M/s Sukhmani Technologies Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 258/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4234 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 19-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: R S AHUJA
• Keywords: Search and seizure
• Section: 143(3); 142(1); 153A; 14A; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 258 /DEL/201 6 A.Y. : 20 0 7 - 08 SUKHMANI TECHNOLOGIES PRIVATE LIMITED, C/O R.S. AHUJA & CO., CHARTERED ACCOUNTANTS, C-353, DEFENCE COLONY, NEW DELHI 110 024 (PAN: AAGS7513M) VS. ACIT, CENTRAL CIRCLE - 11, NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. R.S. AHUJA, CA DEPARTMENT BY : SH. S.S. RANA, CIT(DR) ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU : : : : J JJ JM MM M THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE IMPUGNE D ORDER DATED 19.11.2013 OF LD. CIT(A)-XXXI, NEW DELHI PERTAINING TO ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS:- (A) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. ITO AND THE CIT(A) ERRED IN: 1) UPHOLDING THE ASSESSMENT AND ADDITION OF RS. 1,91,94 5/- U/S. 14A INSPITE OF THE FACT THAT THE ASSESSMENT FOR THE YEAR H AD 2 ABATED IN TERMS OF SECTION 153A AND NO INCRIMINATING MATERIAL WAS UNEARTHED IN THE COURSE OF SEARCH AND SEIZURE OP ERATIONS. 2) DISALLOWING RS. 1,91,945/- U/S. 14A OF THE I.T. ACT. 3) DISALLOWING THE EXPENDITURE U/S. 14A WITHOUT THE AO GI VING ANY FINDING IN THE ASSESSMENT ORDER REGARDING THE AMOUN T OF ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE TO EARN TAX FREE I NCOME. 4) NOT FOLLOWING THE ORDERS OF THE JURISDICTIONAL HIGH CO URT IN THIS MATTER. (B) THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR AMEND THE GROUNDS OF APPEAL AT AND BEFORE THE HEARING. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY WAS CENTRALIZED CONSEQUENT UPON AN ACTION UNDER SECTION 132 OF THE IN COME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT)ON 24.9.2009. NOTI CE U/S. 132 OF THE ACT WAS ISSUED ON 28.4.2010. RETURN DECLARING INCOME AT RS. 183143/ - WAS FILED. NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 29.7.2011 AND SERVED UPON THE ASSESSEE. THEREAFTER, A QUESTIONNAIRE WAS ISSUED ON 5.10.2011 U NDER SECTION 142(1) ALONGWITH NOTICE UNDER SECTION 143(2) OF THE I ACT. IN RESPONSE TO THE SAME, THE LD. AR OF THE ASSESSEE ATTENDED THE PROCEEDINGS AND FILED THE DETAI LS AND AFTER PERUSING THE DETAILS, AO OBSERVED THAT DURING THE RELEVANT PREVIOUS YEAR THE ASSESSEE COMPANY HAS RECEIVED DIVIDEND OF RS. 1721143/-. INCOME ON A CCOUNT OF DIVIDEND HAS BEEN CLAIMED AS EXEMPT FROM TAX. AS ON 31.3.2007 THE ASSESS EE COMPANY HAD MADE TOTAL INVESTMENT OF RS. 38389000/- ON ACCOUNT OF WHICH DIVI DEND WAS RECEIVED. PROVISIONS 3 OF SUB SECTION (1) OF SECTION 14A OF THE ACT PROVIDES THAT FOR THE PURPOSE OF COMPUTING TOTAL INCOME UNDER CHAPTER IV, NO DEDUCTION S HALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DO NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. THEREFORE, EXPENDI TURE INCURRED ON ACCOUNT OF DIVIDEND INCOME WAS DISALLOWED AMOUNTING TO RS. 1,91 ,945/- AND INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 3,75,090/- U/S. 153A/ 143(3) OF THE ACT VIDE ORDER DATED 29.11.2011. 3. AGGRIEVED BY THE AFORESAID ORDER OF THE ASSESSING OFFICER DATED 29.11.2011, ASSESSEE FILED AN APPEAL BEFORE THE LD. FIRST APPELLA TE AUTHORITY, WHO VIDE IMPUGNED ORDER DATED 19.11.2013 HAD DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED WITH THE AFORESAID FINDING OF THE LD. CI T(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. LD. COUNSEL OF THE ASSESSEE HA STATED THAT AO HAS M ADE THE ADDITION ON THE BASIS OF RULE 8D OF SECTION 14A, WHEREAS THE FACT OF THE CASE IS THAT THE ASSESSEE MADE INVESTMENT OUT OF OWNED FUNDS AND THE INVESTMENTS MADE ARE OLD INVESTMENTS, NO NEW INVESTMENTS HAS BEEN MADE DURING TH E YEAR UNDER APPEAL. HE FURTHER STATED THAT NO LOAN HAS BEEN TAKEN DURING THE YEA R AND NO INTEREST HAS BEEN PAID DURING THE YEAR. IT WAS FURTHER STATED THAT AS NO LO AN HAS BEEN TAKEN FOR INVESTMENT AND NO INTEREST HAS BEEN PAID, SO THE DISA LLOWANCE IS ILLEGAL AND AGAINST THE LAW. HE RELIED UPON THE CASE LAW OF HONBLE BOM BAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT (2010) 194 TA XMANN 203 (BOM) AND STATED 4 THAT IN THIS CASE IT HAS BEEN HELD BY THE HONBLE B OMBAY HIGH COURT THAT PROVISION OF SECTION 14A(2) AND (3) READ WITH RULE 8D ARE CON STITUTIONALLY VALID BUT RULE 8D SHALL NOT BE APPLICABLE FOR ASSESSMENT YEAR PRIOR TO ASSESSM ENT YEAR 2008-09, HOWEVER, THE ASSESSMENT YEAR INVOLVED IN THE PRESENT CASE IS AY 2007-08. IN VIEW OF THE ABOVE, HE REQUESTED THAT THE ADDITION IN DISPUTE MAY B E DELETED AND ORDERS OF THE AUTHORITIES BELOW MAY BE CANCELLED AND APPEAL OF THE ASSESSEE MAY BE ALLOWED. 6. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND STATED THAT AS PER PROVISIONS OF SUB SECTION (1) OF S ECTION 14A OF THE I.T. ACT, 1961 PROVIDES THAT FOR THE PURPOSE OF COMPUTING TOTAL INCOME UNDER CHAPTER IV, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DO NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THEREFORE, HE STATED THAT EXPENDITURE INCURRED ON ACCOU NT OF DIVIDEND INCOME WAS RIGHTLY DISALLOWED AND CONFIRMED, WHICH DOES NOT NE ED ANY INTERFERENCE ON OUR PART. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECOR DS ESPECIALLY THE IMPUGNED ORDER. WE FIND THAT AO HAS DISALLOWED RS. 1, 91,145/- U/S. 14A OF THE ACT BY STATING THAT THE ASSESSEE HAS MADE INVESTMENT OF RS. 3.83 CRORES DURING THE YEAR AND EARNED DIVIDEND FROM THE SAME (RS. 17,21,143/-) AND THAT SECTION 14A(1) PROVIDES FOR DISALLOWING EXPENDITURE INCURRED BY THE ASSESSEE ON SUCH INCOME WHICH IS NOT INCLUDED IN THE TOTAL INCOME. THEREFORE, WE D O NOT FIND ANY MERIT IN THE DISALLOWANCE MADE BY THE AO. WE FURTHER NOTE THAT AO HA S NOT GIVEN A FINDING THAT HE WAS NOT SATISFIED WITH THE ASSESSEES CLAIM THAT NO EXPENDITURE WAS INCURRED ON 5 THE INVESTMENT ACTIVITY. HOWEVER, RULE 8D IS EFFECTIVE ONLY FROM AY 2008-09 AND NOT FOR THE CURRENT ASSESSMENT YEAR. IN THIS REGARD, THE AO HAS MECHANICALLY APPLIED RULE 8D ON THE GROUND THAT THE ASSESSEE HAD RECEIVED D IVIDEND INCOME, WHICH IS NOT TENABLE IN THE EYES OF LAW, AS LAID DOWN BY THE HONB LE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE CO. LTD. VS. CIT (308 ITR 91 ) WHEREIN IT HAS BEEN HELD THAT RULE 8D IS NOT APPLICABLE RETROSPECTIVELY AND IS APPL ICABLE ONLY WITH EFFECT FROM AY 2008-09 ONWARDS, HENCE, THE ADDITION IN DISPUTE IS D ELETED AND GROUND RAISED BY THE ASSESSEE STAND ALLOWED. 8. IN THE RESULT, THE ASSESSEES APPEAL STANDS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/09/2017. SD/- SD/- [ [[ [PRASHANT MAHARISHI PRASHANT MAHARISHI PRASHANT MAHARISHI PRASHANT MAHARISHI] ]] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 29/09/2017 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES