M/s. Sunrays Properties & Investment Co. Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 353/DEL/2014

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 101346 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 06-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 20-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K SHARMA
• Assessee Lawyers: MANU K GIRI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SMT. BEENA PILLAI , JM ITA NO. 353/DEL/2014 : ASSTT. YEAR : 2009 - 10 M/S SUNRAYS PROPERTIES & INVESTMENT CO. PVT. L TD., 414/1, 4 TH FLOOR, DDA COMM. COMPLEX, DISTT. CENTER, JANAKPURI, NEW DELHI - 110058 VS JOINT COMMISSIONER OF INCOME TAX, CIRCLE - 9(1) , NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A A ACS3655C ASSESSEE BY : SH. MANU K. GIRI, ADV. REVE NUE BY : SH. A. K. SHARMA, SR. DR DATE OF HEARING : 13 .02 .201 7 DATE OF PRONOUNCEMENT : 17 . 02 .201 7 ORDER PER N. K. SAINI, AM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 22 .10.2013 OF LD. CIT - X I , NEW DELHI . 2. FOLL OWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS BAD IN LAW. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL), ERRED IN REJECTING ASSESSEE'S CONTENTION THAT THE DISALLOW ANCE UNDER SECTION 14A CANNOT EXCEED RS. 15,22,277/ - BEING 0.5% OF THE AVERAGE VALUE OF THE OPENING AND CLOSING BALANCE OF INVESTMENT IN SHARES OF APOLLO TYRES LTD AND PTL ENTERPRISES LTD ON WHICH SUCH DIVIDEND INCOME HAS BEEN RECEIVED BY THE ASSESSEE COMP ANY, THEREBY CONFIRMING THE ADDITION OF RS. ITA NO. 353 /DEL /201 4 SUNRAYS PROPERTIES & INVESTMENT CO. PVT. LTD. 2 1,82,95,666/ - MADE BY THE ASSESSING OFFICER U/S 14A OF THE INCOME TAX ACT, RESULTING IN REDUCTION TO RETURNED LOSS TO THAT EXTENT. 3. WITHOUT TO THE PREJUDICE TO APPELLANT CONTENTION THAT RULE 8D IS NOT APPLICAB LE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT DISALLOWANCE UNDER RULE 8D HAS BEEN CORRECTLY WORKED OUT IN ACCORDANCE WITH THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES, 1962 TO THE TO THE EXTENT OF RS. 1,82,95,666/ - . THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 3. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) AMOUNTIN G TO RS.1,82 ,95,666/ - MADE BY THE AO. 4. DURING THE COURSE OF HEARING THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS SQUARELY COVERED VIDE ORDER DATED 27.11.2015 OF THE ITAT DELHI BENCH D , NEW DELHI IN ITA NO. 6586/DEL/201 3 FOR THE ASSESSMENT YEAR 2009 - 10 IN THE CASE OF M/S GLOBAL CAPITAL LTD., JANKPURI, NEW DELHI VS ACIT, CIRCLE - 12(1), NEW DELHI (COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD). IT WAS FURTHER SUBMITTED THAT DISALLOWANCE U/S 14A OF THE INCOM E TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 SHOULD NOT EXCEED THE EXEMPT ED INCOME , THE RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ITA NO. 353 /DEL /201 4 SUNRAYS PROPERTIES & INVESTMENT CO. PVT. LTD. 3 HOLCIM INDIA PVT. LTD. WHICH HAS BEEN FOLLO WED BY THE ITAT IN THE AFORESAID REFERRED TO ORDER DATED 27.11.2015. 5. IN HIS RIVAL SUBMISSIONS THE LD. DR ALTHOUGH SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 6. W E HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT APPEARS THAT THE DISALLOWANCE MADE BY THE AO IS MORE THAN THE EXEMPTED INCOME CLAIMED BY THE ASSESSEE. ON A SIMIL AR ISSUE THE ITAT DELHI BENCH D IN THE AFORESAID REFERRED TO CASE OF M/S GLOBAL CAPITAL LTD., NEW DELHI VS ACIT, CIRCLE - 12(1), NEW DELHI (SUPRA) BY FOLLOWING THE EARLIER DECISION DATED 29.04.2015 OF THE ITAT C BENCH, NEW DELHI IN THE CASE OF INDUS VALL EY INVESTMENT & FINANCE (P) LTD. VS DCIT IN ITA NO. 3763/DEL/2013 FOR THE ASSESSMENT YEAR 2009 - 10 , OBSERVED AS UNDER: 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. AT THE VERY OUTSET, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED A COPY OF THE ORDER OF THE ITAT DELHI C BENCH IN I.T.A. NO.3763/DEL/2013 FOR ASSESSMENT YEAR 2009 - 10 DATED 29.4.15 IN THE CASE OF INDUS VALLEY INVESTMENT & FINANCE (P) LTD. VS DCIT AND SUBMITTED THAT IN THE SIMILAR SET OF FACTS AND CIRCUMSTANCES, THE TRIBUNAL IN THE CASE OF ASSESSEE S GROUP COMPANY HAS DIRECTED THAT THE DISALLOWANCE U/S 14A SHOULD NOT EXCEED THE EXEMPT INCOME AND THEREFORE, THE DISALLOWANCE WAS RESTRICTED TO THE EXEMPT INCOME. LEARNED COUNSEL OF THE ASSESSEE HAS DRAWN OUR ATTENTION TOWARDS PARA 4 OF THE TRIBUNAL ORDER (SUPRA). ITA NO. 353 /DEL /201 4 SUNRAYS PROPERTIES & INVESTMENT CO. PVT. LTD. 4 4. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW, HOWEVER, HE FAIRLY ACCEPTED THAT IN THE SIMILAR SET OF FACTS AND CIRCUMSTANCES, THE AMOUNT OF DISALLOWANCE HAS BEEN RESTRICTED TO THE EXEMPT INCOME. 5. FIRSTLY, IT WOULD BE APPROPRIATE TO REPRODUCE THE RELEVANT PART OF THE ORDER OF THE TRIBUNAL (SUPRA) WHICH HAS BEEN RELIED BY THE LEARNED COUNSEL OF THE ASSESSEE WHICH READS AS FOLLOWS: - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE TOTAL EXEMPT INCOME EARNED BY THE ASSESSEE IS TO THE TUNE OF RS.25.38 LAC, AGAINST WHICH AN ADDITION OF RS.1.05 CRORE HAS BEEN MADE. THE HON BLE DELHI HIG H COURT IN JOINT INVESTMENT PVT. LTD. VS. CIT, VIDE ITS JUDGMENT DATED 25.2.2015, HAS HELD THAT THE DISALLOWANCE U/S 14A CANNOT EXCEED THE AMOUNT OF EXEMPT INCOME. THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDIA PVT LTD. (2014) 90 CCH 081 - DEL - HON'BLE HIGH COURT, HAS HELD THAT THERE CAN BE NO DISALLOWANCE U/S 14A IN THE ABSENCE OF ANY EXEMPT INCOME. THE RATIONALE BEHIND THESE JUDGMENTS IS THAT THE AMOUNT OF DISALLOWANCE U/S 14A SHOULD NOT EXCEED THE EXEMPT INCOME. SINCE THE TOTAL EXEMPT INCO ME IN THE INSTANT CASE IS RS.25,38,020/ - , WE DIRECT THAT THE DISALLOWANCE U/S 14A BE RESTRICTED TO RS.18,01,968/ - (RS.25,38,020 - RS.7,36,052/ - ). THE REMAINING AMOUNT OF DISALLOWANCE IS DIRECTED TO BE DELETED. 6. IN VIEW OF ABOVE, IT IS OBSERVED THAT IN THE SIMILAR SET OF FACTS AND CIRCUMSTANCES, THE TOTAL EXEMPT INCOME EARNED BY THE PRESENT ASSESSEE IS RS.13,35,040 AGAINST WHICH AN ADDITION OF RS.21,87,713 HAS BEEN MADE BY THE ASSESSING OFFICER U/S 14A OF THE ACT. AS NOTED BY THE COORDINATE BENCH OF THIS TRIBUNAL THAT IN THE CASE OF JOINT INVESTMENT (P) LTD. VS CIT (SUPRA), THE HON BLE DELHI HIGH COURT HAS HELD THAT THE DISALLOWANCE U/S 14A OF THE ACT SHOULD NOT EXCEED THE EXEMPT INCOME. THE TRIBUNAL ALSO NOTED THAT THE HON BLE DELHI HIGH COURT IN THE CAS E OF CIT VS HOLCIM INDIA PVT. LTD. (SUPRA) HELD THAT THERE CAN BE NO DISALLOWANCE U/S 14A IN ITA NO. 353 /DEL /201 4 SUNRAYS PROPERTIES & INVESTMENT CO. PVT. LTD. 5 THE ABSENCE OF ANY EXEMPT INCOME. I.T.A. NO. 6586/DEL/2013 ASSESSMENT YEAR: 2009 - 10 FINALLY, THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT NOTED THAT THE DI SALLOWANCE SHOULD NOT EXCEED THE EXEMPT INCOME DURING THE RELEVANT FINANCIAL PERIOD. IN THE PRESENT CASE, SINCE THE TOTAL EXEMPT INCOME OF THE ASSESSEE IS RS.13,35,040 AND THE ASSESSEE HAD SUO MOTO OFFERED DISALLOWANCE OF RS.1,81,388 UNDER RULE 8D(2)(III) OF THE INCOME TAX RULES, 1962 BEING 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT IN THE SHARES OF APOLLO TYRES LTD. ON WHICH SUCH DIVIDEND INCOME WAS EARNED. HENCE, WE DIRECT THE ASSESSING OFFICER THAT THE DISALLOWANCE U/S 14A BE RESTRICTED TO RS.11,53,752 (RS. 13,35,040 RS.1,81,388) AND THE REMAINING AMOUNT OF DISALLOWANCE IS DIRECTED TO BE DELETED. 7. WE, THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 27.11.2015 IN ITA NO. 6586/DEL/2013 FOR THE ASSESSMENT YEAR 2009 - 10 IN THE CA SE OF M/S GLOBAL CAPITAL LTD., NEW DELHI VS ACIT, CIRCLE - 12(1), NEW DELHI, DIRECT THE AO TO MAK E THE DISALLOWANCE TO THE EXTENT OF THE INCOME CLAIMED BY THE ASSESSEE AS EXEMPT . 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 17 /02/2017 ) SD/ - SD/ - (BEENA PILLAI ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DAT ED: 17 /02 /201 7 *SUBODH* COPY FORWARDED TO: 1. APPELLAN T 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR