ACIT, New Delhi V. M/s Educomp Online Supplemental Service Ltd., New Delhi

ITA 3439/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3495 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 10-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST IMPUGNED DATED PASSED
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.:- 3439/DEL /2016 ASSESSMENT YEAR: 2013-14 ACIT, CENT. CIRCLE 2 NEW DELHI. VS. EDUCOMP ONLINE SUPPLEMENTAL SERVICE LTD. 1211, PADMA TOWER 1, 5, RAJENDER PLACE NEW DELHI 110 008 PAN AACCE3461E (APPELLANT) (RESPONDENT) O R D E R PER AMIT SHUKLA, J.M . THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE IMPUGNED ORDER DATED 13.4.2016 PASSED BY LD. CIT(AP PEALS) -23, NEW DELHI, PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 201 3-14. IN THE GROUNDS OF APPEAL THE REVENUE, THE ONLY EFFECTIVE GROU ND RAISED IS AS UNDER:- DEPARTMENT BY: SHRI ATIQ AHMOD, SR. DR ASSESSEE BY : SHRI V.K. AGGARWAL, AR DATE OF HEARING 01/11/2017 DATE OF PRONOUNCEMENT 07/11/2017 ITA NO. 3439/DEL/2016 ACIT VS . EDUCOMP ONLINE SUPPLEMENTAL SERVICE LTD. 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 70,88,771/- MADE BY A.O. ON ACCOUNT OF DISALLOWANCE U/S 14A OF THE INCOME TAX A CT, 1961. 2. AT THE OUTSET, THE LD. COUNSEL SUBMITTED THAT DURING THE YEAR, ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME WHICH FACT I S EVIDENT FROM PARA 4.2 OF THE APPELLATE ORDER AND THEREFORE, IN VIE W OF THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. ACIT REPORTED IN 378 ITR 33, NO DISALLOWANCE U/S 14A CAN BE MADE. ON THE OTHER HAND LD. DR STRONGLY RELIED UPON TH E ORDER OF THE A.O. 3. IN VIEW OF THE ADMITTED FACT THAT DURING THE YEAR ASSE SSEE HAS NOT EARNED ANY EXEMPT INCOME, THE DISALLOWANCE U/S 14A CANNOT BE TRIGGERED AS HELD BY THE HONBLE JURISDICTIONAL HIGH C OURT IN THE CASE OF CHEMINVEST LTD. VS. ACIT. THIS FACT HAS BEEN NOTED BY THE LD. CIT (A) IN PARA 4.2 IN THE FOLLOWING MANNER:- 4.2 GROUND NO. 03 RELATE TO DISALLOWANCE OF RS.70 ,88,771/- U/S 14A OF THE ACT. FROM THE ASSESSMENT ORDER IT IS APPARENT THAT THERE IS NO EXEMPT INCOME IN THE CASE OF THE APPARENT FOR THIS YEAR. THE A.O. HAS WORKED OUT THE DISALLOWANCE UNDER RUL E 8D (2)(II) AND (III) OF THE INCOME TAX RULES 1962 ( THE RULES HEREINAFTER). ON PERUSAL OF THE AUDITED ACCOUNTS OF THE APPELLANT IT IS OBSERVED THAT THERE IS NO EXEMPT INCOME INCLUDED IN THE TOTAL RECEIPTS, AND THE OPENING BALANCE OF INVESTMENT OF MADE BY THE APPELLANT IN ITS SUBSIDIARIES IS RS.54.28 CRORE AND DURING THE YEAR THERE IS NO FRESH INVESTMENT AND THE AO HAS NOT BRO UGHT ON RECORD ANY MATERIAL TO SUGGEST THAT THERE IS ANY NEXUS BET WEEN BORROWED MONEY (WHICH IS ONLY 4.35 CRORE). MOREOVER, IT IS S ETTLED LAW THAT ITA NO. 3439/DEL/2016 ACIT VS . EDUCOMP ONLINE SUPPLEMENTAL SERVICE LTD. 3 INVESTMENT IN SUBSIDIARY COMPANIES/CONCERNS OUT OF SURPLUS FUNDS ARE FOR BUSINESS PURPOSES AND IT IS NOT THE C ASE OF THE AO THAT INTEREST PAID ON BORROWED FUNDS IS DISALLOWAB LE U/S 36 (1) (III) OF THE ACT. EVEN OTHERWISE, IN VIEW OF THE JU DGMENTS OF THE JURISDICTIONAL HIGH COURT IN CIT V. HOLCIM INDIA PV T. LTD. [2015] 57 TAXMANN.COM 28 (DELHI) AND CHEMINVEST LTD VS. ACIT 378 ITR 33 (DELHI), AND THOSE OF THE HON'BLE PUNJAB AND HARYAN A HIGH COURT IN CIT VS. M/S. LAKHANI MARKETING INCL., ITA NO. 97 0/2008 DECIDED ON 02.04.2014, CIT VS. HERO CYCLES LIMITED [2010] 323 ITR 518 AND CIT VS. WINSOME TEXTILE INDUSTRIES LIMI TED [2009] 319 ITR 204, AND THOSE IN CIT VS. CORRTECH ENERGY ( P.) LTD. [2014] 223 TAXMANN 130 (GUJ.) AND, CIT VS. M/S. SHIVAM MO TORS (P) LTD. IN ITA NO. 88 OF 2014 DECIDED ON 05.05.2014 WHEREIN IT HAS BEEN HELD THAT NO DISALLOWANCE CAN BE MADE U/S 14A IF TH ERE IS NO EXEMPT INCOME IN THE RELEVANT, NO DISALLOWANCE UNDE R SECTION 14A OF THE ACT COULD BE MADE. THE APPELLANT HAS MADE FU RTHER RELIANCE ON THE DECISIONS OF THE JURISDICTIONAL ITAT IN M/S KEE PHARMA LTD. VS ACIT, 2015-TLOL-132- ITAT-DEL AND M/S RLF LTD VS ITO, 2015-TIOL-116-ITAT-DEL. INTERESTINGLY, RELYING ON T HE JUDGMENT IN GODREJ BOYCE MFG. CO. LTD. VS. CCIT AND ANR. ITA NO . 626/10 AND WP NO. 758/10, THE A.O. HAS MENTIONED AT PARA-4.3 O F THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE INCURRED IN RELATION TO I NCOME WHICH DOES NOT FORM PART OF TOTAL INCOME BUT HE HAS HIMSE LF NOT MADE ANY DISALLOWANCE UNDER RULE 8D(2)(I) OF THE RULES A DMITTING THEREBY THAT THERE IS NO EXPENDITURE ATTRIBUTABLE T O EXEMPT INCOME. IN THIS VIEW OF THE MATTER THE ADDITION MADE BY THE A.O. IS NOT SUSTAINABLE AND DELETED. ITA NO. 3439/DEL/2016 ACIT VS . EDUCOMP ONLINE SUPPLEMENTAL SERVICE LTD. 4 SINCE, THE AFORESAID ORDER OF THE LD. CIT (A) IS IN A CCORDANCE WITH LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT, THEREFORE, SAME IS AFFIRMED. 4. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH NOVEMBER, 2017. SD/- SD/- (PRASHANT MAHARISHI) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7/11 /2017 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI