DCIT, Nederland V. M/s Sunrays Propeties & Investment Ltd., New Delhi

ITA 3785/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91198 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 22-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 13-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY CHADDHA
• Assessee Lawyers: MANU K GIRE
• Keywords: Business income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. GEORGE GEORGE K , JM ITA NO. 3785/DEL/2013 : ASSTT . YEAR : 2006-07 DCIT CIRCLE 9 (1), NEDERLAND VS SUNRAYS PROPETIES & INVESTMENT LTD., 414/1, 4 TH FLOOR, DDA COMMERCIAL COMPLEX DISTT. CENTRE, JANAKPURI NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACS3655C APPELLANT BY : SH. VIJAY CHADDHA, SR. DR RESPONDENT BY : SH. MANU K. GIRE, ADV. DATE OF HEARING : 24.06.2015 DATE OF PRONOUNCEMENT : 24.06.2015 ORDER PER N.K. SAINI, A.M. THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST T HE ORDER DATED 18.03.2013 OF LD. CIT(A)- XII, NEW DELHI. 2. ONLY EFFECTIVE GROUND RAISED IN THIS APPEAL READS A S UNDER :- 1. THE LD. CIT(A) ERRED IN LAW AND ON FACT S IN RESTRICTING THE AMOUNT OF DISALLOWANCE TO RS. 88,65,605/- INST EAD OF RS. 1,71,90,424/-. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE FILED THE RETURN OF INCOME DECLARING THE LOSS OF RS. 9,57,318/- ON 10. 10.2008. THE AO MADE DISALLOWANCE OF RS. 1,71,90,424/- U/S 14A OF THE IT ACT, 1961 ITA NO.3785/DEL/2013 2 (HEREINAFTER REFERRED TO AS THE ACT). THE SAID DISA LLOWANCE WAS CONFIRMED BY THE LD. CIT(A). HOWEVER, THE ASSESSEE PREFERRED AN APPEAL IN ITA NO. 3035/DEL/2009 TO THE ITAT WHEREIN VIDE ORDER DATED 25.10.2010. THE MATTER WAS RESTORED TO THE FI LE OF THE AO FOR A FRESH DECISION. THE AO AGAIN MADE THE SAME DISALLOW ANCE OF RS. 1,71,90,424/-. 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MAT TER TO THE LD. CIT(A) WHO RESTRICTED THE DISALLOWANCE TO RS. 88,6 5,605/- BY OBSERVING IN IMPUGNED ORDER AS UNDER :- THE ASSESSING OFFICER VIDE ORDER U/S 254/1 43(3) OF THE INCOME TAX ACT DATED 29.12.2011, HAS ONCE AGAIN MADE THE A DDITION U/S 14A R.W.R.8D. THE PROVISIONS OF RULE 8D ARE APPLICABLE W.E.F. ASSESSMENT YEAR 2008-09 AS LAID DOWN BY THE BOMBAY HIGH COURT IN THE CASE GODREJ & BOYCE MFG. CO. LTD. VS. DCIT (2010) 328 IT R 81. SINCE THE PROVISONS OF RULE 8D ARE NOT APPLICABLE FOR THE AY 2007-08. THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT, T RICHUR VS. CATHOLIC SYRIAN BANK LTD. TRICHUR, VIDE ITS JUDGMEN T HAS SUGGESTED A FORMULA FOR COMPUTING DISALLOWANCE U/S 14A IN CASES PRIOR TO AY 2008-09 WHERE THE PROVISIONS OF RULE 8D OF IT RULES ARE NOT APPLICABLE. THE FORMULA SUGGESTED BY THE HONBLE HI GH COURT IS AS UNDER : TOTAL INTEREST LIABILITY --------------------------X TAX FREE INCOME EARNE D BY THE ASSESSEE TOTAL INCOME ACCORDINGLY THE DISALLOWANCE U/S 14A AS PER THIS RA TIO WORKS OUT TO RS. 88,65,605/- AS DETAILED HEREUNDER. 1,96,35,273 ------------------ X 1,24,5955 0 = 88,65,605/- 2,75,95,034 KEEPING IN VIEW OF THE ABOVE FACTS, I AM OF THE VIEW THAT THE DISALLOWANCES MADE BY THE ASSESSING OFFICER U/S 14A READ WITH RULE 8D ARE NOT APPLICABLE IN THIS YEAR. HENCE, THE ADDI TION IS RESTRICTED ONLY TO RS. 88,65,605/- INSTEAD OF RS. 1,71,90,424/ -. ITA NO.3785/DEL/2013 3 5. BEING AGGRIEVED THE DEPARTMENT IS IN APPEAL. THE L D DR STRONGLY SUPPORTED THE ORDER OF THE AO AND REITERATED THE OB SERVATIONS MADE IN THE ASSESSMENT ORDER DATED 27.12.2011. IN HIS RIVAL SUBMISSION, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 15.05.20 15 OF THIS BENCH OF THE TRIBUNAL IN ITA NO. 2970 & 2971/DEL.2013 FOR TH E ASSESSMENT YEAR 2004-05 & 2007-08 RESPECTIVELY IN ASSESSEES O WN CASE. HE FURNISHED THE COPY OF THE SAID ORDER. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH TH E PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAD BE EN ADJUDICATED BY THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE V IDE ORDER DATED 15.05.2015 IN ITA NO. 2970 & 2971/DEL/2013 FOR THE ASSESSMENT YEAR 2004-05 & 2007-08 RESPECTIVELY WHEREIN RELEVANT FIN DS HAVE BEEN GIVEN AT PARA 6 TO 6.2 AND READ AS UNDER :- 6. APROPOS GROUND NO. 4, WE FIND THAT AO HAD MADE DISALLOWANCE OF RS. 1,64,38,217/- U/S 14A BY APPLYING RULE 8D. H OWEVER, LD. CIT(A) DID NOT APPLY RULE 8D BY OBSERVING THAT THE SAID RULE WAS APPLICABLE W.E.F. ASSESSMENT YEAR 2008-09, AS LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. CO. LTD. VS. DCIT 328 ITR 81. SHE RELIED ON THE DECISIO N OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT TRICHUR VS. CA THOLIC SYRIAN BANK LTD., TRICHUR BY OBSERVING AS UNDER : THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT TRICHUR VS. CATHOLIC SYRIAN BANK LTD., TRICHUR, VIDE ITS JUDGME NT HAS SUGGESTED A FORMULA FOR COMPUTING DISALALOWANCE U/S 14A IN CASE S PRIOR TO AY 2008-09 WHERE THE PROVISIONS OF RULE 8D OF IT RULES ARE NOT APPLICABLE. THE FORMULA SUGGESTED BY THE HONBLE HI GH COURT IS AS UNDER : ITA NO.3785/DEL/2013 4 TOTAL INTEREST LIABILITY / 7,62,03,737 X 1,26,61,0 25 = RS. 33,16,436/- KEEPING IN VIEW OF THE ABOVE FACTS, I AM OF THE VIE W THAT THE DISALLOWANCES MADE BY THE ASSESSING OFFICER U/S 14A READ WITH RULE 8D ARE NOT APPLICABLE IN THIS YEAR. HENCE THE ADDIT ION IS RESTRICTED ONLY TO RS. 33,16,436/- INSTEAD OF RS. 1,64,38,217/ -. 6.1. THE ASSESSEE HAD GIVEN FOLLOWING MODE FOR C OMPUTING THE DISALLOWANCE : DIVIDEND INCOME = RS. 1,26,61,025/- BUSINESS INCOME = RS. 7,62,03,737/- RATIO OF DIVIDEND INCOME TO BUSINESS INCOME : 1,26, 61,025 / 7,62,03,737 X 100 = 16.61% DISALLOWANCE U/S 14A : 12661025* 16.61%= 21,02,996/ -. 6.2 HAVING HEARD BOTH THE PARTIES, WE FIND THAT SINCE THE DISALLOWANCE HAS BEEN COMPUTED BY LD. CIT(A) BY APP LYING THE METHODOLOGY LAID DOWN BY HONBLE KERALA HIGH COURT, THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE SAME. WE, ACCORDI NGLY, CONFIRM 1. CIT(A)S FINDING ON THE ISSUE IN QUESTION. 7. SO RESPECTFULLY FOLLOWING THE AFORESAID REFERR ED TO ORDER DATED 15.05.2015 IN ASSESSEES OWN CASE. WE DO NOT SEE AN Y VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) ON TH IS ISSUE. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMI SSED. (ORDER PRONOUNCED IN THE COURT ON 24/06/2015 ). SD/- SD/- (GEORGE GEORGE K) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24 /06/2015 *B.RUKHAIYAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITA NO.3785/DEL/2013 5 DATE INITIAL 1. DRAFT DICTATED ON 24/06/2015 PS 2. DRAFT PLACED BEFORE AUTHOR 24/06/2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.