Agsons Agencies (I) Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 2166/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87031 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 12-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: GIRISH C HAUDHARY
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI T.S. KAPOOR ITA NO. 2166/DEL/2013 ASSESSMENT YEAR: 2009-10 AGSONS AGENCIES (I) PVT. LTD. VS. DEPUTY CIT, K-1, GREEN PARK EXTENSION CIRCLE-1(1), NEW DELHI. NEW DELHI. (PAN: AAACA0346C) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI GIRISH C HAUDHARY, CA RESPONDENT BY: MS. Y. KAKKAR, D R DATE OF HEARING : 17.12.2014 DATE OF PRONOUNCEMENT: :03.2015 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER W HEREBY THE LEARNED CIT(APPEALS) HAS CONFIRMED THE ADDITION MADE UNDER SECTION 14A READ WITH RULE 8D AMOUNTING TO RS.13,58,851. 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY T HE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILA BLE ON RECORD AND THE DECISIONS RELIED UPON. 3. THE CONTENTIONS OF THE LEARNED AR AGAINST THE AD DITION IN QUESTION REMAINED THAT THE MAIN BUSINESS OF THE ASSESSEE WAS MANUFACTURING AND TRADING OF METAL AND ALLOYS. THE ASSESSEE HAS NOT I NCURRED ANY EXPENDITURE 2 TOWARDS EARNING OF DIVIDEND INCOME AND THAT THE DIV IDEND INCOME EARNED RELATES TO INVESTMENTS MADE BY THE ASSESSEE ARE COM PRISES OF INVESTMENT MADE IN EARLIER YEARS OUT OF ASSESSEES OWN FUNDS A S WELL AS DURING THE YEAR THE INVESTMENTS WERE MADE OUT OF THE SURPLUS BALANC E. HE CONTENDED THAT THE ASSESSEE HAS NOT PAID ANY INTEREST ON FUNDS UTILIZE D FOR INVESTMENT IN THE SHARES, HENCE, PROVISIONS LAID DOWN UNDER SEC. 14A ARE NOT APPLICABLE TO ITS CASE AND, THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE IGNORING THE ABOVE SUBMISSION MADE BEF ORE HIM. HE SUBMITTED FURTHER THAT THE ASSESSING OFFICER HAS NOT IDENTIFI ED THE EXPENSES INCURRED TO EARN DIVIDEND. 1.1% DIVIDEND ONLY HAS BEEN EARNED O UT OF TOTAL EXPENSES. HE SUBMITTED THAT THE EXPENSES WERE RELATING TO BUSINE SS PURPOSE AND NOT FOR EARNING DIVIDEND. 4. THE LEARNED DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. SHE SUBMITTED THAT BEFORE INVOKI NG THE PROVISIONS UNDER SEC. 14A AND RULE 8D, THE ASSESSING OFFICER HAS REC ORDED HIS SATISFACTION FOR DOING SO AT PAGE NO.2 OF THE ASSESSMENT ORDER. HE SUBMITTED THAT SUBSTANTIAL DIVIDEND INCOME HAS BEEN EARNED AND THE ASSESSEE HAS ALSO NOT MAINTAINED SEPARATE ACCOUNT. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) MAXOPP INVESTMENT. LTD. VS. CIT - 347 ITR 272 ( DEL.); II) CATHOLIC SYRIAN BANK LTD. VS. CIT - 330 ITR 55 6 (KER.); 3 5. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THERE IS NO DISPUTE REGARDING THE APPLICABILITY OF THE PROVISIONS LAID DOWN UNDER SEC. 14A OF THE INCOME-TAX ACT, 1961 READ WITH RULE 8D OF THE I.T. RULES, 1962 DURING THE YEAR UNDER CONSIDERATION. STILL THERE ARE SOME IMPO RTANT ASPECTS OF THE CASE WHICH ARE REQUIRED TO BE CONSIDERED BEFORE INVOKING THE ABOVE SAID PROVISIONS TO WORK OUT THE EXPENDITURE IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME. THESE ASPECTS ARE THE SUBMISSIONS OF THE ASSESSEE THAT DIVIDEND INCOME IS ENTIRELY FROM MUTUAL FUNDS, NO EXPENDITUR E WERE INCURRED BY THE ASSESSEE COMPANY TOWARDS EARNING OF DIVIDEND INCOME , DIVIDEND INCOME EARNED RELATES TO INVESTMENTS MADE BY THE ASSESSEE WHICH COMPRISES OF INVESTMENTS MADE IN THE EARLIER YEARS OUT OF THE A SSESSEES OWN FUNDS AS WELL AS DURING THE YEAR THE INVESTMENTS WERE MADE O UT OF SURPLUS BALANCE AND THE ASSESSEE HAS NOT PAID ANY INTEREST ON FUNDS UTILIZED FOR INVESTMENT. AS PER THE AUDITED BALANCE SHEET OF THE COMPANY, TH E COMPANY HAD SECURED LOANS AS UNDER: SBI CC AGAINST STOCK & BOOK DEBTS. RS. 99135/- TERM LOAN FROM SBI IN FOREIGN CURRENCY RS. 48,875 ,000/- TERM LOAN FROM SBI AGAINST BUILDING RS. 20,373,1 73/- BUYERS CREDIT FROM FOREIGN BANK RS. 101,075,105/ - 6. IT WAS SUBMITTED FURTHER THAT CC LIMIT OF RS.99, 135 IS THE LOAN WHICH CAN BE UTILIZED FOR INVESTMENT BUT THIS AMOUNT IS V ERY SMALL IN COMPARISON TO VALUE OF INVESTMENT. THE OTHER LOANS ARE FOR SPECIF IC PURPOSES AND PAID 4 DIRECTLY BY BANKERS TO THE CREDITORS AND COULD NOT UTILIZE FOR INVESTMENT IN MUTUAL FUNDS. BESIDES, THE COMPANY HAS NOT PAID ANY INTEREST ON SECURED LOANS. THE ASSESSEE COMPANY HAD ISSUED INSTRUCTION TO ITS BANKERS, STATE BANK OF INDIA THAT WHENEVER SURPLUS FUNDS ARE THERE IN THE ACCOUNT, IT SHOULD INVEST THEM IN VIABLE MUTUAL FUNDS SO THAT THE COMP ANY CAN EARN SOME RETURN FROM THE IDEAL FUND. SO THE COMPANY HAS NOT PAID AN Y INTEREST ON THE FUNDS UTILIZED FOR INVESTMENT IN MUTUAL FUNDS. IT WAS SUB MITTED THAT THE TOTAL INCOME OF THE ASSESSEE IS RS.100,53,36,873 AND THE DIVIDEND INCOME CLAIMED EXEMPT IS RS.17,90,486 WHICH IS AROUND 00.18%, THER EFORE, 99.82% OF THE INCOME REPRESENTS SALES OF MANUFACTURED AND TRADED ITEM AND OTHER INCOME WHICH IS TAXABLE INCOME. VERY NEGLIGIBLE PORTION OF THE TOTAL INCOME OF THE ASSESSEE IS EXEMPT INCOME, CONTENDED THE ASSESSEE. 7. THE LEARNED AR SUBMITTED THAT ABOVE SUBMISSIONS WERE ALSO MADE BEFORE THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDINGS BUT THE ASSESSING OFFICER WITHOUT EXAMINING THE COR RECTNESS OF THE ABOVE SUBMISSION HAS SIMPLY STATED THAT NO REPLY HAS BEEN SUBMITTED BY THE ASSESSEE. THE ASSESSING OFFICER WAS THUS NOT JUSTIF IED IN APPLYING THE PROVISIONS OF SEC. 14A READ WITH RULE 8D WITHOUT RE CORDING PROPER SATISFACTION ABOUT THE CORRECTNESS OF THE ABOVE SUB MISSION. 5 8. WITHOUT GOING INTO THE CONTROVERSY AS TO WHETHER ABOVE SUBMISSIONS AS CLAIMED BY THE LEARNED AR WERE FURNISHED BEFORE THE ASSESSING OFFICER OR NOT, WE IN THE INTEREST OF JUSTICE SET ASIDE THE MATTER BEFORE THE ASSESSING OFFICER TO EXAMINE THE CORRECTNESS OF ABOVE SUBMISS IONS SUPPORTED BY THE BALANCE SHEET AND OTHER DOCUMENTS AVAILABLE ON RECO RD AND THEN RECORD HIS SATISFACTION ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED BY THE ASSESSEE IN EARNING EXEMPT INCOME BEFORE INVOKING THE PROVISIONS LAID DOWN UNDER SEC. 14A OF THE INCOME-TAX ACT, 1961 READ WITH RULE 8D OF THE I.T. RULES, 1962. IT IS NEEDLESS TO MENTION OVER HERE THAT WHILE DISPOSING OF THE MATTER AS DIR ECTED ABOVE, THE ASSESSING OFFICER WILL AFFORD ADEQUATE OPPORTUNITY OF BEING H EARD. IT IS ALSO MADE CLEAR THAT IF THE ASSESSING OFFICER IS SATISFIED ON THE C ORRECTNESS OF THE ABOVE SUBMISSIONS OF THE ASSESSEE THEN THERE IS NO NEED F OR MAKING ANY DISALLOWANCE UNDER SEC. 14A READ WITH RULE 8D. THE GROUND IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 9. IN RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 13.03.201 5 SD/- SD/- ( T.S. KAPOOR ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13 /03/2015 MOHAN LAL 6 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED ON COMPUTER 13.03.2015 DRAFT PLACED BEFORE AUTHOR 13.03.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 13.03.2015 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 16.03.2015 KEPT FOR PRONOUNCEMENT ON FILE SENT TO THE BENCH CLERK 17.03.2015 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.