M/s. Sunrays Properties & Investment Co. Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 2184/DEL/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2336 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 11-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANACIT
• Assessee Lawyers: MANU K GIRI
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER AND. SH. KULDIP SINGH, JUDICIAL MEMBER ITA NO.2184/DEL/2017 ASSESSMENT YEAR: 2012-2013 M/S. SUNRAYS PROPERTIES & INVESTMENT CO. PVT. LTD. 414/1, 4 TH FLOOR, DDA COMM, COMPLEX, DISTT. CENTER, JANAKPURI, NEW DELHI PAN NO. AAACS3655C VS. ITO WARD 24(3) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. MANU K. GIRI, ADVOCATE RESPONDENT BY SH. S. S. RANA,CIT DR DATE OF HEARING: 04/12/2019 DATE OF PRONOUNCEMENT: 06/12/2019 ORDER PER R.K PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 18.01.2017 OF THE CIT(A)-15, NEW DELHI RELATING TO A.Y.2012-13. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE READS AS UNDER :- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL ), ERRED IN REJECTING ASSESSEE'S CONTENTION THAT THE DISALLOWAN CE SHOULD BE PAGE | 2 RESTRICTED TO RS.3,41,12,414/- BEING THE AMOUNT OF EXEMPT DIVIDEND INCOME EARNED BY THE APPELLANT COMPANY DUR ING THE YEAR UNDER ASSESSMENT AGAINST THE DISALLOWANCE OF R S. 12,30,89,691/- U/S 14A R. W. R. 8 D OF THE INCOME T AX ACT MADE BY ASSESSING OFFICER, WHEREAS THE DISALLOWANCE, IN VIEW OF THE DECISIONS OF THE JURISDICTIONAL DELHI HIGH COURT HO LDING THAT THE DISALLOWANCE U/S 14A CANNOT EXCEED THE AMOUNT OF EX EMPT INCOME EARNED BY THE ASSESSEE. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF DEALING IN SHARE S, ACCEPTING AND MAKING INTER CORPORATE DEPOSITS AND OTHER LINE OF ACTIVITIES AS PROVIDED IN MOA OF THE COMPANY. IT FILED ITS RETURN OF INCOME ON 29.09.2012 DECLARING LOSS OF RS.33,87,215/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED FROM THE P & L ACCOUNT OF THE ASSESSEE THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.3,41,12,414/-. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE DISALLOWANCE U/S. 14 A OF THE IT ACT SHO ULD NOT BE MADE FOR EARNING THE EXEMPT INCOME. IN RESPONSE TO THE SAME, THE ASSESSEE FILED A DETAILED WORKING FOR DISALLOWA NCE U/S. 14A AND CALCULATED THE SAME AT RS.12,12,09,906/-. THE AO COMPUTED SUCH DISALLOWANCE AT RS.12,30,89,691/-. AFTER CONSI DERING THE DISALLOWANCE ALREADY COMPUTED BY THE ASSESSEE AT RS.12,12,09,906/-, THE AO MADE FURTHER DISALLOWANCE OF RS.18,79.758/- TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE ASSESSEE FILED ON APPEAL BEFORE THE CIT(A) C HALLENGING THE ADDITION. IT ALSO TOOK AN ADDITIONAL GROUND BY STATING THAT THE PAGE | 3 DISALLOWANCE U/S.14A CANNOT EXCEED THE EXEMPT INCOM E. HOWEVER, THE LD. CIT(A) REJECTED THE GROUND RAISED BY THE ASSESSEE AND UPHELD THE DISALLOWANCE SO MADE BY THE AO. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET F ILED THE COPY OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2009-10 AND SUBMITTED THAT ON IDENTICAL CIRCUMS TANCES THE TRIBUNAL HAS DIRECTED THE AO TO MAKE THE DISALLOWAN CE TO THE EXTENT CLAIMED BY THE ASSESSEE AS EXEMPT. HE ACCOR DINGLY SUBMITTED THAT THIS BEING A COVERED MATTER IN FAVOU R OF THE ASSESSEE, THE GROUND RAISED BY THE ASSESSEE SHOULD BE ALLOWED. 7. THE LD. DR ON THE OTHER HAND SUPPORTED THE ORDER OF THE CIT(A). 8. AFTER HEARING BOTH THE SIDES WE FIND THE ACTUAL DIVIDEND EARNED BY THE ASSESSEE IN THE INSTANT CASE IS ONLY RS.3,41,12,414/-. THE HONBLE DELHI HIGH COURT IN T HE CASE OF CIT VS. HOLCIM INDIA PRIVATE LIMITED REPORTED IN 90 CCH 81 HAS HELD THAT THE DISALLOWANCE U/S. 14 A CANNOT EXCEED THE A CTUAL DIVIDEND EARNED BY THE ASSESSEE. WE FURTHER FIND TH E TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 VIDE ITA NO.353/DEL/2014 ORDER DATED 17.02.2017 HAS OBSERVED AS UNDER :- PAGE | 4 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN TH E PRESENT CASE, IT APPEARS THAT THE DISALLOWANCE MADE BY THE AO IS MORE THAN THE EXEMPT ED INCOME CLAIMED BY THE ASSESSEE. ON A SIMILAR ISSUE THE ITAT DELHI BENCH D IN THE AFORESAID REFERRED TO CASE OF M/S GLOBAL CAPITAL LTD., NEW DELHI VS ACIT, CIRCLE-12(L), NEW DELHI (SUPRA) BY FOLLOWING THE EARLIER DECISION DATED 29.04.2015 OF THE ITAT C BENCH, NEW DELHI IN THE CASE OF INDUS VALLEY INVESTMENT & FINANCE \( P) LTD. VS DCIT IN ITA NO. 3763/DEL/2013 FOR THE ASSESSMENT YEAR X009-10, OBSE RVED AS UNDER: 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. AT THE VERY OUTSET, LEAR NED COUNSEL OF THE ASSESSEE SUBMITTED A COPY OF THE ORDER OF THE ITAT DELHI C BENCH IN I.T.A. NO.3763/DEL/2013 FOR ASSESSMENT YEAR 2009-10 DATED 29.4.15 IN THE CASE OF INDUS VALLEY INVESTMENT & FINANCE (P) LTD. VS 1 DCIT AND SUBMITTED THAT IN THE SIMILAR SET OF FACTS AND CIRCUMSTANCES, THE TRIBUNA L IN THE CASE OF ASSESSEES GROUP COMPANY HAS DIRECTED THAT THE DISALLOWANCE U/ S 14A SHOULD NOT EXCEED THE EXEMPT INCOME AND THEREFORE, THE DISALLOWANCE WAS R ESTRICTED TO THE EXEMPT INCOME. LEARNED COUNSEL OF THE ASSESSEE HAS DRAWN O UR ATTENTION TOWARDS PARA 4 OF THE TRIBUNAL ORDER (SUPRA). 4. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPO RTED THE ORDERS OF THE AUTHORITIES BELOW, HOWEVER, HE FAIRLY ACCEPTED THAT IN THE SIMILAR SET OF FACTS AND CIRCUMSTANCES, THE AMOUNT OF DISALLOWANCE HAS B EEN RESTRICTED TO THE EXEMPT INCOME. 5. FIRSTLY, IT WOULD BE APPROPRIATE TO REPRODUCE THE RELEVANT PART OF THE ORDER OF THE TRIBUNAL (SUPRA) WHICH HAS BEEN RELIED BY THE LEARNED COUNSEL OF THE ASSESSEE WHICH READS AS FOLLOWS 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE TOTAL EXEMPT INCOME EARNED BY THE ASSESSEE IS TO THE TUNE OF RS.25.38 LAC, AGAINST WHICH AN ADDITION OF RS. 1.05 CRORE HAS BEEN MADE. THE HONBLE DELHI HIGH COURT IN JOINT INVESTM ENT PVT. LTD. VS. CIT, VIDE ITS JUDGMENT DATED 25.2.2015, HAS HELD THAT TH E DISALLOWANCE U/S 14A CANNOT EXCEED THE AMOUNT OF EXEMPT INCOME. THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDIA PVT LTD. (2014) 90 CCH 081-DEL-HON'BLE PAGE | 5 HIGH COURT, HAS HELD THAT THERE CAN BE NO DISALLOWA NCE U/S 14A IN THE ABSENCE OF ANY EXEMPT INCOME. THE RATIONALE BEHIND THESE JUDGMENTS IS THAT THE AMOUNT OF DISALLOWANCE U/S 14A SHOULD NOT EXCEE D THE EXEMPT INCOME. SINCE THE TOTAL EXEMPT INCOME IN THE INSTANT CASE I S RS.25,38,020/-, WE DIRECT THAT THE DISALLOWANCE U/S 14A BE RESTRICTED TO RS.1 8,01,968/- (RS.25,38,020- RS.7,36,052/-). THE REMAINING AMOUNT OF DISALLOWANC E IS DIRECTED TO BE DELETED. 6. IN VIEW OF ABOVE, IT IS OBSERVED THAT IN THE SIMIL AR SET OF FACTS AND CIRCUMSTANCES, THE TOTAL EXEMPT INCOME EARNED BY TH E PRESENT ASSESSEE IS RS.13,35,040 AGAINST WHICH AN ADDITION OF RS.21,87, 713 HAS BEEN MADE BY THE ASSESSING OFFICER U/S 14A OF THE ACT. AS NOTED BY T HE COORDINATE BENCH OF THIS TRIBUNAL THAT IN THE CASE OF JOINT INVESTMENT (P) L TD. VS CIT (SUPRA), THE HON BLE DELHI HIGH COURT HAS HELD THAT THE DISALLOWANC E U/S I4A OF THE ACT SHOULD NOT EXCEED THE EXEMPT INCOME. THE TRIBUNAL ALSO NOT ED THAT THE HON 'BLE DELHI HIGH COURT IN THE CASE OF CIT VS HOLCIM INDIA PVT. LTD. (SUPRA) HELD THAT THERE CAN BE NO DISALLOWANCE U/S 14A IN THE ABSENCE OF AN Y EXEMPT INCOME. I.T.A. NO. 6586/DEL/2013 ASSESSMENT YEAR: 2009-10 FINALLY, THE RATIO LAID DOWN BY THE .JURISDICTIONAL HIGH COURT NOTED THAT THE DISALLOWA NCE SHOULD NOT EXCEED THE EXEMPT INCOME DURING THE RELEVANT FINANCIAL PERIOD. IN THE PRESENT CASE, SINCE THE TOTAL EXEMPT INCOME OF THE ASSESSEE IS RS. 13,3 5,040 AND THE ASSESSEE HAD SUO INOTO OFFERED DISALLOWANCE OF RS. 1,81,388 UNDE R RULE 8D(2)(HI) OF THE INCOME TAX RULES, 1962 BEING 0.5% OF THE AVERAGE VA LUE OF THE INVESTMENT IN THE SHARES OF APOLLO TYRES LTD. ON WHICH SUCH DIVIDEND INCOME WAS EARNED. HENCE, WE DIRECT THE ASSESSING OFFICER THAT THE DISALLOWAN CE U/S 14A BE RESTRICTED TO RS. 11,53,752 (RS. 13,35,040 - RS.L,81,388) AND THE REM AINING AMOUNT OF DISALLOWANCE IS DIRECTED TO BE DELETED. 7. WE, THEREFORE, RESPECTFULLY FOLLOWING THE AFORES AID REFERRED TO ORDER DATED 27.11.2015 IN ITA NO. 6586/DEL/2013 FOR THE ASSESSM ENT YEAR 2009-10 IN THE CASE OF M/S GLOBAL CAPITAL LTD., NEW DELHI VS ACIT, CIRCLE- 12(L), NEW DELHI, DIRECT THE AO TO MAKE THE DISALLOWANCE TO THE EXTENT OF THE INCOM E CLAIMED BY THE ASSESSEE AS EXEMPT. PAGE | 6 9. SINCE THE ACTUAL DIVIDEND INCOME EARNED BY THE A SSESSEE IS ONLY RS.3,41,12,414/-, THEREFORE, THE DISALLOWANCE U/S. 14 A CANNOT EXCEED THE ACTUAL DIVIDEND INCOME RECEIVED. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) AND ALLOW THE GROUND RAISED BY THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.12.2019 SD/- SD/- (KULDIP SINGH) (R.K PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA* DATE:- 06.12.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 04.12.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 05.12.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS 06.12.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 06.12.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 06.12.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 06.12.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 06.12.2019 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER