Smt. Tarunjit Tejpal, New Delhi V. DCIT, New Delhi

ITA 3246/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3677 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 02-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Source of fund
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C , NEW DELHI BEFORE SHRI N.K. SAINI , ACCOUNTANT MEMBER AND SHRI K.N. CHARY, JUDICIAL MEMBER I.T.A. NO. 3246 /DEL /201 6 ASSESSMENT YEAR: 20 12 - 13 TARUNJIT TEJPAL, M - 130, IST FLOOR, G.K. PART - II NEW DELHI PAN - ACTPT7152P VS. DCIT CENT, CIRCLE - 20 NEW DELHI [APPELLANT] [RESPONDENT] APPELLANT BY: SH. SATISH SINGH, CA RESPONDENT BY: SH. ARUN KUMAR YADAV, SR. DR DATE OF HEARING: 20 12 2017 DATE OF PRONOUNCEMENT: 31 01 2018 O R D E R PER N.K. SAINI , A.M: THIS IS AN APP EAL BY THE ASSESSEE AGAINST THE ORDER DATED 31.3.2016 OF CIT(A) - 27 , NEW DELHI . THE ONLY GROUND RAISED IN THIS APPEAL READS AS UNDER: - NORMAL PROFESSIONAL EXPENSES OF THE ASSESSEE AS PER THE PROFIT & LOSS ACCOUNT HAVE BEEN DISALLOWED U/S 14A (1) TO THE EXTENT OF 75% ON AN ADHOC BASIS CLAIMING THAT THESE EXPENSES DO NOT RELATE TO PROFESSIONAL INCOME 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 30.9.2012 DECLARING AN INCOME OF RS. 3,22,53,040/ - . LATER ON THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD CLOSING BALANCE OF INVESTMENT TO THE TUNE ITA NO. 3246 /DEL/201 6 2 OF RS. 79, 00, 680/ - AND HAS NOT DISALLOWED ANY EXPENSES AS PER THE PROVISIONS OF SECTION 14A OF THE ACT. HE ALSO OBSERVED THAT THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) WERE APPLICABLE IN THE CASE OF ASSESSEE IN ALL THE SITUATIONS WHETHER THE INCO ME WHICH DOES NOT FORM PART OF TOTAL INCOME WAS RECEIVED OR NOT DURING THE PREVIOUS YEAR. THE AO INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 AND MADE THE DISALLOWANCE OF RS. 39,503/ - . THE AO ALSO NOTICED THAT THE ASSESSEE HAS RECEIVED NON COMPE TING FEES , ROYALTY INCOME AND OTHER INCOME BUT HAS NOT FILED THE DETAILS OF EXPENSES WHICH WERE RELATED TO THOSE INCOMES . HE DIS ALLOWED 75% OF THE TOTAL EXPENSES OF RS. 34,03,752/ - CLAIMED BY THE ASSESSEE , IN THIS MANNER DISALLOWANCE OF RS. 25,52,814/ - WAS ALSO MADE. 3. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED AS UNDER: - THE ASSESSING OFFICER HAS MADE ADDITIONS IN THE CASE WHICH ARE NOT JUSTIFIED WITH THE FACTS O F THE CASE AND ARE IN THE NATURE OF ADHOC ADDITIONS WITHOUT REASONS AND JUSTIFICATIONS. 1 . THE ASSESSING OFFICER HAS INVOKED BOTH SECTIONS 14(A) AND 8(D)2 TO THE CASE AND HAS DISALLOWED THE SAME EXPENDITURE TWO TIMES. 2 . DURING THE PREVIOUS YEAR THE ASSESSEE RECEIVED A NONCOMPETING FEE OF RS.2.50 CRORE AGAINST WHICH HE HAS PAID AN ADVANCE TAX OF RS. 70 LAKHS SUBJECTING THE ENTIRE NON COMPETING FEE TO TAXATION. NO EXPENSES HAVE BEEN CLAIMED AGAINST THIS INCOME. 3 . HOWEVER, SINCE THE NON COMPETING FEE IS TAXABLE U NDER THE HEAD INCOME FROM BUSINESS AND PROFESSION THE SAME HAS BEEN' CREDITED TO THE INCOME AND EXPENDITURE ACCOUNT OF HIS PROFESSION. 4 . THE ASSESSEE IS A CELEBRATED AUTHOR AND A JOURNALIST AND DERIVES INCOME FROM HIS WRITINGS IN THE FORM OF PROFESSIONAL FEE AND ROYALTY ON BOOKS. 5 . FOR THE TWO SOURCES OF INCOME DESCRIBED IN PARAGRAPH 4 ABOVE, THE ASSESSEE INCURS USUAL PROFESSIONAL EXPENSES AND ALSO UNDERTAKES CONSIDERABLE TRAVEL TO PROMOTE HIS BOOKS. THESE USUAL EXPENSES AND ALSO UNDERTAKES CONSIDERABLE TRAVEL TO PROMOTE HIS BOOKS. THESE USUAL EXPENSES HAVE BEEN CLAIMED IN THE INCOME & EXPENDITURE ACCOUNT AND ARE THE SAME WHICH ARE CLAIMED E VERY YEAR AS PROFESSIONAL EXPENSES. THIS IS NOT THE FIRST YEAR WHEN HE HAS CLAIMED THESE EXPENSES. IN FACT HIS PROFESSIONAL INCOME IS SUBJECTED TO TAX AUDIT AND THE SAME EXPENS ES HAVE BEEN CLAIMED ALONG WITH A TAX AUDIT REPORT IN THE PREVIOUS YEAR. 6 . THE AO HAS MADE AN ADHOC ADDITION OF 75% OF THESE EXPENSES WHICH IS UNCALLED ITA NO. 3246 /DEL/201 6 3 FOR PARTICULARLY WHEN THE ACCOUNTS OF THE ENCLOSED WITH THE RETURN. THE ASSESSING OFFICER HAS COMPLETELY IGNORED THE REPORT WITHOUT GIVING ANY REASONS. THE LOGIC OF ADDITIONS IS NOT CLE ARLY MENTIONED AND IS WITHOUT CONSIDERATION OF THE FACTS OF THE CASE. 7 . DISALLOWANCE U/S 14A 1. THE INVESTMENTS AS STATED BY THE ASSESSING OFFICER AS ON 31.03.2012 ARE RS. 79,00,680/ - WHICH IS AS PER THE BALANCE SHEET BUT THE AO HAS NOT CONSIDERED THE DETAI LS OF THESE INVESTMENTS. THEY ARE AS FOLLOWS: SR. NO. MODE OF INVESTMENT AMOUNT A. SHARES IN ASSOCIATE COMPANIES 31.03.11 31.03.12 ANANT MEDIA PVT. LTD. 473100 473 1 00 THINKWORKS PVT. LTD. (BABBLER BOOKS PVT. LTD.) 93000 520000 BUFFALO NETWORKS PVT. LTD. 255380 255380 KAGAZ KE PHOOT PVT. LTD. 50000 AOD LODGES PVT. LTD. 50000 50000 CHESTNUT HEIGHTS RESORTS PVT. LTD. 2500000 2500000 TEHELKA.COM PVT. LTD. 2000 UDDER ART PVT. LTD. 200 TOTAL 3371480 3850680 B. INVESTMENT IN MUTUAL FUNDS HDFC TOP FUND 100000 100000 KOTAK MAHINDRA MUTUAL FUND 500000 SB I MUTUAL FUND 1000000 FT INDIA LIFE STAGE FOF 50 S PLUS 1 684214 KOTAL EQUITY AB 1000000 TOTAL 1784214 1600000 C. INSURANCES ITA NO. 3246 /DEL/201 6 4 ICICI PRUDENTIAL LIFE INSURANCE 500000 KOTAK LIFE INSURANCE 1900000 1900000 TOTAL 1900000 2400000 D. FDR BANK OF MAHARASTHRA 50000 50000 TOTAL 50000 50000 GRAND TOTAL 7105694 7900680 3. IT IS VERY CLEAR FROM THE ABOVE THAT IV. THERE IS HARDLY ANY MOVEMENT OF INVESTMENTS FROM 31.3.11 TO 31.03.12. V. MOST OF THESE INVESTMENTS ARE NOT GENERATING ANY INCOME FOR THE ASSESSEE. VI. THE ASSESSEE NEED NOT HAVE ANY INFRASTRUCTURE OR MAKE ANY EXPENSES FOR MAKING THE ABOVE INVESTMENTS. 3. NONE OF THE EXPENSES CLAIMED BY THE ASSESSEE ARE IN RELATING TO EITHER THE ABOVE INVESTMENTS OR THE EXPECTED RETURNS FROM THESE INVESTMENTS. 4. SECTION 14A(1) READS AS FOLLOWS: FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATING TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THI S ACT. 5. THE EXPENSES CLAIMED BY THE ASSESSEE IN HIS P & L ACCOUNT ARE NOT IN RELATION TO ANY INCOME FROM THE ABOVE INVESTMENTS ACTUAL OR EXPECTED. 8. GIVEN THE ABOVE FACTS WE PRAY THAT THE ADDITIONS MAY BE REVERSED AND HE DEMAND CREATED THEREBY IS CANCELLED. 4. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE SUSTAINED THE ADDITIONS MADE BY THE AO BY OBSERVING IN PARA 6 & 6.1 OF THE IMPUGNED ORDER AS UNDER: - I HAVE CONSIDERED THE WRITTEN SUBMISSIONS OF THE A PPELLANT AND THE FACTS OF THE CASE, THE APPELLANT HAS RAISED GROUND AGAINST DISALLOWANCE U/S 14A STATING THAT THE PROVISIONS OF THE SECTION ARE NOT APPLICABLE IN THE CASE OF THE APPELLANT AND THAT THE DISALLOWANCE IS MADE ON THE CLOSING BALANCE OF ITA NO. 3246 /DEL/201 6 5 INVESTME NT AND RULE 8D TO APPLIED. IT. IS SEEN IN THE ORDER OF ASSESSMENT THAT THE ASSESSING OFFICER HAS DISALLOWED EXPENSES ON CERTAIN INVESTMENT APPLYING PROVISIONS OF SECTION 14A AND RULE 8D. AS SUCH THE DISALLOWANCE HAS BEEN CORRECTLY MADE AND THERE IS NO NEED TO INTERFERE WITH THE SAME. THE ADDITION OF RS. 39,503/ - IS CONFIRMED. THE GROUND IS DISMISSED. 6.1 I HAVE CONSIDERED THE WRITTEN SUBMISSIONS OF THE APPELLANT AND THE FACTS OF THE CASE. THE APPELLANT HAS RAISED GROUND AGAINST THE DISALLOWANCE OF EXPENSES CLAIMED BY THE APPELLANT AGAINST NON COMPETING FEES AND ROYALTY INCOME OF RS. 25,52,814/ - . IT IS SEEN IN THE ORDER OF ASSESSMENT THAT THE A SSESSEE SHOWED INCOME AGAINST NON COMPETING FEES, ROYALTY INCOME AND OTHER INCOME AND CLAIM OF EXPENSES AGAINST THE SAID INCOME. WHEN ASKED TO FILE DETAILS OF EXPENSES ALONG WITH SUPPORTING DOCUMENTS AND JUSTIFICATION, THERE WAS NO INFORMATION AND NO DOCUMENTARY EVIDENCE WAS PROVIDED BY THE ASSESSEE, HENCE THE ADDITION. I HAVE NO REASON TO DISAGREE WITH THE ASSESSING OF FICER ON THE ADDITION. THE GROUND RAISED IN APPEAL IS DISMISSED. 5. NOW THE ASSESSEE IS IN APPEAL . 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO EXEMPT INCOME WAS CLAIMED BY THE ASSESSEE SO THERE WAS NO OCCASION TO MAKE THE DISALLOWANCE U/S 14 A OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE AO MADE THE ADHOC DISALLOWANCE OF 75% OF THE TOTAL EXPENSES WHICH INCLUDED THE EXPENSES RELATED TO THE REGULAR BUSINESS OF THE ASSESSEE AND THAT THE LEARNED CIT(A) ALSO SUSTAINED THE ADDITION S MADE BY THE AO WITHOUT GIVING ANY COGENT REASONS. IN HIS RIVAL SUBMISSIONS, THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE AO NOWHERE POINTED OUT THAT THE ASSESSEE CLAIMED ANY EXEMPT INCOME BUT HE MADE THE DISALLOWANCE U/S 14A OF THE ACT, ON THE BASIS OF THE INVESTMENTS MADE BY THE ASSESSEE AND ALSO OBSERVED THAT DISALLOWANCE WAS TO BE MADE WHETHER THE ASSESS EE RECEIVED THE INCOME OR NOT. SIMILARLY, DISALLOWANCE HAS BEEN MADE OUT OF THE EXPENSES TO THE EXTENT OF 75% OF TOTAL EXPENSES WITHOUT POINTING OUT THAT ANY OF THE EXPENSES INCURRED IN REGULAR COURSE OF BUSINESS WAS FOR NON BUSIN ESS PURPOSES. DETAILS OF ITA NO. 3246 /DEL/201 6 6 THE EXPENSES HAVE BEEN GIVEN BY THE AO AT PAGE 5 OF THE ASSESSMENT ORDER DATED 30.3.2015. T HE SAID DETAIL REVEALED THAT THE EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE ON ACCOUNT OF TOUR AND TRAVELLING SALARY, RENT, MEETING CONFERE NCE, HONORARIUM , BOOKS AND PERIODICAL , DE PRECIATION ETC. HOWEVER, IT IS NOT BROUGHT ON RECORD THAT HOW AND IN WHAT MANNER THOSE EXPENSES WERE NOT RELATED TO THE REGULAR BUSINESS OF THE ASSESSEE. IN OUR OPINION, WHEN THERE WAS NO EXEMPT INCOME CLAIMED BY TH E ASSESSEE, DISALLOW ANCE U/S 14A WAS NOT JUSTIFIED AND WHEN NO INSTANCE OF THE EXPENSES INCURRED FOR NON BUSINESS PURPOSES WAS POINTED OUT , THE ADHOC DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE LEARNED CIT(A) @ 75% OF THE EXPENSES INCURRED WAS NOT JUSTIFIED . A CCORDINGLY, THE SAME IS DELETED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. (ORDER P RONOUNCE D IN THE OP EN COURT ON 31 . 01.2018. ) SD/ - SD/ - [K.N. CHARY] [ N.K. SAINI ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31. 01.2018 SH ITA NO. 3246 /DEL/201 6 7 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR