M/s Nilgiri Infrastructure Development Ltd., New Delhi V. ACIT, New Delhi

ITA 4108/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91370 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 27-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA SENIOR
• Assessee Lawyers: G C SRIVASTAVA; SAURABH SRIVASTAVA
• Keywords: Earning of tax free income; Question of law
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.4108/DEL./2013 (ASSESSMENT YEAR : 2009-10) M/S. NILGIRI INFRASTRUCTURE DEVELOPMENT LTD., VS. A CIT, CIRCLE 13 (1), F 60, MALHOTRA BUILDING, 2 ND FLOOR, NEW DELHI. CONNAUGHT PLACE, NEW DELHI 110 001. (PAN : AACCN3012E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.C. SRIVASTAVA, ADVOCATE AND SHRI SAURABH SRIVASTAVA, FCA REVENUE BY : SHRI P. DAM KANUNJNA, SENIOR DR DATE OF HEARING : 08.07.2015 DATE OF PRONOUNCEMENT : 10.07.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS DI RECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-X VI, DELHI DATED 03.04.2013. THE RELEVANT ASSESSMENT YEAR IS 2009 -10. 2. THE SOLE GROUND OF APPEAL IS AGAINST THE CONFIRM ATION OF THE ADDITION MADE BY THE AO AMOUNTING TO RS.1,36,94,050/- MADE U NDER SECTION 14A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT) RE AD WITH RULE 8D OF THE INCOME-TAX RULES, 1962 (HEREINAFTER THE RULES). ITA NOS.4108/DEL./2013 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY WHO DECLARED CURRENT YEAR LOSS OF RS.1,27,5 4,359/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTICES WERE ISSUED AND THE ASSESSEE COOPERATED WITH THE ASSESSMENT PROCEED INGS BEFORE THE AO. THE AO TOOK NOTE THAT THE ASSESSEE COMPANY HAD MADE INVESTMENT IN THE SHARES OF M/S. HIGH LAND MEADOWS PVT. LTD. AND M/S. PARK LAND DEVELOPERS PVT. LTD. OF RS.50 CRORES EACH. THE TOT AL INVESTMENT THUS MADE AND SHOWN IN THE BALANCE SHEET OF THE SAID TWO COMP ANIES WAS TO THE TUNE OF RS.100 CRORES. VIDE ORDER SHEET ENTRY DATED 09. 11.2011, THE AR OF THE ASSESSEE WAS ASKED TO SHOW-CAUSE WHY THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES MAY NOT BE INVOK ED SINCE THE INCOME FROM THE INVESTMENTS IN THE SHARES WOULD BE OF THE NATURE OF TAX EXEMPT DIVIDEND INCOME. THE ASSESSEE COMPANY VIDE REPLY D ATED 15.11.2011 SUBMITTED THAT SECTION 14A DOES NOT APPLY ON THE AS SESSEE COMPANY AS THERE WAS NO EXEMPT INCOME. HOWEVER, THE AO DID NO T ACCEPT THE SAID CONTENTION OF THE ASSESSEE AND AFTER RELYING ON THE SPECIAL BENCH DECISION IN THE CASE OF M/S. CHEMINVEST LTD. VS. ITO DATED 0 5.08.2009, HE HELD THAT SECTION 14A IS APPLICABLE AND AFTER APPLYING RULE 8 D, MADE AN ADDITION OF RS.1,36,94,050/-. 4. AGGRIEVED BY THE SAID ORDER OF THE AO, THE ASSES SEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A) WHO WAS PLEASED TO CO NFIRM THE SAID ADDITION MADE BY THE AO. ITA NOS.4108/DEL./2013 3 5. THE LD. AR TOOK OUR ATTENTION TO PAGE 3 PARA 3.3 .2 OF THE AOS ORDER AND POINTED OUT THAT ASSESSEE HAD NOT EARNED DIVIDE ND INCOME OR TAX FREE INCOME IN THE INSTANT ASSESSMENT YEAR WHICH FACT HA S NOT BEEN CONTROVERTED BY THE AO BEFORE PROCEEDING TO DISALLOW BY INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D. HE RELIED ON THE DE CISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDI A P. LTD. REPORTED IN 2014-TIOL-1586-HC-DEL-IT WHEREIN THE HONBLE HIGH C OURT HAS HELD THAT SECTION 14A CANNOT BE INVOKED WHEN NO EXEMPT I NCOME WAS EARNED. 6. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF THE SPECIAL BENCH CITED BY THE AO, AS STATED ABOVE, TO SUPPORT THE DE CISION OF CIT (A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE FIND THAT THERE IS NO QUARREL THAT THE ASSESSEE COMPANY HAS NOT RECEIVED ANY DIVIDEND INCOME OR TAX FREE INCOME. ON THE SAID FA CTUAL MATRIX, THE ISSUE BEFORE US IS NO LONGER RES INTEGRA. THE HONBLE JU RISDICTIONAL HIGH COURT, AFTER TAKING NOTICE OF THE PUNJAB & HARYANA HIGH CO URT JUDGMENTS IN THE CASES OF CIT, FARIDABAD VS. M/S. LAKHANI MARKETING INCL. (ITA NO.970/2008 DECIDED ON 02.04.2014, CIT VS. HERO CYC LES LIMITED (323 ITR 518) AND CIT VS. WINSOME TEXTILE INDUSTRIES LTD . (219 ITR 204), HELD AS UNDER :- 14. ON THE ISSUE WHETHER THE RESPONDENT-ASSESSEE C OULD HAVE EARNED DIVIDEND INCOME AND EVEN IF NO DIVIDEND INCO ME WAS EARNED, YET SECTION 14A CAN BE INVOKED AND DISALLOW ANCE OF ITA NOS.4108/DEL./2013 4 EXPENDITURE CAN BE MADE, THERE ARE THREE DECISIONS OF THE DIFFERENT HIGH COURTS DIRECTLY ON THE ISSUE AND AGA INST THE APPELLANT-REVENUE. NO CONTRARY DECISION OF A HIGH C OURT HAS BEEN SHOWN TO US. THE PUNJAB AND HARYANA HIGH COUR T IN COMMISSIONER OF INCOME TAX, FARIDABAD VS. M/S. LAKH ANI MARKETING INCL., ITA NO. 970/2008, DECIDED ON 02.04 .2014, MADE REFERENCE TO TWO EARLIER DECISIONS OF THE SAME COURT IN CIT VS. HERO CYCLES LIMITED, [2010] 323 ITR 518 AND CIT VS. WINSOME TEXTILE INDUSTRIES LIMITED, [2009] 319 ITR 204 TO HOLD THAT SECTION 14A CANNOT BE INVOKED WHEN NO EXE MPT INCOME WAS EARNED. THE SECOND DECISION IS OF THE G UJARAT HIGH COURT IN COMMISSIONER OF INCOME TAX-I VS. CORRTECH ENERGY (P.) LTD. [2014] 223 TAXMANN 130 (GUJ.). THE THIRD DECISION IS OF THE ALLAHABAD HIGH COURT IN INCOME TAX APPEAL NO . 88 OF 2014, COMMISSIONER OF INCOME TAX (II) KANPUR, VS. M /S. SHIVAM MOTORS (P) LTD. DECIDED ON 05.05.2014. IN T HE SAID DECISION IT HAS BEEN HELD: AS REGARDS THE SECOND QUESTION, SECTION 14A OF THE ACT PROVIDES THAT FOR THE PURPOSES OF COMPUTING THE TOT AL INCOME UNDER THE CHAPTER, NO DEDUCTION SHALL BE ALL OWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. HENCE, WHAT SECTION 14A PROVI DES IS THAT IF THERE IS ANY INCOME WHICH DOES NOT FORM PART OF THE INCOME UNDER THE ACT, THE EXPENDITURE WHICH IS INCURRED FOR EARNING THE INCOME IS NOT AN ALLOWABLE DEDUCTION. FOR THE YEAR IN QUESTION, THE FINDING OF FACT IS THAT THE ASSESSEE HAD NOT EARNED ANY TAX FREE INCOM E. HENCE, IN THE ABSENCE OF ANY TAX FREE INCOME, THE ITA NOS.4108/DEL./2013 5 CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT F OR DISALLOWANCE. THE VIEW OF THE CIT(A), WHICH HAS BEE N AFFIRMED BY THE TRIBUNAL, HENCE DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. HENCE, THE DELETION OF THE DISALLOWANCE OF RS.2,03,752/- MADE BY THE ASSESSING OFFICER WAS IN ORDER . THUS, THE HONBLE DELHI HIGH COURT, AFTER TAKING NO TE OF THE AFORESAID ORDER, UPHELD THE TRIBUNAL ORDER ALLOWING THE CLAIM OF THE ASSESSEE COMPANY AND THE APPEAL OF THE REVENUE WAS DISMISSED . WE ARE BOUND BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT AND THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED AND THE IMPUGNED AD DITION IS DIRECTED TO BE DELETED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 10 TH DAY OF JULY, 2015. SD/- SD/- (R.S. SYAL) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 10 TH DAY OF JULY, 2015 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XVI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.