DCIT, Circle- 2(1), New Delhi V. AKC Retailers Pvt. Ltd., New Delhi

ITA 3262/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7509 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 04-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI B BENCH: NEW DELHI (THROUGH VIDEO CONFERENCING ) BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA NO.3262/DEL/2018 ASSESSMENT YEAR : 2014-15 DCIT, CIRCLE-2(1), NEW DELHI. VS AKC R E TAILER PVT.LTD., 305, 3 RD FLOOR, BHANOT CORNER, PAMPOSH ENCLAVE, GREATER KAILASH- 1, NEW DELHI-110048. PAN-AABCU0112B APPELLANT RESPONDENT APPELLANT BY SH. MAHESH THAKUR, SR.DR RESPONDENT BY SH. M.P.RASTOGI, ADV. & SH. RAJEEV, CA DATE OF HEARING 12.08.2021 DATE OF PRONOUNCEMENT 31 .08.2021 ORDER PER KUL BHARAT, JM : THIS APPEAL FILED BY THE REVENUE PERTAINING TO ASSE SSMENT YEAR 2014-15 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-1, NEW DELHI DATED 19.02.2018. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.2,94,81,452/- MADE BY THE ASSESS ING OFFICER U/S 14A R.W.R.8D OF INCOME TAX RULES ON THE GROUND THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE RELEVANT YEAR, IGNORING THE CBDT CIRCULAR NO.5/2014 DATED 11.02.2014 WHICH SPECIFICA LLY CLARIFIES THAT RULE 8D READ WITH SECTION 14A OF THE INCOME TAX ACT, 196 1 PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE THE TAX PAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME. ITA NO.3262/DEL/2018 ASSESSMENT YEAR : 2014-15 PAGE | 2 2. THE ONLY EFFECTIVE GROUND IS AGAINST THE DELETIO N OF DISALLOWANCE OF RS.2,94,81,452/- MADE BY THE ASSESSING OFFICER BY I NVOKING THE PROVISION OF SECTION 14A R.W.RULE 8D OF THE INCOME TAX RULES, 19 62 (THE RULES). 3. THE FACTS IN BRIEF ARE THAT THE CASE OF THE ASSE SSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) O F THE INCOME TAX ACT, 1961 (THE ACT) WAS FRAMED VIDE ORDER DATED 30.09. 2016. BY FRAMING THE ASSESSMENT, THE ASSESSING OFFICER ISSUED A SHOW CAU SE NOTICE VIDE ORDER SHEET DATED 24.08.2016 AS TO WHY THE DISALLOWANCE U/SECTI ON 14A R.W. RULE 8D OF THE RULES MAY NOT BE MADE. IN RESPONSE THERETO, THE AS SESSEE FILED A DETAILED REPLY AND SUBMISSIONS OF THE ASSESSEE WAS FOUND NOT ACCEP TABLE ON THE GROUND THAT CBDT CIRCULAR NO.5/2014 HAD CLARIFIED THAT EVEN IF THERE IS NO EXEMPT INCOME, DISALLOWANCE U/SECTION 14A R.W. RULE 8D OF THE RULE S CAN BE MADE. HENCE, THE ASSESSING OFFICER MADE ADDITION OF RS. 2,94,81,452/ - AND ASSESSED TAXABLE INCOME OF RS.6,59,691/- AGAINST THE RETURNED LOSS O F RS.2,88,21,761/-. 4. AGGRIEVED AGAINST THIS, THE ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS, PARTLY ALLOW ED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITION MADE BY THE ASSES SING OFFICER BY INVOKING THE PROVISION OF SECTION 14A R.W. RULE 8D OF THE RU LES. 5. AGGRIEVED AGAINST THIS, THE REVENUE PREFERRED AP PEAL BEFORE THIS TRIBUNAL. 5.1. LD.SR.DR SUPPORTED THE ASSESSMENT ORDER AND SU BMITTED THAT LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY INVOKING THE PROVISION OF SECTION 14A OF THE ACT. ITA NO.3262/DEL/2018 ASSESSMENT YEAR : 2014-15 PAGE | 3 6. PER CONTRA, LD. SR. DR RELIED UPON THE ORDER OF LD.CIT(A) AND SUBMITTED THAT THE ISSUE IS NO MORE RES INTEGRA AS THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME. THEREFORE, IN THE LIGHT OF THE JU DGEMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASES OF CIT VS. HOLCIM INDIA (P) LTD [2015]57 TAXMANN.COM 28 (DELHI) IN ITA NO. 486/2014 & ITA NO . 299/2014 AND CHEMINVEST LTD. VS. CIT - VI (ITA 749/2014) 234 TAX MAN 761 (DEL) DECIDED ON 02.09.2015, WHEREIN DISALLOWANCE CANNOT BE MADE BY INVOKING S ECTION 14A OF THE ACT. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD.CIT(A) HAS DELETED THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE U/S 14A OF THE ACT, BY OBSERVING AS UN DER:- I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND OBSERVATION OF THE AO MADE IN THE ASSESSMENT ORDER ON THE ISSUE. THE A O COMPUTED DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D A T RS.2,94,81,452/-. THE LD. AR HAS STATED THAT SINCE NO DIVIDEND INCOME WAS EARNED, THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE. HE RE LIED ON A NUMBER OF JUDICIAL PRECEDENTS APPROVING THE PROPOSITION THAT IN THE ABSENCE OF EXEMPT INCOME, NO DISALLOWANCE COULD BE MADE U/S 14A OF TH E ACT. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDIA (P) LTD [2015]57 TAXMANN.COM 28 (DELHI) IN ITA NO. 486/ 2014 & ITA NO. 299/2014 HAS RULED THAT PROVISIONS OF SECTION 14A C ANNOT BE INVOKED IF THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINV EST LTD. VS. CIT - VI (ITA 749/2014) 234 TAXMAN 761 (DEL) DECIDED ON 02.09.2015 HAS RULED THAT SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED DURING THE RELEVANT PREVIOUS YEAR. THE HON'BLE COURT RULED AS UNDER: '23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINB EFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT THE EXP RESSION 'DOES ITA NO.3262/DEL/2018 ASSESSMENT YEAR : 2014-15 PAGE | 4 NOT FORM PART OF THE TOTAL INCOME' IN SECTION 14A O F THE ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS Y EAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVAN T PREVIOUS YEAR. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE HIGH COURT OF DELHI, THE DISALLOWANCE MADE BY THE ASSESSING OFFIC ER IS NOT SUSTAINABLE AS THERE WAS NO EXEMPT INCOME EARNED BY THE APPELLA NT DURING THE YEAR. THE DISALLOWANCE OF RS.2,94,81,452/- MADE BY THE AS SESSING OFFICER IS, THEREFORE, DELETED. 8. THE REVENUE HAS NOT POINTED OUT THAT DURING THE YEAR UNDER APPEAL, THE ASSESSEE HAS EARNED DIVIDEND INCOME. LD.CIT(A) HAS FOLLOWED THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE C ASES OF CIT VS. HOLCIM INDIA (P) LTD (SUPRA) AND CHEMINVEST LTD. VS. CIT - VI (SUPRA). THE REVENUE HAS NOT BROUGHT ANY OTHER CONTRARY BINDING PRECEDENTS BY TH E HONBLE JURISDICTIONAL HIGH COURT OR HONBLE SUPREME COURT TO OUR NOTICE. THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE FINDING OF LD.CIT(A), THE SAME IS HEREBY AFFIRMED. THUS, GROUND RAISED BY THE REVENUE IS REJECTED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ABOVE DECISION WAS PRONOUNCED ON CONCLUSION OF VIRT UAL HEARING IN THE PRESENCE OF BOTH THE PARTIES ON 31 ST AUGUST, 2021. SD/- SD/- (ANADEE NATH MISSHRA) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIA L MEMBER *AMIT KUMAR* ITA NO.3262/DEL/2018 ASSESSMENT YEAR : 2014-15 PAGE | 5 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI