ACIT, New Delhi V. M/s. Gen X Commodities (P) Ltd., New Delhi

ITA 2395/DEL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6988 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 21-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

ITA NO. 2395/DEL/2017 ASSESSMENT YEAR 2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH FRIDAY C NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBE R AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.2395/DEL/2017 ASSESSMENT YEAR: 2013-14 ACIT, CENTRAL CIRCLE-29, ROOM NO. 318, 3 RD FLOOR, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI. VS GEN X COMMODITIES (P) LTD., FA-45, LOWER GROUND FLOOR, SHIVAJI ENCLAVE, NEW DELHI. (PAN: AAACA2303H) APPELLANT RESPONDENT DEPARTMENT BY: MS NAINA SOIN KAPIL, SR . DR ASSESSEE BY : SHRI VED JAIN, CA DATE OF HEARING : 02.07.2019 DATE OF PRONOUNCEMENT : 31.07.2019 O R D E R PER SUDHANSHU SRIVASTAVA, JM : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER DATED 25.01.2017 PASSED BY THE LD. CIT(A)-30, NEW D ELHI FOR ASSESSMENT YEAR 2013-14. 2.0 THE SOLE ISSUE ARISING IN THIS APPEAL IS THE DELETION OF DISALLOWANCE OF RS. 1,50,72,830/- MADE U/S 14A OF T HE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE ACT') R/W R ULE 8D OF THE INCOME TAX RULES, 1962 (HEREINAFTER CALLED THE RUL ES). 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN COMMODITIES I .E. SILVER, ITA NO. 2395/DEL/2017 ASSESSMENT YEAR 2013-14 2 GOLD, TIMBER AND SUGAR ETC. THROUGH STOCK EXCHANGE AS WELL AS IN THE OPEN MARKET. DURING THE YEAR UNDER CONSIDERATI ON, THE RETURN OF INCOME WAS FILED DECLARING AN INCOME OF R S. 2,100/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER THE CASS GUIDELINES AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN AS T O WHY THE PROVISIONS OF SECTION 14A OF THE ACT WERE NOT APPLI CABLE IN THE ASSESSEES CASE. IT WAS THE ASSESSEES CONTENTION BEFORE THE ASSESSING OFFICER THAT SINCE THE ASSESSEE HAD NOT R ECEIVED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION, THE PROVISIONS OF SECTION 14A DID NOT GET ATTRACTED. H OWEVER, THE ASSESSING OFFICER PROCEEDED TO MAKE AN ADDITION OF RS. 1,50,70,726/- U/S 14A R/W RULE 8D. THE ASSESSEES APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX(A) WAS A LLOWED WHO DELETED THE ADDITION BY HOLDING THAT SINCE NO EXEMP T INCOME HAD BEEN EARNED, THE ASSESSING OFFICER HAD ERRONEOUSLY INVOKED THE PROVISIONS OF SECTION 14A. 2.2 AGGRIEVED WITH THE ORDER OF THE LD. COMMISSIO NER OF INCOME TAX(A), THE DEPARTMENT IS NOW IN APPEAL BEFORE THIS TRIBUNAL AND HAS CHALLENGED THE DELETION BY THE LD. COMMISSIONER OF INCOME TAX(A). ITA NO. 2395/DEL/2017 ASSESSMENT YEAR 2013-14 3 2.3 LD. SR. DR VEHEMENTLY ARGUED THAT THE DISALLO WANCE HAD BEEN INCORRECTLY DELETED BY THE LD. COMMISSIONER OF INCOME TAX(A). HOWEVER, THE LD. SR. DR COULD NOT NEGATE T HE FACT THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE W AS NOT IN RECEIPT OF ANY EXEMPT INCOME. THE LD. AR SUPPORTED THE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX(A). 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS UNDISPUTED THAT THE ASSESSEE HAD NOT RECEIVED ANY E XEMPT INCOME DURING THE YEAR UNDER CONSIDERATION AND, THE REFORE, THE RATIO OF JUDGMENT OF THE HONBLE DELHI HIGH COURT I N THE CASE OF CHEMINVEST LTD. VS C.I.T. (2015) 378 ITR 33 WOULD C OME TO THE AID OF THE ASSESSEE WHEREIN THE HONBLE HIGH COURT HAD HELD THAT IN THE ABSENCE OF ANY EXEMPT INCOME, DISALLOWANCE U /S 14A OF THE ACT OF ANY AMOUNT WAS NOT PERMISSIBLE. THE REL EVANT PARAGRAPHS OF THE JUDGMENT OF THE HONBLE HIGH COUR T ARE REPRODUCED HEREINUNDER FOR A READY REFERENCE:- 22. IN THE IMPUGNED ORDER, THE IT AT HAS REFERRED TO THE DECISION IN MAXOPP INVESTMENT LTD. (SUPRA) AND REMANDED THE MATTER TO THE AO FOR RECONSIDERATION O F THE ISSUE AFRESH. THE ISSUE IN MAXOPP INVESTMENT LT D. (SUPRA) WAS WHETHER THE EXPENDITURE (INCLUDING INTEREST ON BORROWED FUNDS) IN RESPECT OF INVESTMEN T IN SHARES OF OPERATING COMPANIES FOR ACQUIRING AND RETAINING A CONTROLLING INTEREST THEREIN WAS ITA NO. 2395/DEL/2017 ASSESSMENT YEAR 2013-14 4 DISALLOWABLE UNDER SECTION 14 A OF THE ACT. IN THE SAID CASE ADMITTEDLY THERE WAS DIVIDEND EARNED ON SUCH INVESTMENT. IN OTHER WORDS, IT WAS NOT A CASE, AS T HE PRESENT, WHERE NO EXEMPT INCOME WAS EARNED IN THE YEAR IN QUESTION. CONSEQUENTLY, THE SAID DECISION WAS NOT RELEVANT AND DID NOT APPLY IN THE CONTEXT OF TH E ISSUE PROJECTED IN THE PRESENT CASE. 23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINBEFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE ENVISAGES T HAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELE VANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME . IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMP T INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVAN T PREVIOUS YEAR. 3.1 THEREFORE, RESPECTFULLY FOLLOWING THE RATIO OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT AS AFORESAID, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX(A) ON THE ISSUE AND WE DISMISS THE APPEAL OF TH E REVENUE. 4. IN THE RESULT, THE APPEAL OF THE REVENUE STAND S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST JULY, 2019. SD/- SD/- (R.K. PANDA ) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 ST JULY 2019 GS ITA NO. 2395/DEL/2017 ASSESSMENT YEAR 2013-14 5 COPY FORWARDED TO: - 1) APPELLANT 2) RESPONDENT 3) CIT(A) 4) CIT 5) DR TRUE COPY BY ORDER ASSTT. REGISTRAR DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER