DCIT, New Delhi V. M/s Maha Seer Hotel & Resorts Pvt. Ltd., New Delhi

ITA 3526/DEL/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6168 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 02-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DLEHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER MA NO.434/DEL OF 2017 I.T.A. NO.3526/DEL/2014 ASSESSMENT YEAR: 2009-10 M/S A.K.M. SYSTEMS P. LTD., VS DY. COMMISSIONER OF INCOME-TAX, 1 ST FLOOR, THE GREAT EASTERN CENTRE, CIRCLE 1(1), NEW DELHI. 70, NEHRU PLACE, BEHIND IFCI TOWER, NEW DELHI. (PAN: AAACA2464K) (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI MUKESH SINGHAL, ADVOCATE DEPARTMENT BY: SHRI AMITKATOCH, SR. DR DATE OF HEARING: 18.01.2019 DATE OF PRONOUNCEMENT:24.01.2019 ORDER PER K. NARASIMHA CHARY, JM THIS MISCELLANEOUS APPLICATION IS FILED BY THE ASSESSEEU/S 254(2) OF THE INCOME-TAX ACT, 1961 (THE ACT) WITH A PRAYER TO RECALL THE ORDER DATED 29.6.2017 AND TO CONSIDER GROUND NO.5 THEREIN BECAUSE AN INADVERTENTLY THIS GROUND HAS LOST APPRECIATION AT THE TIME OF PASSING OF THE IMPUGNED ORDER. 2. FEW FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITA NO.3526/DEL/2014 DISPUTING THE DISALLOWANCE OF RS.33,83,185/- MADE BY THE AO U/S 14A OF THE ACT FOR THE AY 2009-10. ASSESSEE DECLARED THE DIVIDEND INCOME OF RS.11,93,95,627/- AND CLAIMED EXEMPTION U/S 10(34) OF THE ACT WHILE MAKING SUO MOTO DISALLOWANCE OF RS.15,05,986/- U/S 14A OF THE ACT ON THE BASIS OF 2 ALLOCATION OF COMMON EXPENSES WHICH WERE TO THE TUNE OF RS.45,17,958/- . LEARNED AO, HOWEVER, DID NOT ACCEPT THE COMPUTATION OF DISALLOWANCE DONE BY THE ASSESSEE AND AFTER RECORDING THE REASONS, HE APPLIED RULE 8D OF THE RULES FOR WORKING OUT THE ADDITION U/S 14A AND COMPUTED THE DISALLOWANCE AT RS.48,89,171/-. AFTER ALLOWING THE CREDIT FOR THE SUO MOTO DISALLOWANCE OF RS.15,05,986/- DONE BY THE ASSESSEE, LEARNED AO MADE THE ADDITION OF RS.33,83,185/- AND IT WAS CONFIRMED BY THE LEARNED CIT(A) IN THE APPEAL. 3. ASSESSEE, THEREFORE, PREFERRED ABOVE APPEAL ON THE FOLLOWING GROUNDS: 1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX - APPEALS (IV) (CIT(A)) CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER (A.O.) IS BAD, BOTH IN THE EYE OF LAW AND ON THE FACTS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH IN FACTS AND LAW IN CONFIRMING THE DISALLOWANCE OF RS. 33,83,185/- ON ACCOUNT OF EXPENSES PERTAINING TO INCOME CLAIMED EXEMPT FROM TAX. 3. THAT THE ABOVE-SAID ADDITION HAS BEEN MADE IGNORING THE FACT THAT THE APPELLANT HAS VERY MUCH COMPLIED WITH THE PROVISIONS OF SECTION 14A OF THE ACT. 4. THAT THE LEARNED C1T (A) HAS FAILED TO APPRECIATE THAT THE LEARNED A.O. HAS NOT RECORDED ANY REASON AS TO WHY THE LEARNED A.O. IS NOT SATISFIED WITH THE CORRECTNESS OF CLAIM OF THE APPELLANT IN RESPECT OF EXPENDITURE PERTAINING TO INCOME CLAIMED EXEMPT FROM TAX, AND WHY PROVISIONS OF RULE 8D ARE REQUIRED TO BE INVOKED IN THE MATTER OF THE APPELLANT. 5. WITHOUT PREJUDICE TO THE ABOVE, TOTAL COMMON EXPENSES INCURRED BY THE APPELLANT AMOUNT TO RS. A5,\L OUT OF WHICH AN AMOUNT OF RS. 15,05,986/- HAS BEEN VOLUNTARILY DISALLOWED BY THE APPELLANT, AND THEREFORE, THE DISALLOWANCE U/S 14A READ WITH RULE 8D HAS TO BE RESTRICTED ONLY TO RS. 30,11,972/-. 4. AFTER HEARING BOTH THE SIDES AND BY WAY OF SPEAKING ORDER DATED 29.06.2017, THIS TRIBUNAL RECORDED A FINDING THAT THERE IS NO LACK OF RECORDING OF SATISFACTION BY THE AUTHORITIES BEFORE PROCEEDING TO MAKE THE 3 DISALLOWANCE AND ALSO THAT THERE IS NO MISTAKE ON COMPUTATION OF DISALLOWANCE UNDER CLAUSE (III) OF RULE 8D WHICH APPLIES TO THE ASSTT. YEAR 2009-10. WHILE RECORDING SUCH A FINDING, THE TRIBUNAL DISMISSED THE APPEAL. 5. THE ASSESSEE NOW FILED THE MISCELLANEOUS APPLICATION AND SUBMITTED THAT BY INADVERTENCE THE TRIBUNAL LOST SIGHT OF GROUND NO.5 WHICH IS TO THE EFFECT THAT THE TOTAL COMMON EXPENSES INCURRED BY THE ASSESSEE WERE RS.45,17,958/- OUT OF WHICH AN AMOUNT OF RS.15,05,986/- HAD ALREADY VOLUNTARILY BEEN DISALLOWED BY THE ASSESSEE AND, THEREFORE, ANY FURTHER DISALLOWANCE CANNOT EXCEED THE TOTAL COMMON EXPENSES AND BE RESTRICTED ONLY TO RS. 30,11,972/- WHICH IS THE DIFFERENCE BETWEEN THE TOTAL EXPENSES DEBITED BY THE ASSESSEE TO THEIR PROFIT AND LOSS ACCOUNT REDUCED BY THE AMOUNT OF VOLUNTARY DISALLOWANCE DONE BY THE ASSESSEE. 6. ON A CAREFUL CONSIDERATION OF THE MATTER AND AFTER HEARING THE LEARNED DR, WE FIND FORCE IN THE SUBMISSIONS ADVANCED ON BEHALF OF THE ASSESSEE AND IT APPEARS THAT BY INADVERTENCE SUCH A CONSIDERATION OF THE GROUND LOST THE ATTENTION OF THE TRIBUNAL. WE, THEREFORE, HAVING SATISFIED WITH THE SUBMISSIONS OF THE LEARNED AR FIND THAT THE ORDER DATED 29.06.2017 NEEDS TO BE RECALLED, AND WE ACCORDINGLY RECALL THE SAME. 7. IT IS THE SUBMISSION ON EITHER SIDE THAT INASMUCH AS THERE IS NO DISPUTE BY THE ASSESSEE AS TO THE FINDINGS ALREADY REACHED BY THE TRIBUNAL ON THE OTHER GROUNDS, THE APPEAL MAY BE HEARD AND DECIDED. WE, THEREFORE, HEARD THE APPEAL ON MERITS AND NOW PROCEED TO RECORD OUR REASONS HEREUNDER. 8. IN SO FAR AS THE RECORDING OF SATISFACTION BY THE AUTHORITIES BEFORE PROCEEDING TO MAKE DISALLOWANCE U/S 14A AND THE APPLICATION OF RULE 8D TO THE FACTS OF THE CASE ARE CONCERNED, THERE IS NO DISPUTE. THE ONLY POINT CANVASSED BEFORE US NOW IS IN RESPECT OF GROUND NO.5 AND THE PRAYER IS THAT 4 WHATEVER MAY BE THE DISALLOWANCE THAT COULD BE MADE U/S 14A READ WITH RULE 8D, IT SHALL NOT EXCEED THE TOTAL COMMON EXPENSES INCURRED AND CLAIMED AS DEDUCTION BY THE ASSESSEE. 9. THERE IS NO DISPUTE THAT AS RECORDED BY THE LEARNED CIT(A) VIDE PARA 4.2 OF HIS ORDER, THE ASSESSEEDEBITED RS.45,17,958/- IN ITS PROFIT AND LOSS ACCOUNT, BUT ON THE PREMISE THAT THESE EXPENSES ARE INCURRED FOR THREE STREAMS OF INCOME, ONE-THIRD THEREOF I.E., RS.15,05,986/- WAS ATTRIBUTED FOR EARNING THE EXEMPT INCOME AND DISALLOWED. HOWEVER, WHILE CALCULATING THE DISALLOWANCE BY APPLYING THE FORMULA UNDER RULE 8D(II), LEARNED AO COMPUTED THE TOTAL DISALLOWANCE AT RS.48,89,171/-, OUT OF WHICH HE REDUCED THE AMOUNT OF RS.15,05,986/- WHICH WAS SUO MOTO DISALLOWED BY THE ASSESSEE. BALANCE OF DISALLOWANCE MADE BY THE AO WAS RS.33,83,185/- WHERE THE ASSESSEE SUBMITS THAT RS.15,05,986/- HAS TO BE REDUCED NOT FROM THE AMOUNT ARRIVED AT BY THE LD. AO ON APPLICATION OF THE FORMULA UNDER RULE 8D(II), BUT FROM THE TOTAL COMMON EXPENSES INCURRED AND CLAIMED BY THE ASSESSEE AT RS.45,17,958/-. 10. ASSESSEE PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL IN ITA NO.267/DEL/2012 FOR THE ASSTT. YEAR 2008-09 DECIDED BY ORDER DATED 23.3.2012 WHEREIN A COORDINATE BENCH OF THIS TRIBUNAL HELD THAT ANY DISALLOWANCE IN EXCESS OF THE EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE AND DEBITED TO THE PROFIT AND LOSS ACCOUNT IS UNJUSTIFIED AND THE TOTAL DISALLOWANCE SHALL BE RESTRICTED TO THE EXTENT OF EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE. THIS DECISION APPLIES SQUARELY TO THE FACTS OF THE CASE ON HAND, AND WHILE RESPECTFULLY FOLLOWING THE SAID DECISION, WE ARE OF THE CONSIDERED OPINION THAT THE AUTHORITIES BELOW COMMITTED A MISTAKE IN MAKING THE TOTAL DISALLOWANCE AT RS.48,89,171/- WHEREAS THE TOTAL COMMON EXPENSES DEBITED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT WAS ONLY 5 RS.45,17,958/-; AND THAT AFTER CONSIDERING THE VOLUNTARY DISALLOWANCE OF RS.15,05,986/- BY THE ASSESSEE, THE DISALLOWANCE U/S 14A READ WITH RULE 8D HAS TO BE RESTRICTED ONLY TO RS.30,11,972/-. WE, THEREFORE, MODIFY THE DISALLOWANCE ACCORDINGLY. 11. IN THE RESULT, WHEREAS MISCELLANEOUS APPLICATION IS ALLOWED, ITA NO.3526/DEL/2014 IS ALLOWED IN PART SUBJECT TO THE ABOVE MODIFICATION. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JANUARY, 2019. SD/- SD/- (R.K. PANDA) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24 TH JANUARY , 2019. VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSTT. REGISTRAR, ITAT DRAFT DICTATED ON 23.01.2019 DRAFT PLACED BEFORE AUTHOR 23.01.2019 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS KEPT FOR PRONOUNCEMENT ON DATE OF UPLOADING ORDER ON THE WEBSITE FILE SENT TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.