ACIT, CIRCLE- 10(2), NEW DELHI V. GYAN ENTERPRISES PVT. LTD., NEW DELHI

ITA 3896/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6464 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 15-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROCTIM SAIKEA
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCING) ITA NO.3896/DEL/2017 ASSESSMENT YEAR: 2011-12 ACIT CIRCLE 10 (2) NEW DELHI VS M/S. GYAN ENTERPRISES PVT. LTD., 4 TH FLOOR, PUNJABI BHAWAN, 10 ROUSE AVENUE, NEW DELHI-10002 PAN NO.AAACG0512G (APPELLANT) (RESPONDENT) APPELLANT BY SH. ROCTIM SAIKEA, SR. DR RESPONDENT BY SH. M. P. RASTOGI, ADVOCATE DATE OF HEARING: 08/09/2021 DATE OF PRONOUNCEMENT: 08/09/2021 ORDER PER N. K. BILLAIYA, AM: THIS APPEAL FILED BY THE REVENUE IS PREFERRED AGAI NST THE ORDER OF THE CIT(A)-3, NEW DELHI DATED 09.02.2017 P ERTAINING TO A.Y.2011-12. 2. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT T HE CIT(A) ERRED IN DELETING THE ADDITION OF RS.26415111/- MADE U/S . 14A OF THE ACT BY THE AO. 2 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DU RING THE FINANCIAL YEAR UNDER CONSIDERATION THE ASSESSEE COM PANY WAS TRADING IN UNITS OF MUTUAL FUNDS AND INVESTMENT IN SHARES AND DEBENTURES. DURING THE COURSE OF THE SCRUTINY ASSES SMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAS EA RNED DIVIDEND INCOME OF RS.232092684/- WHICH WAS CLAIMED EXEMPT. THE AO FURTHER FOUND THAT THE ASSESSEE HAS SUO-MOTO DISALL OWED RS.9554057/- U/S. 14A BEING EXPENSES PERTAINING TO THE TAX FREE DIVIDEND INCOME. 4. THE ASSESSEE WAS ASKED TO SHOWCAUSE WHY THE DISA LLOWANCE SHOULD NOT BE MADE AS PER RULE 8D OF THE IT RULES 1 962. THE ASSESSEE FILED A DETAILED REPLY BY STATING THAT NO DIRECT EXPENSES WAS INCURRED EARNING THE DIVIDEND INCOME AND EXPLAI NED THE BASIS OF SUO-MOTO DISALLOWANCE OF RS.9554057/-. 5. THE EXPLANATION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE AO WHO PROCEEDED TO COMPUTE THE DISALLOWANCE AS PER RULE 8D. THE TOTAL DISALLOWANCE WAS COMPUTED AT RS.3596 9168/- AND AFTER REDUCING THE AMOUNT ALREADY DISALLOWED, THE A O MADE THE ADDITION OF RS.26415111/-. 6. ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) AN D REITERATED ITS CONTENTION THAT NO DIRECT EXPENSES WERE INCURRE D FOR EARNING THE EXEMPT INCOME AND THE DIVIDEND HAS BEEN MOSTLY RECEIVED FROM PROMOTERS COMPANY. 7. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS THE CIT(A) WAS CONVINCED WITH THE CONTENTION OF THE ASSESSEE A ND DELETED THE DISALLOWANCE MADE BY THE AO. 3 8. BEFORE US THE DR STRONGLY SUPPORTED THE FINDINGS OF THE AO AND READ THE RELEVANT OBSERVATIONS FROM THE ASSESSM ENT ORDER. 9. PER CONTRA THE COUNSEL REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 10. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO HAS NOT RECORDED ANY SAT ISFACTION AND IN-FACT THE COMPUTATION OF SUO-MOTO DISALLOWANCE OF RS.9554057/- HAS NOT BEEN FAULTED WITH. IN OUR CONS IDERED VIEW WITHOUT POINTING OUT ANY SPECIFIC ITEM OF EXPENDITU RE DIRECTLY ATTRIBUTABLE TO THE EARNING OF THE EXEMPT INCOME AN D WITHOUT POINTING OUT ANY INFIRMITY OR ERROR IN THE SUO-MOTO DISALLOWANCE MADE BY THE ASSESSEE, THE AO SHOULD NOT HAVE PROCEE DED MECHANICALLY BY APPLYING THE FORMULA GIVEN IN RULE 8D. THE INVESTMENT IN THE QUOTED SHARES IS TO THE TUNE OF R S.179.57 CRORES WHEREAS THE OWN FUNDS OF THE ASSESSEE ARE TO THE TUNE OF RS.295 CRORES. THEREFORE, IT CAN BE SAFELY CONCLUD ED THAT THE INVESTMENT HAVE BEEN MADE BY THE ASSESSEE FROM THE INTEREST FREE FUNDS AVAILABLE WITH IT. 11. CONSIDERING THE FACTS OF THE CASE IN TOTALITY W E DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE CIT(A ). 4 12. IN RESULT, THE APPEAL FILED BY THE REVENUE IS A CCORDINGLY DISMISSED. 13. DECISION ANNOUNCED IN THE OPEN COURT IN THE PRE SENCE OF BOTH THE REPRESENTATIVES ON 08.09.2021. SD/- SD/- (SUCHITRA KAMBLE) (N . K. BILLAIYA) JUDICIAL MEMBER A CCOUNTANT MEMBER *NEHA* DATE:-08.09.2021 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGI STRAR ITAT NEW DELHI DATE OF DICTATION 0 8 .09.2021 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 0 8 .09.2021 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 0 8 .09.2021 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS 0 8 .09.2021 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 0 8 .09.2021 DATE ON WHICH THE FAIR ORDER COM ES BACK TO THE SR. PS/ PS 0 8 .09.2021 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 0 8 .09.2021 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 0 8 .09.2021 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 5 DATE OF DISPATCH OF THE ORDER