DCIT, New Delhi V. M/s. M K Overseas (P) Ltd., New Delhi

ITA 2537/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1976 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 30-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: HERSIMRAN GREWAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI R. K. PANDA, ACCOUNTANT MEMBER ITA NO.1677/DEL/2015 ASSESSMENT YEAR : 2011-12 M. K. OVERSEAS PVT. LTD., 14, FIRE BRIGADE LANE, CONNAUGHT PLACE, NEW DELHI. VS. ACIT, CENTRAL CIRCLE- 19, NEW DELHI. PAN : AAACM2076P (APPELLANT) (RESPONDENT) ITA NO.2537/DEL/2015 ASSESSMENT YEAR : 2011-12 DCIT, CIRCLE- 16(1), NEW DELHI. VS. M. K. OVERSEAS PVT. LTD., 39/5864, BASTI HARPHOOL SINGH, SADAR BAZAR, NEW DELHI. PAN : AAACM2076P (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. HERSIMRAN GREWAL, ADV. DEPARTMENT BY : SHRI S. R. SENAPATI, SR. DR DATE OF HEARING : 23-08-2018 DATE OF PRONOUNCEMENT : 10-09-2018 O R D E R PER BECNH : THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE ASSESSEE AND THE SECOND ONE FILED BY THE REVENUE AND ARE DIRECTED AG AINST THE ORDER DATED 21.01.2015 OF THE CIT(A)- 1, NEW DELHI RELATING TO ASSESSMENT YEAR 2011-12. 2 ITA NO.1677/DEL/2015 ITA NO.2537/DEL/2015 FOR THE SAKE OF CONVENIENCE THESE WERE HEARD TOGETH ER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.1677/DEL/2015 (BY ASSESSEE) : 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED, T HESE ALL RELATE TO THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWA NCE OF RS.21,63,995/- U/S 14A OF THE I.T. ACT, 1961 READ WITH RULE 8D OF THE I.T. RULES, 1962 MADE BY THE ASSESSING OFFICER. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF PROCESSING AND E XPORT OF FRESH/FROZEN MEAT AND MANUFACTURING OF POULTRY FEED AND TALLOW. IT F ILED ITS RETURN OF INCOME ON 30.09.2011 DECLARING NIL INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA S SHOWN EXPENSES INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS PER PROVISIONS OF THE ACT WHICH REQUIRES TO BE DISALLOW ED AS PER THE PROVISIONS OF SECTION 14A R.W. RULE 8D. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY PROPORTIONATE DISALLOWANCE U/S 14A OF THE ACT S HOULD NOT BE MADE FROM THE EXPENSES INCURRED TOWARDS INVESTMENTS MADE IN SHARE S/SECURITIES OF COMPANIES. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASS ESSEE AND APPLYING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D, THE AS SESSING OFFICER MADE DISALLOWANCE OF RS.21,63,995/-. 3 ITA NO.1677/DEL/2015 ITA NO.2537/DEL/2015 4. BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT NO FRESH INVESTMENT WAS MADE DURING THE YEAR UNDER REFERENCE AND THE ENTIRE INVESTMENT OF RS.8.51 CRORES IS BROUGHT FORWARD. THE COMPANY HAS MADE IN VESTMENT OF RS.5.43 CRORES IN THE SUBSIDIARIES FROM THE STRATEGIC POINT OF VIE W FOR THE PROMOTION OF BUSINESS AND NOT FOR TRADING IN THE INVESTMENT. THE INVESTM ENT OF RS.3.07 CRORES WAS MADE IN THE BANK OF BARODA MUTUAL FUNDS, WHICH IS T HE BANKER OF THE COMPANY. THE ASSESSEE HAS OWN PAID UP SHARE CAPITAL AND RESE RVES OF 85.28 CRORES. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS RECEIVED ON LY AN AMOUNT OF RS.4,280/- AS DIVIDEND INCOME DURING THE YEAR WHICH HAVE BEEN INC LUDED UNDER MISCELLANEOUS INCOME. RELYING ON VARIOUS DECISIONS, IT WAS SUBMI TTED THAT NO DISALLOWANCE U/S 14A IS CALLED FOR. HOWEVER, THE LD. CIT(A) WAS NOT SATISFIED WITH THE ARGUMENT ADVANCED BY THE ASSESSEE AND UPHELD THE ACTION OF T HE ASSESSING OFFICER. 5. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE TOTAL DIVIDEND RECEIVED DURING THE YEAR IS ONLY RS.4280/- AND, THEREFORE, THE DISALLOWANCE, IF ANY, CANNOT EXCEED THE AMOUNT OF D IVIDEND RECEIVED. FOR THE ABOVE PROPOSITION, HE RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS (P.) LTD. VS. CIT REP ORTED IN 372 ITR 694 AND VARIOUS OTHER DECISIONS. 7. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON T HE ORDERS OF THE ASSESSING OFFICER AND THE LD. CIT(A). 4 ITA NO.1677/DEL/2015 ITA NO.2537/DEL/2015 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSING O FFICER IN THE INSTANT CASE, APPLYING THE PROVISIONS OF SECTION 14A R.W. RULE 8D , MADE DISALLOWANCE OF RS.21,63,995/- WHICH HAS BEEN UPHELD BY THE LD. CIT (A). IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE ACT UAL DIVIDEND INCOME RECEIVED DURING THE YEAR WHICH IS EXEMPT IS ONLY RS.4280/-, THEREFORE, DISALLOWANCE, IF ANY, U/S 14A R.W. RULE 8D CANNOT EXCEED THE ACTUAL AMOUNT OF SUCH EXEMPT INCOME RECEIVED. WE FIND SOME FORCE IN THE ABOVE A RGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. IT HAS BEEN HELD IN VARIOUS DECI SIONS THAT DISALLOWANCE U/S 14A R.W. RULE 8D CANNOT EXCEED THE ACTUAL DIVIDEND INCO ME RECEIVED WHICH HAS BEEN CLAIMED AS EXEMPT. WE, THEREFORE, HOLD THAT THE DI SALLOWANCE U/S 14A IN THE INSTANT CASE CANNOT EXCEED RS.4280/- WHICH IS THE A CTUAL EXEMPT INCOME RECEIVED BY THE ASSESSEE DURING THE YEAR. WE, THER EFORE, SET-ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE U/S 14A TO THE EXTENT OF ACTUAL EXEMPT INCOME RECEIVED BY THE ASSESSEE WHICH IN THE INSTANT CASE IS RS.4280/-. THE GROUND RAISED BY TH E ASSESSEE IS ACCORDINGLY PARTLY ALLOWED. ITA NO.2537/DEL/2015 (BY REVENUE) : 9. AFTER HEARING BOTH THE SIDES, WE FIND THE TAX EF FECT INVOLVED IN THE GROUNDS RAISED BY THE REVENUE IN THE IMPUGNED APPEA L IS ADMITTEDLY BELOW 5 ITA NO.1677/DEL/2015 ITA NO.2537/DEL/2015 RS.20 LAKHS. THEREFORE, THE APPEAL FILED BY THE RE VENUE IS NOT MAINTAINABLE IN VIEW OF THE LATEST CBDT CIRCULAR NO.03/2018 [F.NO.2 79/MISC.142/2007-ITJ (PT)] DATED 11 TH JULY, 2018 WHICH IS APPLICABLE EVEN TO PENDING APP EALS. HOWEVER, IF THE REVENUE AT ANY POINT OF TIME FINDS THAT THE CASE OF THE REVENUE FALLS UNDER ANY OF THE CLAUSES AS PER AMENDED PARA 10 OF THE SAID CIRCULAR VIDE NOTIFICATION DATED 20.08.2018, THE REVENUE IS AT LI BERTY TO FILE MISCELLANEOUS APPLICATION FOR REVIVAL OF THE APPEAL. THE APPEAL FILED BY THE REVENUE IS DISMISSED IN THE TERMS INDICATED ABOVE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH SEPTEMBER, 2018. SD/- SD/- (DIVA SINGH) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 10-09-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI