSESSMENT YEAR. FOR EXAMPLE, LON G TERM. CAPITAL GAIN ON SALE OF SHARES IS PRESENTLY NOT TAX ABLE WHERE ITA NO. 2340/DEL/2017 DEEPAK DHAR GUPTA 11 SECURITY TRANSACTION TAX HAS BEEN PAID, BUT A PRIVA TE SALE OF SHARES IN AN OFF MARKET TRANSACTION ATTRACTS CAPITA L GAINS TAX. IT IS AN UNDISPUTED POSITION THAT RESPONDENT ASSESSEE IS AN INVESTMENT COMPANY AND HAD INVESTED BY PURCHASING A SUBSTANTIAL NUMBER OF SHARES AND THEREBY SECURING R IGHT TO MANAGEMENT. POSSIBILITY OF SALE OF SHARES BY PRIVAT E PLACEMENT ETC. CANNOT BE RULED OUT AND IS NOT ALL IMPROBABILI TY. DIVIDEND MAY OR MAY NOT BE DECLARED. DIVIDEND IS DECLARED BY THE COMPANY AND STRICTLY IN LEGAL SENSE, A SHAREHOLDER HAS NO CONTROL AND CANNOT INSIST ON PAYMENT OF DIVIDEND. WHEN DECL ARED, IT IS SUBJECTED TO DIVIDEND DISTRIBUTION TAX. 21. HENCE, KEEPING IN VIEW THE LEGAL AND FACTUAL PO SITION OF THE CASE, WE HEREBY HOLD THAT THE DISALLOWANCE NEEDS TO BE RESTR ICTED TO THE DIVIDEND YIELDING INVESTMENT ONLY FOR THE YEARS INVOLVED. TH E ASSESSING OFFICER IS HEREBY DIRECTED TO RE-COMPUTE THE DISALLOWANCE TAKI NG INTO CONSIDERATION, THE DIVIDEND YIELDING INVESTMENTS. 22. IN THE RESULT, WE HEREBY HOLD THAT (A) NO DISALLOWANCE ON THE INTEREST IS REQUIRED WHE N THE ASSESSEE HAS GOT SUFFICIENT OWN FUNDS AT THEIR DISPOSAL TO LEND/ADVA NCE. (B) THE DISALLOWANCE UNDER RULE 8D(2)(III) BE RESTR ICTED TO DIVIDEND YIELDING INVESTMENTS TO DETERMINE THE AVERAGE VALUE OF THE I NVESTMENTS. 23. THE APPEALS OF THE ASSESSEE ARE HEREBY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 29/01/2020. SD/- SD/- (KULDIP SINGH) (D R. B. R. R. KUMAR) JUDICIAL MEMBER ACCO UNTANT MEMBER DATED: 29/01/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR