Abhilash Growth Fund Pvt. Ltd., New Delhi V. DCIT, Circle-1(1), New Delhi

ITA 2957/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4328 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 26-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDER SINGH
• Keywords: Earning of tax free income; Notional interest; Rule 8D
• Section: 143(3); 14A

Judgement Text

1 ITA NO. 2957/DEL/2018 IN THE INCOME TAX APPE LLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE MS SUCHITRA KAMBLE, JUDICIAL MEMBER AND DR. B. R. R. KUMAR, ACCOUNT ANT MEMBER ITA NO. 2957/DEL/ 2018 ( A.Y 2014-15) (THROUGH VIDEO C ONFERENCING) ABHILASH GROWTH FUND PVT. LTD. 105, ASHOKA ESTATE, 24, BARAKHAMBA ROAD, NEW DELHI AAACA2461H (APPELLANT) VS DCIT CIRCL-1(1) NEW DELHI (RESPONDENT) APPELLANT BY SH. ANOOP SHARMA, ADV RESPONDENT BY SH. VIRENDER SINGH, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEALS IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 26/02/2018 PASSED BY CIT(A)-1, NEW DELHI FOR ASSESSMENT YEAR 2 014-15. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE ID. CIT(A) (APPEALS) IS BAD & ERRONEOUS IN LAW. A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A), HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.53,36,75 3/- U/S 14A READ WITH RULE 8D AS AGAINST RECEIPT OF TOTAL EXEMPTED INCOME OF RS4,,77,220 (BEING DIVIDEND INCOME OF RS.4,42,693/- AND EXEMPTED LONG TERM CAPITAL GAIN OF RS.34,5271- MADE BY THE ID. AO. B) THAT ID. CIT(A) ERRED IN LAW AND ON FACTS OF THE C ASE IN NOT GIVING THE DIRECTIONS TO COMPUTE DISALLOWANCE U/R 8D BY CONSID ERING THE AVERAGE OF ONLY DATE OF HEARING 28.09.2021 DATE OF PRONOUNCEMENT 05.10.2021 2 ITA NO. 2957/DEL/2018 THOSE INVESTMENTS ON WHICH THE EXEMPTED INCOME WAS RECEIVED BY THE APPELLANT COMPANY INSTEAD OF TOTAL INVESTMENTS. DIRECTIONS BE GIVEN TO COMPUTE DISALLOWANCE U/R 8D BY TAKING INTO ACCOUNT OF ONLY THOSE INVESTMENTS ON WHICH THE EXEMPTED INCOME WAS RECEIVED AS HELD BY HONBLE JURISDICTIONAL HIGH COURT OF DELHI AND O THER COURTS. C) THAT ID. CIT(A) ERRED IN LAW AND ON FACTS IN NOT D IRECTING THE ASSESSING OFFICER TO COMPUTE DISALLOWANCE U/R 8D BY CONSIDERI NG THE NET INTEREST PAID AFTER REDUCING THE AMOUNT OF INTEREST INCOME. D) THAT ID. CIT(A) FURTHER, ERRED IN LAW AND ON FACTS IN NOT RESTRICTING THE DISALLOWANCE U/R 8D READ WITH SECTION 14A OF THE AC T, TO THE EXTENT OF EXEMPTED INCOME OF RS. 4,77,220/- RECEIVED BY THE COMPANY. DIRECTIONS BE GIVEN TO RESTRICT THE DISALLOWANCE U/ R 8D TO THE EXTENT OF EXEMPTED INCOME OF RS 4,77,220/- RECEIVED BY THE APPELLANT. 3. THE ASSESSEE COMPANY IS NON-BANKING FINANCIAL CO RPORATION ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES, SECURITIES AS WELL AS ADVANCING OF LOANS. RETURN OF INCOME WAS FILED ON 22/9/2016 DECLARING L OSS OF RS.57,85,128/-. ASSESSMENT U/S 143(3) WAS PASSED ON 28/12/2015 DETE RMINING TOTAL LOSS AT RS. 4,03,500/-. THE ASSESSING OFFICER ADDED RS. 39 ,04,820/- ON ACCOUNT OF EXPENSES INCURRED FOR EARNING EXEMPT INCOME U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. THE ASSESSING OFFICER FURT HER ADDED NOTIONAL INTEREST OF RS. 14,77,258/- ON LOANS/ADVANCES TO ONE OF THE PARTY. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE AS SESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. THE LD. AR SUBMITTED THAT THE CIT(A) ERRED IN CO NFIRMING THE DISALLOWANCE OF RS. 53,36,753/- U/S 14A READ WITH R ULE 8D AS AGAINST RECEIPT OF TOTAL EXEMPT INCOME OF RS. 4,77,220/- (BEING DIV IDEND INCOME OF RS. 4,42,693/- AND EXEMPT LONG TERM CAPITAL GAIN OF RS. 34,527/-) MADE BY THE ASSESSING OFFICER. THE LD. AR SUBMITTED THAT THE R EVENUE SHOULD HAVE 3 ITA NO. 2957/DEL/2018 COMPUTED DISALLOWANCE UNDER RULE 8D BY CONSIDERING THE AVERAGE OF ONLY THOSE INVESTMENT ON WHICH THE EXEMPT INCOME WAS RECEIVED BY THE ASSESSEE COMPANY INSTEAD OF TOTAL INVESTMENTS. THE LD. AR RELIED UP ON THE JURISDICTIONAL HIGH COURT DECISIONS IN CASE OF CHEMINVESTMENT LTD. VS. CIT 61 TAXMAN.COM 118 AND ACB INDIA PVT. LTD. VS. ACIT (ITA 615/2014 DECI DED ON 24TH MARCH, 2015). THE LD. AR SUBMITTED THAT THE ASSESSEE HAS RECEIVED ONLY RS. 4,77,220/- AS EXEMPT INCOME. THEREFORE, THE DISALLO WANCE SHOULD HAVE BEEN AS PER THAT AMOUNT ITSELF. 6. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS RECEIVED THE EXEMPT INCOME TO THE EXTENT OF RS. 4,77,220/- BEING DIVIDE ND INCOME AND EXEMPT LONG TERM CAPITAL GAIN. THIS FACT WAS NOT DISPUTED BY THE REVENUE AUTHORITIES. THEREFORE, THE APPLICABILITY OF RULE 8D SHOULD HAVE BEEN RESTRICTED TO THAT EXTENT ONLY. HENCE, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE ON THE AMOUNT OF RS. 4,77,220/- AS PER SECTION 14A READ WITH RULE 8D. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8. IN RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 05 TH DAY OF OCTOBER, 2021 SD/- SD/- (B. R. R. KUMAR) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 05/10/2021 R. NAHEED 4 ITA NO. 2957/DEL/2018 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI