HERO FUTURE ENERGIES PVT. LTD., NEW DELHI V. DCIT, CIRCLE- 11(1), NEW DELHI

ITA 3131/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8706 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 03-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA
• Keywords: Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.-3131/DEL/2018 (ASSESSMENT YEAR: 2013-14) HERO FUTURE ENERGIES PVT. LTD., C/O RRA TAXINDIA, D-28, SOUTH EXTENSION PART-1, NEW DELHI. VS. DCIT, CIRCLE 11(1), NEW DELHI PAN NO. AACCA3104G APPELLANT RESPONDENT ASSESSEE BY SH. SOMIL AGARWAL, CA REVENUE BY MS. ANIMA, SR. DR DATE OF HEARING: 27/07/2021 PRONOUNCEMENT ON 27/07/2021 ORDER PER K. NARASIMHA CHARY, JM AGGRIEVED BY THE ORDER DATED 23/3/2018 IN APPEAL N O. 652/16-17 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-35, NEW DELHI (LD. CIT(A)), IN THE CASE OF HERO FUTURE EN ERGIES PRIVATE LIMITED (THE ASSESSEE), FOR THE ASSESSMENT YEAR 2013-14, ASSESSEE PREFERRED THIS APPEAL CHALLENGING THE ADDITION MADE UNDER SEC TION 14A OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) READ WIT H RULE 8D OF THE INCOME TAX RULES1962 (THE RULES). 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING CONSULTANCY SERVICES. FOR THE ASSESSMENT YEAR 2013-14 THEY HAVE FILED THEIR RETURN OF INCOME ON 2 8/9/2013 DECLARING A LOSS OF RS. 84, 76, 092/-. ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETE, HOWEVER, BY MAKING CERTAIN ADDITIONS ON A CCOUNT OF CAPITALISATION OF BROKERAGE AND COMMISSION EXPENSES , CAPITALISATION OF TRAINING AND RECRUITMENT EXPENSES AND DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES. 3. IN APPEAL, LD. CIT(A) DELETED THE ADDITIONS MADE ON ACCOUNT OF CAPITALISATION OF BROKERAGE AND COMMISSION EXPENSES AS WELL AS TRAINING AND RECRUITMENT EXPENSES, BUT SUSTAINED THE ADDITIO N MADE ON ACCOUNT OF 14A OF THE ACT READ WITH RULE 8D OF THE RULES. A SSESSEE IS THEREFORE AGGRIEVED BY SUCH AN ACTION OF THE LD. CIT(A) AND F ILE THIS APPEAL. 4. IT COULD BE SEEN FROM THE RECORD THAT DURING THE RELEVANT FINANCIAL YEAR THE ASSESSEE EARNED THE DIVIDEND INCOME TO THE TUNE OF RS.8,44,551/-AND MADE SUO MOTO DISALLOWANCE OF RS. 6,41,077/-UNDER SECTION 14A BEING THE EXPENSES PERTAINING TO THE TA X-FREE INCOME. LEARNED ASSESSING OFFICER HOWEVER COMPUTED THE DISA LLOWANCE AS PER THE FORMULA UNDER RULE 8D OF THE RULES AND IT DETERMINE D IT AT RS.20,66,599/- . AFTER EXCLUDING THE SUO MOTO DISALLOWANCE OF RS. 6,41,077/-, LEARNED ASSESSING OFFICER MADE AN ADDITION OF RS. 14,25,522 /-, WHICH WAS CONFIRMED BY THE LD. CIT(A). 5. ONLY PLEA TAKEN BY THE ASSESSEE BEFORE US AT THE TIME OF ARGUMENT IS THAT IN VIEW OF THE DECISION OF THE JURISDICTION AL HIGH COURT IN THE CASE OF JOINT INVESTMENTS P. LTD. VS. CIT (2015) 372 ITR 694 DISALLOWANCE OF EXPENDITURE U/S 14A OF THE ACT CANNOT EXCEED THE AM OUNT OF TAX-EXEMPT 3 INCOME, AND THEREFORE, THE DISALLOWANCE SHOULD BE R ESTRICTED TO THE DIFFERENCE BETWEEN THE TAX-FREE INCOME AND THE DISA LLOWANCE MADE BY THE ASSESSEE. IN VIEW OF THIS BINDING PRECEDENT REN DERED BY THE HONBLE JURISDICTIONAL HIGH COURT, WE ARE OF THE CONSIDERED OPINION THAT THE REQUEST MADE BY THE ASSESSEE HAS TO BE ACCEPTED. WE ACCORDINGLY, DIRECT THE LEARNED ASSESSING OFFICER TO RESTRICT THE DISAL LOWANCE TO THE DIFFERENCE BETWEEN THE TAX-FREE INCOME EARNED AND T HE SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE. SUBJECT TO THIS OBSERVATION, APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF JULY, 2021 IMMEDIATELY AFTER THE CONCLUSION OF THE HEARIN G OR VIRTUAL MODE. SD/- SD/- (N.K.BILLAIYA) (K. NARSIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27/07/2021