KDDL Ltd., Chandigarh V. DCIT, Circle- 5(1), New Delhi

ITA 3982/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9308 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 16-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VED PRAKASH MISHRA
• Keywords: Opportunity of being heard; Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI A BEN CH, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 3982/DEL/2017 [ASSESSMENT YEAR: 2010-11] KDDL LTD VS. THE DCIT SCO, 88-89, SECTOR 8C CIRCLE 5(1) CHANDIGARH NEW DELHI PAN: AAACK 1929 M [APPELLANT] [RESPONDENT] DATE OF HEARING : 09.01.2020 DATE OF PRONOUNCEMENT : 10.01.2020 ASSESSEE BY : SHRI ABHISHEK AGARWAL, CA REVENUE BY : SHRI VED PRAKASH MISHRA, SR. DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] - 44, NEW DELH I DATED 16.12.2016 PERTAINING TO ASSESSMENT YEAR 2010-11. 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE AS SESSEE IS THAT THE CIT(A) ERRED IN SUSTAINING THE DISALLOW ANCE OF RS. 61,81,775/- MADE BY THE ASSESSING OFFICER BY INVOKI NG PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 19 61 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] R. W.R 8D OF THE I.T. RULES, 1962. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT D URING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSE SSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN DIVIDEN D INCOME OF RS. 1.20 LAKHS AND CLAIMED THE SAME TO BE EXEMPT . THE ASSESSING OFFICER WAS OF THE FIRM BELIEF THAT PROVI SIONS OF SECTION 14A R.W.R 8D SQUARELY APPLY. INVOKING THE PROVISIONS OF THE SAID RULE, THE ASSESSING OFFICER COMPUTED DI SALLOWANCE AT RS. 6,22,948/-. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHE MENTLY STATED THAT THE ASSESSING OFFICER HAS WRONGLY COMPU TED THE 3 DISALLOWANCE U/R 8D IN AS MUCH AS THE ASSESSING OFF ICER SHOULD HAVE TAKEN INTO CONSIDERATION ONLY THOSE INV ESTMENTS WHICH GENERATED EXEMPT INCOME. THE LD. COUNSEL FOR THE ASSESSEE FURNISHED CORRECT CALCULATION AS PER RULE 8D WHICH IS AS UNDER: 6. THE LD. DR SUPPORTED THE FINDINGS OF THE ASSESSI NG OFFICER. 7. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE OR DERS OF THE AUTHORITIES BELOW AND HAVE PERUSED THE COMPUTAT ION OF DISALLOWANCE FURNISHED BY THE ASSESSEE AS MENTIONED HEREINABOVE. WE FIND FORCE IN THE CONTENTION OF TH E LD. COUNSEL FOR THE ASSESSEE. ONLY THAT AVERAGE VALUE OF PARTICULARS AMOUNT ('RS.) DIRECT EXPENDITURE 1 - INTEREST EXPENDITURE 2 = (A*B)/C 45,626 0.5% OF VALUE OF INVESTMENT 3 = 10,00,000*0.5% 5,000 TOTAL DISALLOWANCE AS PER RULE 8D 1+2+3 50,626 WORKING FOR 2: INTEREST EXPENSES A 393,26,783 AVERAGE VALUE OF INVESTMENT [(10,00,000+10,00,000)/2] B 10,00,000 AVERAGE VALUE OF ASSETS [(89,35,05,064+83,03,54,764)7 2] C 8619,29,914 4 INVESTMENT HAS TO BE TAKEN INTO CONSIDERATION WHICH RESULTS INTO EXEMPT INCOME. WE, ACCORDINGLY, REMIT THE MAT TER TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING O FFICER IS DIRECTED TO EXAMINE THE COMPUTATION OF DISALLOWANCE AS MENTIONED HEREINABOVE AND DECIDE THE ISSUE AFRESH A FTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 3982/DEL/2017 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10.01. 2020. SD/- SD/- (BHAVNESH SAINI) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 10 TH JANUARY, 2020. VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT ASST. REGISTRAR 4. CIT(A) ITAT, NEW DELHI 5. DR 5 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER