ACIT, Circle- 11(2), New Delhi V. Hind Industries Ltd., New Delhi

ITA 2302/DEL/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1013 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 03-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 2302/DEL/2018 (ASSESSMENT YEAR : 2012-13) ACIT CIRCLE 11(2), NEW DELHI PAN NO. AAACH 0870 N VS. HIND INDUSTRIES LTD., A-1, PHASE 1, OKHLA INDUSTRIAL AREA, NEW DELHI (APPELLANT) (RESPONDENT) A SSESSEE BY -- NONE -- RE VENUE BY MS. SUNITA SINGH, CIT (DR) DATE OF HEARING: 08 / 0 7 /202 1 DATE OF PRONOUNCEMENT: 08 / 0 7 /202 1 ORDER PER ANIL CHATURVEDI, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 04.01.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-42, NEW DELHI RELATING TO ASSESSMENT YEAR 2012-13. 2. THE RELEVANT FACTS AS CULLED FROM THE MATERIAL ON RECORDS ARE AS UNDER : 2 3. ASSESSEE IS A COMPANY WHICH IS STATED TO BE ENGAGED IN THE BUSINESS OF MARKETING OF MANUFACTURED FERTILIZERS AND RETAILED INTERMEDIATE PRODUCTS, EXPORT OF PROCESSED MEAT PRODUCTS. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2012-13 ON 29.09.2011 DECLARING LOSS OF RS.1,01,55,404/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 20.03.2015 DETERMINING TO TOTAL INCOME AT RS. 61,85,98,990/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO VIDE ORDER DATED 04.01.2018 IN APPEAL NO.92/17-18/CIT(A)-42 GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS: 1. WHETHER THE CIT(A) IS CORRECT IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 14A OF THE ACT READ WITH RULE 8D AMOUNTING TO RS. 2,57,35,700/-. 2. WHETHER FOR APPLICATION OF SECTION 14A(1) OF THE INCOME TAX ACT, 1961 (THE ACT) THE PURPOSE FOR MAKING INVESTMENT AND EARNING TAX EXEMPT INCOME THEREON IS AN ESSENTIAL LEGAL REQUIREMENT? 3. WHETHER THE TERM 'IN RELATION TO' AS USED IN SECTION 14A OF THE ACT CONTEMPLATES A DIRECT AND PROXIMATE NEXUS BETWEEN 'EXPENDITURE INCURRED' AND 'EARNING OF EXEMPT INCOME? 4. WHETHER THE CIT(A) IS CORRECT IN NOT UPHOLDING DISALLOWANCE U/S 14A OF THE ACT WITHOUT CONSIDERING LEGISLATIVE INTENT OF INTRODUCING SECTION 14A BY THE FINANCE ACT, 2001 AS CLARIFIED BY CBDT CIRCULAR NO. 5/2014 DATED: 10.02.2014? 5. WHETHER THE CIT(A) IS LEGALLY JUSTIFIED IN NOT UPHOLDING DISALLOWANCE U/S 14A OF THE ACT WITHOUT CONSIDERING A LEGAL PRINCIPLE THAT ALLOWABILITY/DISALLOWABILITY OF EXPENDITURE UNDER 3 THE ACT IS NOT CONDITIONAL UPON THE EARNING OF THE INCOME AS UPHELD BY HON'BLE SUPREME COURT IN CASE OF CIT VS. RAJENDRA PRASAD MOODY [1978] 115 ITR 519? 6. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING . 4. ON THE DATE OF HEARING NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT APPLICATION WAS FILED ON ITS BEHALF THOUGH THE NOTICE OF HEARING WAS ISSUED TO THE ASSESSEE. IN SUCH A SITUATION, WE PROCEED TO DECIDE THE MATTER EX PARTE QUA THE ASSESSEE AFTER CONSIDERING THE MATERIAL ON RECORD AND HEARING THE DR. THOUGH VARIOUS GROUNDS HAVE BEEN RAISED BY THE REVENUE, BUT HOWEVER THE ISSUE INVOLVED IS WITH RESPECT TO DISALLOWANCE U/S 14A OF THE ACT. 5. AO NOTED THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS MADE CERTAIN INVESTMENTS IN SHARES AND SINCE THOSE INVESTMENTS HAVE YIELDED OR MAY YIELD INCOME IN THE FORM OF DIVIDEND, LONG TERM CAPITAL GAIN ETC, WHICH DOES NOT FOUND PART OF INCOME OF THE ASSESSEE AND THEREFORE THE EXPENDITURE WAS REQUIRED TO BE DISALLOWED UNDER THE PROVISIONS OF SECTION14A OF THE ACT. ASSESSEE WAS ASKED TO PRODUCE CALCULATION FOR DISALLOWANCE AS PER RULE 8D TO WHICH ASSESSEE INTER ALIA SUBMITTED THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING THE DIVIDEND INCOME. THE SUBMISSIONS MADE BY THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO AO. AO THEREAFTER BY APPLYING THE PROVISION OF RULE 8D OF THE IT RULES WORKED OUT THAT DISALLOWANCE 4 U/S 14A AT RS.2,57,35,700/- AND DISALLOWED THE SAME U/S 14A OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO DELETED THE ADDITION MADE BY THE AO. FOR ARRIVING AT THE DECISION TO DELETE THE ADDITION HE WAS SWAYED BY THE FACT THAT ASSESSEE HAD NOT RECEIVED ANY EXEMPT INCOME IN THE FORM OF DIVIDEND FROM THE INVESTMENTS AND THAT THE INVESTMENT WERE MADE OUT INTEREST FREE FUNDS. HE SUPPORTED HIS DECISION BY RELYING ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT [TS-5469-HC-2015 (DELHI)-O] AND CIT VS. TAIKISHA ENGINEERING INDIA LTD., (ITA NO.115/2014) WHEREIN IT WAS HELD THAT IN THE ABSENCE OF EXEMPT INCOME DURING THE YEAR, NO DISALLOWANCE U/S 14A COULD BE MADE. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW BEFORE US. 6. BEFORE US, LEARNED DR SUPPORTED THE ORDER OF AO. 7. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MATERIALS ON RECORD. WE FIND THAT CIT(A) DELETED THE ADDITION MADE BY AO U/S 14A BY OBSERVING THE FACT THAT NO DIVIDEND INCOME HAS BEEN EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND IN THE ABSENCE OF ANY DIVIDEND INCOME, THE DISALLOWANCE U/S 14A IS NOT CALLED FOR. CIT(A) HAD ALSO RELIED ON THE DECISION RENDERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. (SUPRA) AND TAIKISHA ENGINEERING INDIA LTD. (SUPRA). 5 8. BEFORE US, NO FALLACY IN THE FINDINGS OF CIT(A) HAS BEEN POINTED OUT BY THE REVENUE NOR REVENUE HAS PLACED ON RECORD ANY CONTRARY BINDING DECISION IN ITS SUPPORT. IN SUCH A SITUATION, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A), THUS THE GROUNDS OF REVENUE ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.07.2021 SD/- SD/- (SUDHANSHU SRIVASTAVA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE:- 08.07.2021 PY* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI