ACIT, New Delhi V. M/s Sun Investment Pvt. Ltd., New Delhi

ITA 238/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2086 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 15-09-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 21-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KISHORE B
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

I.T.A. NO. 238/DEL/2009 1/4 IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI, BENCH G BEFORE SHRI DEEPAK R. SHAH, ACCOUTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO.238 /DEL/2009 (ASSESSMENT YEAR 2005-06) ACIT, CIRCLE 9(1), VS. M/S. SUN INVESTMENTS PVT. L TD. NEW DELHI. 86, SFS, DDA FLATS, SHAKTHI APARTMENTS, ASHOK VIHAR, NEW DELHI. (APPELLANTS) (RESPONDENTS) APPELLANT BY: SHRI KISHORE B, SR. DR RESPONDENT BY: SHRI K SAMPATH, ADV. PAN / GIR NO. AAACS0389M ORDER PER GEORGE MATHAN, JM: 1. THIS APPEAL BY THE REVENUE HAS BEEN PREFERRED AG AINST THE ORDER OF LD. CIT(A)-XII, NEW DELHI IN APPEAL NO.165/2007-08 DATED 24.10.2008 FOR THE ASSESSMENT YEAR 2005-06. SHRI KISHORE B, SR. DR REPRESENTED F OR THE REVENUE AND SHRI K SAMPATH, ADV. REPRESENTED FO R THE ASSESSEE. IN THE REVENUES APPEAL, THE REVENUE HAS CHALLENGED THE ORDER OF LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY INVOKING THE PROVISIONS OF SECTION 14A ON THE GROUND THAT THE MANAGEMENT I.T.A. NO. 238/DEL/2009 2/4 EXPENSES ATTRIBUTABLE TO THE DIVIDEND INCOME DISALL OWED BY THE A.O., HAD BEEN DELETED. 2. IT WAS THE SUBMISSION BY THE LD. D.R. THAT THE A SSESSEE IS AN INVESTMENT COMPANY AND THE ASSESSEE HAD RECEI VED DIVIDEND OF RS.5,76,85,414/- AND THE A.O. HAD DISALLOWED 2% OF THE DIVIDEND INCOME BY INVOKING TH E PROVISIONS OF SECTION 14A AS EXPENSES ATTRIBUTABLE FOR EARNING THE SAME. IT WAS THE SUBMISSION BY THE LD. D.R. THAT THE CIT(A) ON THE GROUND THAT THE A.O. HA D NOT BROUGHT OUT ON RECORD ANY EVIDENCE TO RELATE TH E EXPENDITURE TO THE TAX FREE DIVIDEND, HAD DELETED T HE ADDITION. IT WAS THE SUBMISSION THAT THE LD. CIT(A ) HAD FOLLOWED THE DECISION OF 3 RD MEMBER DECISION OF THE TRIBUNAL IN THE CASE OF WIMCO SEEDLINGS LTD. REPORTE D IN 107 ITD 267. IT WAS THE SUBMISSION THAT AFTER T HE DECISION OF THE LD. CIT(A), THE DECISION OF SPECIAL BENCH OF ITAT HAD BEEN RENDERED IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. REPORTED IN 117 ITD 16 9 (S.B.). IT WAS THE SUBMISSION THAT IN VIEW OF THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE C ASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. REFERRED TO SUPRA , THE ORDER OF LD. CIT(A) WAS LIABLE TO BE REVERSED. 3. IN REPLY, THE LD. A.R. SUBMITTED THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF PUNJAB & HARYAN A HIGH COURT IN THE CASE OF HERO CYCLES LTD. IN I.T.A . I.T.A. NO. 238/DEL/2009 3/4 NO. 331/2009 DATED 04.11.2009 WHEREIN THE HON'BLE HIGH COURT HAD SPECIFICALLY HELD THAT THE DISALLOWA NCE U/S 14A REQUIRED A FINDING OF INCURRING OF THE EXPENDITURE AND WHERE IT IS FOUND THAT FOR EARNING EXEMPTED INCOME NO EXPENDITURE HAS BEEN INCURRED, DISALLOWANCE U/S 14A CANNOT STAND. IT WAS THE FURT HER SUBMISSION THAT THE ALLEGATION OF INCURRING EXPENDI TURE FOR EARNING THE EXEMPT INCOME HAVING BEEN MADE BY T HE A.O. IT WAS BEFORE THE A.O. TO SPECIFICALLY POINT O UT THE EXPENDITURE WHICH HE FINDS WAS INCURRED FOR EARNING THE EXEMPT INCOME. IT WAS THE FURTHER SUBMISSION THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD ALSO BEEN ASKED AS TO THE DETAILS OF EXPENSES INCUR RED IN RELATION TO THE DIVIDEND INCOME AND THE ASSESSEE HA D REPLIED THAT NO EXPENSE HAD BEEN INCURRED FOR THE S AME. IT WAS THE SUBMISSION THAT THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF HERO CYCLES WAS AFTER THE DECISION OF SPECIAL BENCH IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. REFERRED TO SUPRA AND THE DECISION OF PUNJAB & HARYANA HIGH COURT BEING THE ONLY DECISION ON THE ISSUE THE SAME WAS LIABLE TO B E FOLLOWED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE DECISION OF PUNJAB & HARYANA HIGH COURT CLEARLY SHOWS THAT FOR THE PURPOSE OF MAKING A DISALLOWANCE U/S I.T.A. NO. 238/DEL/2009 4/4 14A, A FINDING OF INCURRING THE EXPENDITURE FOR EAR NING THE EXEMPT INCOME IS ABSOLUTELY NECESSARY. HERE IN THE PRESENT CASE, IT IS NOTICED THAT THE A.O. HAS NOT B ROUGHT OUT ANY SPECIFIC EXPENDITURE, WHICH HAS BEEN INCURR ED BY THE ASSESSEE FOR EARNING OF EXEMPT DIVIDEND INCO ME. IN THESE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF PUNJAB & HARYANA HIGH COURT WHICH IS TH E ONLY DECISION OF A HIGH COURT ON THIS ISSUE AVAILAB LE AS ON TODAY AND AS NO OTHER DECISION OF ANY OTHER HIGH COURT ON THIS ISSUE AND CONTRARY TO THE DECISION OF PUNJAB & HARYANA HIGH COURT HAVING BEEN PLACED BEFORE US, THE FINDING OF LD. CIT(A) ON THIS ISSUE STANDS CONFIRMED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 6. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT O N 11 TH DEC., 2009. SD./- SD./- (DEEPAK R. SHAH) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:11 TH DEC., 2009 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI