M/s. Apollo Finance Ltd., New Delhi V. DCIT, New Delhi

ITA 340/DEL/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7662 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 16-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MANU K GIRI
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI A BEN CH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI LALIET KUMAR, JUDICIAL MEMB ER ITA NO. 340/DEL/2015 [ASSESSMENT YEAR: 2011-12] M/S APOLLO FINANCE LTD VS. THE DY. C.I.T 414/1, DDA COMMERCIAL COMPLEX CIRCLE 2(1) DISTRICT CENTER, JANAKPURI, NEW DELHI NEW DELHI PAN : AAACA 5354 J [APPELLANT] [RESPONDENT] DATE OF HEARING : 22.07.2019 DATE OF PRONOUNCEMENT : 22 .07.2019 ASSESSEE BY : SHRI MANU K. GIRI, A DV REVENUE BY : SMT. RINKU SINGH, SR. DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)- V, NEW DELHI DATED 31.10.2014 PERTAININ G TO A.Y 2011-12. 2 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT T HE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 97,08,477/- MADE BY THE ASSESSING OFFICER U/S 14A OF THE INCOME-TAX ACT, 1961 [HEREIN AFTER REFERRED TO AS 'THE ACT'] R.W.R 8D OF THE RULES 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT D URING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSE SSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAS EARNE D DIVIDEND INCOME OF RS. 4.78 CRORES CLAIMED AS EXEMP T FROM TAX. 5. THE ASSESSEE WAS ASKED TO EXPLAIN WHY PROVISIONS OF SECTION 14A R.W.R 8D BE NOT MADE APPLICABLE. 6. IN ITS REPLY, THE ASSESSEE EXPLAINED THAT IT HAS NOT MADE ANY EXPENDITURE DIRECTLY RELATING TO EARNING DIVIDE ND INCOME U/S 14A OF THE ACT EXCEPT RS. 21,658/- TOWARDS DEMA T CHARGES. IT WAS FURTHER EXPLAINED THAT THE ASSESSE E HAS SUO MOTO DISALLOWED RS. 2,79,50,021/- U/S 14A OF THE AC T TOWARDS EXPENSES ON EARNING EXEMPT INCOME. 3 7. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE CONTENTIONS OF THE ASSESSEE AND PROCEEDED BY APPLYING RULE 8D FOR THE COMPUTATION OF DISALLOWANCE U/S 14A OF THE ACT AND COMPUTED THE DI SALLOWANCE AT RS. 2,79,50,021/- AND AFTER DEDUCTING SUO MOTO DISALLOW ANCE OF RS. 2,79,50,021, ADDED RS. 97,08,477/-. 8. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) BUT WITHOUT ANY SUCCESS. 9. THIS ISSUE IS NO MORE RES INTEGRA AND HAS BEEN D ECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE HO N'BLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD 91 TAXMA NN.COM 154. THE GIST OF THE DECISION OF THE HON'BLE SUPREME COURT I S AS UNDER: (1) WHEN THE SHARES ARE HELD BY THE ASSESSEE NOT T O EARN EXEMPT INCOME BUT TO RETAIN CONTROLLING STAKE IN TH E INVESTEE COMPANY, THE DOMINANT PURPOSE TEST CANNOT BE SAID T O BE RELEVANT FOR THE PURPOSE OF SEC 14A AND DISALLOWANC E U/S 14A CAN BE MADE. IT IS NOT THE DOMINANT PURPOSE TEST BU T THE PRINCIPLE OF APPORTIONMENT WHICH IS INGRAINED IN TH E PROVISIONS OF SECTION 14A. WHEN THE ASSESSEE ITSELF MAKES DISA LLOWANCE OF CERTAIN EXPENDITURE INCURRED TO EARN DIVIDEND IN COME AND IF THE AO DOES NOT ACCEPT SUCH DISALLOWANCE, IT IS NEC ESSARY FOR THE AO TO RECORD SATISFACTION BEFORE REJECTING THE SAME. (2) 4 SECTION 14A WOULD BE APPLICABLE ONLY TO INCOME ARIS ING FROM THE INVESTMENT PORTFOLIO AND NOT FROM STOCK-IN-TRAD E. 9. IN THE LIGHT OF THE RATIO LAID DOWN BY THE HON'B LE SUPREME COURT [SUPRA] WE CONFIRM THE ADDITION AND DISMISS THE APP EAL. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 340/DEL/2015 IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22.07. 2019. SD/- SD/- [ LALIET KUMAR ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22TH JULY, 2019 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 5 ASST. REGISTRAR, ITAT, NEW DELHI DATE OF DICTATION 2 2 . 0 7 . 2 0 1 9 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 2 2 . 0 7 . 2 0 1 9 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 2 2 . 0 7 . 2 0 1 9 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS 2 2 . 0 7 . 2 0 1 9 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 2 2 . 0 7 . 2 0 1 9 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS 2 2 . 0 7 . 2 0 1 9 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 2 3 . 0 7 . 2 0 1 9 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER