ITO, New Delhi V. M/s. Moderate Leasing & Capital Services Ltd., New Delhi

ITA 2279/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3641 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: PREMJIT S KASHYAP
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B , NEW DELHI BEFORE SH. H.S. SIDHU , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 2279 /DE L/ 2015 ASSESSMENT YEAR: 2010 - 11 INCOME TAX OFFICER, WARD - 17(1), NEW DELHI VS. M/S. MODERATE LEASING & CAPITAL SERVICES LTD., 410, MODI TOWERS, 98, NEHRU PLACE, NEW DELHI PAN : AAACM6945K ( APPELLANT ) (RESPONDENT) APPELLANT BY MS. ASHIMA NEB, SR.DR RESPONDENT BY SH. PREMJIT S. KASHYAP, CA DATE OF HEARING 18.01.2018 DATE OF PRONOUNCEMENT 31.01.2018 ORDER PER O.P. KANT , A. M. : THIS APPEAL BY THE R EVENUE IS DIRECTED AGAINST ORDER DATED 30/01/2015 PASSED BY THE LD. COMMISSIONER OF INCOME - TAX( APPEALS) - 6, NEW DELHI [IN SHORT THE LD. CIT - (A) ] FOR ASSESSMENT YEAR 2010 - 11 RAISING FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING A RELIEF OF RS.94,77,441/ - OUT OF THE ADDITION OF RS. 94,79,441/ - MADE BY THE AO ON ACCOUNT OF DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE ACT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LA W, THE LD. CI T(A) HAS ERRED IN IGNORING THAT THE DISALLOWANCE WAS MADE ACCORDING TO THE SECTION 14A READ WITH RULE 8D OF THE ACT. 2 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. C I T (A) HAS ERRED IN IGNORING THAT THE DISALLOWANCE U/S 14A READ WITH RULE 8D WAS MADE AS PER THE CALCULATION SUBMITTED BY THE ASSESSEE. 4. THAT THE ORDER OF THE LD. C1T (A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR FORGO ANY GROUND(S) OF APPEAL EITHER OR AT THE TIME OF HEARING OF THE APPEAL. 2. B RIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE IS A REGISTERED NONBANKING FINANCE COMPANY (NBFC) REGISTERED WITH THE RESERVE BANK OF INDIA (RBI) . FOR THE YEAR UNDER CONSIDERATI ON, THE ASSESSEE FILED RETURN OF DECLARING INCOME OF RS. 22, 70, 870/ - ON 23/09/2012. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) WAS ISSUED AND COMPLIED WITH. THE ASSESSING OFFICER NOTI CED THAT THE ASSESSEE EARNED EXEMPT INCOME OF RS. 2000/ - DURING THE YEAR UNDER CONSIDERATION, HOWEVER NO EXPENDITURE WAS DISALLOWED BY THE ASSESSEE SUO MOTU UNDER SECTION 14A OF THE ACT . IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE ACT, THE ASSE SSING O FFICER MADE DISALLOWANCE OF RS. 94, 79, 441/ - IN TERMS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF INCOME - T AX R ULES , 1962 . FO R COMPUTING DISALLOWANCE UNDER R ULE 8D(2)(II), THE ASSESSING OFFICER , TOOK INTEREST AMOUNT OF RS.1, 2 7,57, 198/ - I.E. OTHER THAN THE INTEREST PAID ON THE LOANS UTILIZED TOWARDS FINANCE ACTIVITY A ND COMPUTED DISALLOWANCE OF RS.59,92, 862/ - . SIMILARLY , UNDER R ULE 8D(2)(III) , THE ASSESSING OFFICER TOOK AVERAGE INVESTMENT OF RS.69, 73,15, 870/ - AND MADE DISALLOWANCE OF RS. 34,86, 579/ - . IN THIS MANNER , HE MADE TOTAL DISALLOWANCE OF RS.94,79,441/ - AND ASSESSED TOTAL INCOME AT RS.1,17,50,3 10/ - 2.1 T HE LD. CIT - ( A ) FOLLOWING THE JUDICIAL PRECEDENTS, RESTRICTED THE DISALLOWANCE TO THE AMOUNT OF EXEMPT INCOME OF RS. 2000 EARNED BY THE 3 AS SESSEE. AGGRIEVED , THE R EVENUE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS AS REPRODUCED ABOVE. 3. ALL THE GROUNDS RAISED BY THE R EVENUE ARE IN RELATION T O DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF THE ACT. 4. LD. DR SUPPORTING THE ORDER OF THE ASSESSING OFFICER SUBMITTED THAT DISALLOWANCE MADE BY THE ASSESSING OF FICER FOLLOWING RULE 8D OF THE INCOME - TAX R ULES SHOULD BE UPHELD. 5. ON THE OTHER HAND, THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2009 - 10, THE TRIBUNAL, DELHI BENCH IN ITA NUMBER 04/07/2006/DEL/2014 FOLLOWING THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT PRIVATE LIMITED 372 ITR 694 HAS DIRECTED TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF EX EMPT INCOME EARNED. HE SUBMITTED THAT ACCORDINGLY, THE ORDER OF THE LD. CIT - A SHOULD BE UPHELD. 6. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HA S EARNED DIVIDEND INCOME OF RS. 2000 / - ON THE SHAR ES OF HDFC BANK AND CLAIM ED THIS INCOME AS EXEMPT HOWEVER NO EXPENDITURE HAS BEEN DISALLOWED AGAINST THE SAID EXEMPT INCOME. THE ASSESSING OFFICER INVOKED RULE 8D OF THE INCOME - TAX R ULES A ND COMPUTED DISALLOWANCE OF RS.94,79, 441/ - . WE FI ND THAT TRIBUNAL IN THE ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2009 - 10 IN ITA NO. 4706/DEL/2014, FOLLOWING THE DECISION OF THE HON BLE DELH I HIGH COURT IN THE CASE OF J OINT INVESTMENT PRIVATE L IMITED VS. CIT (SUPRA) RESTRICTED THE DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME . THE RELEVANT FINDING OF THE TRIBUNAL(SUPRA) IS REPRODUCED AS UNDER: 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. ADMITTEDLY NO DISALLOWANCE HAS BEEN MADE BY THE ASSESSEE DESPITE EARNING 4 EXEMPT INCOME OF RS. 1700/ - . THEREFORE, THE PROVISIONS OF RULE 8D SHALL APPLY AND DISALLOWANCE NEEDS TO BE RECOMPUTED. THE ID FIRST APPELLATE AUTHORITY HAS RECOMPUTED THE DISALLOWANCE UNDER RULE 8D AND RESTRICTED THE DISALLOWANCE TO RS. 264/ - ONLY. NO INFI RMITY WAS POINTED OUT BEFORE US IN THE COMPUTATION CONFIRMED BY THE ID FIRST APPELLATE AUTHORITY. HOWEVER, THE HON'BLE DELHI HIGH COURT IN CASE OF JOINT INVESTMENT PVT. LTD. VS. CIT 372 ITR 694 HAS HELD THAT DISALLOWANCE U/S 14A CANNOT SWALLOW THE ENTIRE A MOUNT AS IT HAS HAPPENED IN THIS CASE AS PER ASSESSMENT ORDER. THEREFORE, FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT WE ARE OF THE OPINION THAT AS THE EXEMPT INCOME ITSELF IS RS, 1700/ - ONLY THE DISALLOWANCE CANNOT EXCEED THAT SUM. HENCE, NO F URTHER DISALLOWANCE CAN BE MADE. THEREFORE, THE APPEAL OF THE REVENUE IS DESERVES TO BE DISMISSED. 7. T HUS, RESPECTFULLY FOLLOWING THE FINDING OF THE TRIBUNAL (SUPRA) IN THE ASSESSE E S OWN CASE, WE HOLD THAT THE ORDER OF THE LD. CIT - A ON THE ISSUE IN DIS PUTE IS WELL REASONED AND WE DO NOT FIND ANY INFIRMITY IN THE SAME, AND ACCORDINGLY , WE UPHOLD THE SAME. THE GROUNDS OF THE APPEAL ARE ACCORDINGLY DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE R EVENUE IS DISMISSED. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 3 1 S T JAN . , 201 8 . S D / - S D / - ( H.S. SIDHU ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 1 S T JANUARY , 201 8 . RK / - (D.T.D) COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI