Tourism Finance Corporation of India Ltd., New Delhi V. ACIT, New Delhi

ITA 3843/DEL/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69640 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 14-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA SENIOR
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H : NEW DELHI) SHRI U.B.S. BEDI, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.3843/DEL./2013 (ASSESSMENT YEAR : 2009-10) TOURISM FINANCE CORPORATION OF INDIA LTD., VS. ACI T, CIRCLE 16(1), 13 TH FLOOR, IFCI TOWER, NEW DELHI. 61, NEHRU PLACE, NEW DELHI 110 019. (PAN : AAACT0706D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY AGGARWAL, CA REVENUE BY : SHRI SAMEER SHARMA, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF CIT (APPEALS)-19, NEW DELHI DATED 31.03.2013 FOR THE AS SESSMENT YEAR 2009-10. 2. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 200 9-10 FILED ON 25.09.2009 DECLARING INCOME AT RS.34,52,72,384/-. THE RETURN WAS SUBSEQUENTLY REVISED. 3. THE ONLY ISSUE INVOLVED IN THE APPEAL IS WITH RE GARD TO THE DISALLOWANCES MADE OF RS.6,91,41,523/- U/S 14A ON T HE EXEMPTED INCOME EARNED AT RS.24,72,225/-. THE LD. AR PLEADED THAT ASSESSING OFFICER HAS NOT ITA NO.3843/DEL./2013 2 ESTABLISHED A CLEAR NEXUS BETWEEN INTEREST BEARING FUNDS ALLEGED TO BE INVESTED FOR GENERATING TAX FREE DIVIDEND INCOME. THEREFORE , THIS ADDITION WAS NOT CALLED FOR. 4. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE D ECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT L TD. VS. CIT [2011] 203 TAXMANN 364 (DELHI) IS ALSO RELEVANT TO THE ISS UE INVOLVED. THE HON'BLE DELHI HIGH COURT IN PARAS 41 & 42 HAS HELD AS UNDER :- 41. SUB-SECTION (2) OF SECTION 14A, AS WE HAVE SEE N, STIPULATES THAT THE ASSESSING OFFICER SHALL DETERMI NE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOM E WHICH DOES NOT FORM PART OF THE TOTAL INCOME IN ACCORDAN CE WITH SUCH METHOD AS MAY BE PRESCRIBED. OF COURSE, THIS DETERMINATION CAN ONLY BE UNDERTAKEN IF THE ASSESSI NG OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. THIS PART OF SECTIO N 14A(2) WHICH EXPLICITLY REQUIRES THE FULFILLMENT OF A COND ITION PRECEDENT IS ALSO IMPLICIT IN SECTION 14A(1) [AS IT NOW STANDS] AS ALSO IN ITS INITIAL AVATAR AS SECTION 14A. IT IS ONLY THE PRESCRIPTION WITH REGARD TO THE METHOD OF DETERMINI NG SUCH EXPENDITURE WHICH IS NEW AND WHICH WILL OPERATE PROSPECTIVELY. IN OTHER WORDS, SECTION 14A, EVEN P RIOR TO THE INTRODUCTION OF SUB-SECTIONS (2) & (3) WOULD REQUIR E THE ASSESSING OFFICER TO FIRST REJECT THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXTENT OF SUCH EXPENDITURE AND SUCH R EJECTION MUST BE FOR DISCLOSED COGENT REASONS. IT IS THEN TH AT THE QUESTION OF DETERMINATION OF SUCH EXPENDITURE BY TH E ASSESSING OFFICER WOULD ARISE. THE REQUIREMENT OF ADOPTING A SPECIFIC METHOD OF DETERMINING SUCH EXPENDITURE HAS BEEN INT RODUCED BY VIRTUE OF SUB-SECTION (2) OF SECTION 14A. PRIOR TO THAT, THE ASSESSING WAS FREE TO ADOPT ANY REASONABLE AND ACCE PTABLE METHOD. ITA NO.3843/DEL./2013 3 42. THUS, THE FACT THAT WE HAVE HELD THAT SUB-SECTI ONS (2) & (3) OF SECTION 14A AND RULE 8D WOULD OPERATE PROSPE CTIVELY (AND, NOT RETROSPECTIVELY) DOES NOT MEAN THAT THE A SSESSING OFFICER IS NOT TO SATISFY HIMSELF WITH THE CORRECTN ESS OF THE CLAIM OF THE ASSESSEE WITH REGARD TO SUCH EXPENDITU RE. IF HE IS SATISFIED THAT THE ASSESSEE HAS CORRECTLY REFLECTED THE AMOUNT OF SUCH EXPENDITURE, HE HAS TO DO NOTHING FURTHER. ON THE OTHER HAND, IF HE IS SATISFIED ON AN OBJECTIVE ANALYSIS A ND FOR COGENT REASONS THAT THE AMOUNT OF SUCH EXPENDITURE AS CLAI MED BY THE ASSESSEE IS NOT CORRECT, HE IS REQUIRED TO DETERMIN E THE AMOUNT OF SUCH EXPENDITURE ON THE BASIS OF A REASONABLE AN D ACCEPTABLE METHOD OF APPORTIONMENT. IT WOULD BE APPROPRIATE TO RECALL THE WORDS OF THE SUPREME COURT IN WALFORT (SUPRA) TO TH E FOLLOWING EFFECT:- THE THEORY OF APPORTIONMENT OF EXPENDITURE BETWEEN TAXABLE AND NON-TAXABLE HAS, IN PRINCIPLE, BEEN NOW WIDENED UNDER SECTION 14A.' SO, EVEN FOR THE PRE-RULE 8D PERIOD, WHENEVER THE I SSUE OF SECTION 14A ARISES BEFORE AN ASSESSING OFFICER, HE HAS, FIRST OF ALL, TO ASCERTAIN THE CORRECTNESS OF THE CLAIM OF T HE ASSESSEE IN RESPECT OF THE EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SA ID ACT. EVEN WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS B EEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME, THE ASSESSING OFFICER WILL HAVE TO VERIFY T HE CORRECTNESS OF SUCH CLAIM. IN CASE, THE ASSESSING O FFICER IS SATISFIED WITH THE CLAIM OF THE ASSESSEE WITH REGAR D TO THE EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, THE ASSESSING OFFICER IS TO ACCEPT THE CLAIM OF THE ASS ESSEE INSOFAR AS THE QUANTUM OF DISALLOWANCE UNDER SECTION 14A IS CONCERNED. IN SUCH EVENTUALITY, THE ASSESSING OFFIC ER CANNOT EMBARK UPON A DETERMINATION OF THE AMOUNT OF EXPEND ITURE FOR THE PURPOSES OF SECTION 14A(1). IN CASE, THE ASSES SING OFFICER IS NOT, ON THE BASIS OF OBJECTIVE CRITERIA AND AFTE R GIVING THE ASSESSEE A REASONABLE OPPORTUNITY, SATISFIED WITH T HE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, HE SHALL HAVE TO REJECT THE CLAIM AND STATE THE REASONS FOR DOING SO. HAVIN G DONE SO, THE ASSESSING OFFICER WILL HAVE TO DETERMINE THE AM OUNT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DO ES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT. HE IS REQUIRED TO DO ITA NO.3843/DEL./2013 4 SO ON THE BASIS OF A REASONABLE AND ACCEPTABLE METH OD OF APPORTIONMENT. AFTER HEARING BOTH THE SIDES ON THE ISSUE, WE FIND IT APPROPRIATE TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECID E DE NOVO IN VIEW OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF MAXOPP INVESTMENT LTD., CITED SUPRA. WE ORDER ACCORDINGLY . 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 17 TH DAY OF DECEMBER, 2013. SD/- SD/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 17 TH DAY OF DECEMBER, 2013 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-19, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.