DCIT, Circle-12(1), New Delhi V. IL & FS Energy Development Co. Ltd., New Delhi

ITA 3851/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8025 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 22-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SARWAN KUMAR GAUTAM
• Keywords: Earning of tax free income; Rule 8D; Capital Gains
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. KULDIP SINGH, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCING) ITA NOS. 3479 & 3851/DEL/2018 (ASSESSMENT YEARS : 2013-14 & 2014-15) DCIT CIRCLE 12(1) NEW DELHI PAN NO. AABCI 6885 K VS. IL & FS ENERGY DEVELOPMENT CO. LTD., A-268, 1 ST FLOOR, BHISHM PITAMAH MARG & DEFENCE COLONY, NEW DELHI (APPELLANT) (RESPONDENT) A SSESSEE BY -- NONE -- RE VENUE BY SHRI SARWAN KUMAR GAUTAM, CIT - D.R. DATE OF HEARING: 18 .08.2021 DATE OF PRONOUNCEMENT: 25 . 0 8 . 202 1 ORDER PER ANIL CHATURVEDI, AM : BOTH THE PRESENT APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (A)-35 & 22, NEW DELHI DATED 27.02.2018 & 26.03.2018 RELATING TO ASSESSMENT YEARS 2013-14 & 2014-15. 2. ON THE DATE OF HEARING, NONE APPEARED ON BEHALF OF ASSESSEE NOR ANY ADJOURNMENT APPLICATION WAS FILED THROUGH THE NOTICE OF HEARING WAS ISSUED TO THE ASSESSEE. THE CASE FILE FURTHER REVEALS THAT EVEN ON EARLIER OCCASION THERE WAS NO APPEARANCE ON BEHALF OF THE ASSESSEE. CONSIDERING THE AFORESAID FACTS, WE PROCEED TO 2 DISPOSE OF THE APPEAL EX PARTE QUA THE ASSESSEE AFTER CONSIDERING THE MATERIAL ON RECORD AND AFTER HEARING BY THE LEARNED DR. 3. BEFORE US, AT THE OUTSET, LEARNED DR SUBMITTED THAT THE ISSUE INVOLVED IN BOTH THE APPEALS ARE IDENTICAL EXCEPT FOR THE YEAR AND AMOUNTS INVOLVED AND THEREFORE HE HAS COMMON SUBMISSIONS TO MAKE FOR BOTH THE YEARS. IN VIEW OF THE AFORESAID SUBMISSIONS OF THE LEARNED DR, WE FOR THE SAKE OF CONVENIENCE PROCEED TO DISPOSE OF BOTH THE APPEALS BY A CONSOLIDATED ORDER BUT FOR THE SAKE OF REFERENCE REFER TO THE FACTS FOR A.Y. 2013-14. 4. THE RELEVANT FACTS AS CULLED FROM THE MATERIAL ON RECORDS ARE AS UNDER: 5. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF CONSULTANCY SERVICES AND EARNED INTEREST & SOME OTHER MISCELLANEOUS INCOME. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2013-14 ON 29.11.2013 DECLARING TOTAL INCOME OF RS.35,56,68,190/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 29.12.2016 AND THE TOTAL INCOME WAS DETERMINED AT RS.75,95,06,109/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO VIDE ORDER DATED 27.02.2018 (APPEAL NO.736/16-17) GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE MADE BY 3 ASSESSING OFFICER U/S 14A R. W. RULE 8D, AMOUNTING TO RS 12,50,66,466/-. 2. WHETHER FOR APPLICATION OF SECTION 14A(1) OF THE INCOME TAX , 1961 (THE ACT) THE PURPOSE FOR MAKING INVESTMENT AND EARNING TAX EXEMPT INCOME THEREON IS AN ESSENTIAL LEGAL REQUIREMENT? 3. WHETHER THE TERM 'IN RELATION TO' AS USED IN SECTION 14A OF THE ACT CONTEMPLATES A DIRECT AND PROXIMATE NEXUS BETWEEN 'EXPENDITURE INCURRED' AND 'EARNING OF EXEMPT INCOME'? 4. WHETHER THE CIT(A) IS CORRECT IN LAW AND CIRCUMSTANCE IN NOT UPHOLDING DISALLOWANCE U/S 14A OF THE IT ACT WITHOUT CONSIDERING LEGISLATIVE INTENT OF INTRODUCING SECTION 14A BY THE FINANCE ACT, 2001 AS CLARIFIED BY CBDT CIRCULAR NO. 5/2014 DATED: 10.02.2014? 5. WHETHER THE CIT(A) IS CORRECT IN LAW AND CIRCUMSTANCE IS LEGALLY JUSTIFIED IN NOT UPHOLDING DISALLOWANCE U/ SL4A OF THE IT ACT WITHOUT CONSIDERING A LEGAL PRINCIPLE THAT ALLOWABILITY/DISALLOWABILITY OF EXPENDITURE UNDER THE ACT IS NOT CONDITIONAL UPON THE EARNING OF THE INCOME AS UPHELD BY HON'BLE SUPREME COURT IN CASE OF CIT VS. RAJENDRA PRASAD MOODY [1978] 115 ITR 519? 6. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF APPEAL. 6. BEFORE US, THE LEARNED DR SUBMITTED THAT THOUGH THE REVENUE HAS RAISED VARIOUS GROUNDS BUT THE SOLE CONTROVERSY IS WITH RESPECT TO DISALLOWANCE MADE U/S 14A R.W.R 8D OF THE ACT. 7. AO ON PERUSING THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET, NOTICED THAT ASSESSEE HAD MADE SUBSTANTIAL INVESTMENT IN SHARES FOR THE PURPOSE OF EARNING DIVIDEND INCOME AND LONG TERM CAPITAL GAINS WHICH ARE EXEMPT FROM TAX. HE ALSO NOTICED THAT ASSESSEE HAS NOT DISALLOWED ANY AMOUNT U/S 14A OF THE ACT, 4 THOUGH IN THE TAX AUDIT REPORT THE AUDITOR HAD COMPUTED AMOUNT OF RS.12,50,66,466/- AS BEING INADMISSIBLE IN TERMS OF SECTION 14A. THE ASSESSEE WAS ASKED TO JUSTIFY AS TO WHY NO DISALLOWANCE U/S 14A BE MADE TO WHICH ASSESSEE INTER ALIA SUBMITTED THAT SINCE NO EXEMPT INCOME HAS BEEN EARNED, NO DISALLOWANCE U/S 14A IS WARRANTED. IT WAS FURTHER SUBMITTED THAT IDENTICAL ISSUE AROSE IN ASSESSEES OWN CASE IN A.Y. 2011-12 WHEREIN THE HONBLE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE SUBMISSIONS OF THE ASSESSE WAS NOT FOUND ACCEPTABLE TO AO. AO NOTED THAT THE ISSUE U/S 14A OF THE ACT IN THE ABSENCE OF ANY DIVIDEND INCOME EARNED BY THE ASSESSEE WAS PRESENTLY SUBJUDICE BEFORE THE SUPREME COURT, AND IN ORDER TO KEEP THE ISSUE ALIVE HE DISALLOWED RS.12,50,66,466/- U/S 14A OF THE ACT. 8. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). CIT(A) NOTED THAT HONBLE DELHI HIGH COURT IN ITS DECISION DATED 16.08.2017 IN CASE OF IL & FS ENERGY DEVELOPMENT COMPANY LTD. VS PCIT IN ITA NO.520/2017 FOR A.Y. 2011-12 HAS BEEN HELD THAT WHEN NO DIVIDEND INCOME WAS EARNED NO DISALLOWANCE SHOULD BE MADE U/S 14A OF THE ACT. CIT(A) FURTHER NOTED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMNIVEST LTD VS. CIT-IV 61 TAXMANN.COM 118 (DELHI) HAS ALSO HELD THAT SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME RECEIVED DURING THE YEAR. SHE FOLLOWING THE AFORESAID DECISIONS OF DELHI HIGH COURT DELETED THE ADDITION. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPAEL BEFORE US. 5 9. BEFORE US, LEARNED DR SUPPORTED THE ORDER OF AO. 10. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO THE DELETION OF DISALLOWANCE U/S 14A OF THE ACT. WE FIND THAT ASSESSEE HAD SUBMITTED BEFORE THE AO THAT NO EXEMPT INCOME IN THE FORM OF DIVIDEND HAS BEEN EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE AFORESAID CONTENTION OF THE ASSESSEE HAS NOT CONTROVERTED BY THE REVENUE. WE FIND THAT CIT(A) BY FOLLOWING THE DECISIONS IN THE CASE OF CHEMNIVEST LTD. (SUPRA), IL & FS ENERGY DEVELOPMENT COMPANY LTD. (SUPRA) AND THE DECISION IN THE CASE OF CIT VS. HOLCIM INDIA P. LTD. 57 TAXMANN.COM 28 (2015) DELHI HELD THAT WHEN NO DIVIDEND INCOME HAS BEEN RECEIVED BY THE ASSESSEE, NO DISALLOWANCE U/S 14A OF THE ACT IS CALLED FOR. 11. BEFORE US, NO FALLACY IN THE FINDINGS OF CIT(A) HAS BEEN POINTED OUT BY THE REVENUE. REVENUE HAS ALSO NOT PLACED ON RECORD ANY CONTRARY BINDING DECISION IN ITS SUPPORT. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE TO THE ORDER OF CIT(A) AND THUS THE APPEAL OF THE REVENUE IS DISMISSED. 12. SINCE THE FACTS FOR A.Y. 2014-15 IN ITA NO.3851/DEL/2018 ARE SIMILAR TO THAT OF A.Y. 2013-14 AS ADMITTED BY LEARNED DR, WE FOR THE REASONS STATED HEREIN WHILE DISMISSING THE GROUND OF REVENUE AND FOR SIMILAR REASONS DISMISS THE GROUNDS FOR A.Y. 2014-15 ALSO. THUS THE GROUNDS OF REVENUE ARE DISMISSED. 6 13. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.08.2021. SD/- SD/- (KULDIP SINGH) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE:- 25.08.2021 PY* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI