Mr. Naveen Kandhari, New Delhi V. ACIT, New Delhi

ITA 4060/DEL/2012

• Counselvise Citation: 406020114 RSA 2012
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 27-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Assessee Lawyers: S K KHANDARI
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 143(3); 14A; 37

Judgement Text

ITA NO. 4060/ DEL/ 2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E , NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 4060 /DEL/201 2 A.Y. : 2009 - 10 NAVEEN K H ANDHARI, C/O M/S S.K. KANDHARI & COMPANY, 6 - A, HANSALAYA, 15, BARAKHAMBA ROAD, NEW DELHI 110 001 (PAN: AAKPK0419R) VS. ACIT, CIRCLE 32(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. S.K. KHANDARI, FCA DEPARTMENT BY : SH. P. DAM KANUNJNA, SR. DR DATE OF HEARING : 27 - 3 - 201 5 DATE OF ORDER : 3 1 - 3 - 201 5 ORDER PER H.S. SIDHU : J M TH IS APPEAL BY THE ASSESSEE IS D IRECTED AGAINST THE O RDER DATED 12.6.2012 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) - XX VI, NEW DELHI P ERTAINING TO ASSESSMENT YEAR 2009 - 10 . 2. THE GROUNDS RAISED IN THE APPEAL READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS LEGALLY ERRED IN CONFIRMING DISALLOWANCE OF EXPENSES OF RS. 2,92,460/ - BY INVOKING SECTION 14A OF THE I NCOME TAX ACT READ WITH RULE 8D(2)(III) IN THE ABSENCE OF ITA NO. 4060/ DEL/ 2012 2 ANY EXEMPTED INCOME CLAIMED BY THE ASSESSEE IN THE RETURN. 2. THE APPELLANT RESERVES THE RIGHT TO ADD, MODIFY, AND WITHDRAW ANY GROUND(S) OF APPEAL EITHER BEFORE OR DURING THE COURSE OF APPEAL HE ARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS CARRYING ON BUSINESS OF HOTELIER AND CATERING AND DURING THE YEAR UNDER CONSIDERATION, HAS EARNED BUSINESS PROFIT FROM INDIAN HOTELS COMPANY LTD. TO WHOM THE ASSESSEE HAS ASSIGNED TWO PIECES OF LAND FOR RUNNING HOTEL. ACCORDING TO THE AO THE EXPENDITURE CLAIMED BY THE ASSESSEE ARE NOT FULLY ALLOWABLE U/S. 37 OF THE I.T. ACT, 1961, THERE IS ANOTHER ISSUE IN THE MATTER I.E. APPLICABILITY OF SECTION 14A OF THE INCOME TAX ACT, 1961 IN THE CASE OF ASSESSEE. THE ASSESSEE VIDE HIS LETTER DATED 8.8.2011 HAS STATED THAT NONE OF THE EXPENSES CLAIMED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AND ANOTHER SOURCES SHALL FORM PART OF TOTAL INCOME IN VIEW OF SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. BUT ACCORDING TO THE BALANCE SHEET OF THE ASSESSEE, THE AO HAS HELD THAT ASSESSEE HAS MADE INVESTMENT IN SHARE OF INDIAN COMPANIES, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF TOTAL INCOME. AS PE R BALANCE SHEET, THE INVESTMENT AS ON 31.03.2008 IS RS.5,77,42, 1 OO/ - AND AS ON 31.03.2009 IS RS.5,92,42,100/ - . IN VIEW OF THE ABOVE FACTS VIDE ORDER SHEET ENTRY DATED 20.09.2011, THE ASSESSEE WAS SHOW CAUSE AS TO WHY PROVISION OF SECTION 14A READ WITH RULE 8 D MAY NOT BE INVOKED AND PROPORTIONATE EXPENSES BE DISALLOWED. IN RESPONSE TO THE SAME, ASSESSEE SUBMITTED THAT NO INCOME HAS BEEN CLAIMED AS EXEMPT DURING THE YEAR UNDER ASSESSMENT. THE ASSESSEE HAS NOT RECEIVED ANY INCOME AS ON 31.03.2008 AND ITA NO. 4060/ DEL/ 2012 3 31.03.20 09 FROM SHAREHOLDING IN INDIAN COMPANIES, THEREFORE, THE PROVISION OF SECTION 14A READ WITH RULE BD IS NOT APPLICABLE TO THE ASSESSEE AS THE ASSESSEE HAS NOT CLAIMED ANY EXPENSES PERTAINING TO T H E EXEMPT INCOME. AFTER CONSIDERING THE SUBMISSIONS FILED BY THE ASSESSEE, THE AO FINALLY HELD THAT THE ASSESSEE CLAIMED THAT NO AMOUNT OF EXPENDITURE IS ATTRIBUTABL E TOWARDS EXEM PT INCOME WHICH IS MATERIAL, BUT THE INVESTMENT INCOME F ROM WHICH DOES NOT OR SHALL NOT FO RM PART OF TOTAL INCOME. ACCORDINGLY, THE CASE OF ASSESSEE IS COVERED U /S 14A OF THE INCOME - TAX ACT, 1961. IT CAN BE SEEN THAT THE EXPENDITURE INCURRED BY ASSESSEE ARE NO WAY RELATED TO THE EARNING OF 'MINIMUM BUSINESS PROFIT' FROM INDIAN HOTELS COMPANY LT D. AND INFACT, HAVE BEEN INCURRED IN CONNECTION WITH OTHER ACTIVITIES OF INVESTMENT WHICH SHOWS THAT EVEN THE REMA INING EXPENSES CLAIMED BY ASSESSEE IN HIS P&L ALC ARE CLEARLY ATTRIBUTABLE TO INVESTMENT OR OTHER RELATED ACTIVITIES. TRUE THAT NO EXPENDITU RE ON INTEREST HAS BEEN CLAIMED BY ASSESSEE BUT ALL ADMINISTRATIVE EXPENSES DEBITED IN P&L ALC ARE CLEARLY ATTRIBUTABLE TO THE INVESTMENT INCOME FROM WHICH IS NOT TAXABLE. THUS, MERE CLAIMING THAT NO EXPENDITURE IS INCURRED IN CONNECTION WITH INVESTMENT YI ELDING EXEMPT INCOME IS NOT SUFFICIENT ON THE PART OF ASSESSEE. THE CASE OF ASSESSEE IS THUS SQUARELY COVERED U/S 14A OF THE INCOME - TAX ACT , 1961. IN VIEW OF THE ABOVE, THE CONTENTION OF ASSESSEE ARE NOT ACCEPTED AND PROPORTIONATE EXPENSES ATTRIBUTABLE TO THE EARNING OF EXEMPT INCOME WILL BE DISALLOWED IN ACCORDANCE TO RULE 8D(2)(III) OF THE INCOME - TAX RULES, 1962 AND HE DISALLOWED RS. 2,92,460/ - FOR THE ASSESSMENT YEAR IN DISPUTE, ATTRIBUTABLE TOWARDS INVESTMENT INCOME FROM WHICH DOES NOT OR SHALL NOT FO RM PART OF THE TOTAL INCOME AND DISALLOWED U/S. 14A OF THE I.T. ACT BY COMPLETING THE ASSESSMENT U/S. 143(3) OF THE I.T. ACT ON 28.10.2011. ITA NO. 4060/ DEL/ 2012 4 4. AGGRIEVED BY THE ORDER DATED 28.102.011, ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 12.6.2012 UPHELD THE ORDER OF THE AO AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. 5. NOW THE ASSESSEE IS AGGRIEVED AGAINST THE ORDER OF THE LD. CIT(A) DATED 12.6.2012. 6. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT NO INCOME HAS BEEN CLAI MED AS EXEMPT DURING THE YEAR UNDER ASSESSMENT. THE ASSESSEE HAS NOT RECEIVED ANY INCOME AS ON 31.3.2008 AND 31.3.2009 FROM SHAREHOLDING IN INDIAN COMPANIES, THEREFORE, THE PROVISION OF SECTION 14A READ WITH RULE 8D IS NOT APPLICABLE TO THE ASSESSEE AS T HE ASSESSEE HAS NOT CLAIMED ANY EXPENSES PERTAINING TO THE EXEMPT INCOME. THE ASSESSEE HAS CLAIMED THAT NO AMOUNT OF EXPENDITURE WAS ATTRIBUTABLE TOWARDS EXEMPT INCOME. 7. LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD . WE HAVE GONE THROUGH THE ORDERS PASSED BY THE AO AS WELL AS LD. CIT(A) ON THE ISSUE IN DISPUTE. WE FIND THAT THE ASSESSMENT ORDER AS WELL AS THE APPELLATE ORDER, IS NOT CLEAR ON T HE QUANTIFICATION OF THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE EXEMPT INCOME. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE MATTER REQUIRES RE - CONSIDERATION AT THE LEVEL OF THE AO WITH THE DIRECTION TO QU ANTIFY THE EXPENDITURE ON THE BASIS OF EXEMPT INCOME, AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND PASS A FRESH ITA NO. 4060/ DEL/ 2012 5 ORDER ON THE ISSUE. ACCORDINGLY, THE ISSUE IN DISPUTE IS REMITTED BACK TO THE FILE OF THE AO WITH THE ABOVE DIRECTIONS. 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE O PEN C OURT ON 3 1 / 3 /20 1 5 . SD / - S D / - [ N.K. SAINI ] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 3 1 / 3 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 4060/ DEL/ 2012 6