DCIT, CIRCLE- 7(1), NEW DELHI V. DLF BRANDS LTD., NEW DELHI

ITA 4152/DEL/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1131 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 22-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Rule of consistency; Earning of tax free income; Rule 8D
• Section: 14A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. H. S. SIDHU, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 4151/DEL/2017 : ASSTT. YEAR : 2011-12 ITA NO. 4152/DEL/2017 : ASSTT. YEAR : 2012-13 DEPUTY COMM ISSIONER OF INCOME TAX, CIRCLE-7(1), NEW DELHI VS M/S DLF BRANDS LTD., 1-E, NAAZ CINEMA COMPLEX, JHANDEWALAN EXTENSION, NEW DELHI-55 (APPELLANT) (RESPONDENT) PAN NO. AAFCA7971E CO NO. 196/DEL/2017 (IN ITA NO. 4151/DEL/2017 : ASSTT. YEAR : 2011-12) M/S DLF BRANDS LTD., 1-E, NAAZ CINEMA COMPLEX, JHANDEWALAN EXTENSION, NEW DELHI-55 VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAFCA7971E ASSESSEE BY : SH. R. S. SINGHVI, CA REVENUE BY : MS. ASHIMA NEB, SR. DR DATE OF HEAR ING: 10 . 12 .201 9 DATE OF PRONOUNCEMENT: 13 .12 .201 9 ORDER PER BENCH: THE PRESENT APPEALS HAVE BEEN FILED BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE AGAINST THE ORDERS DATED 15.03.2017 AND 28.03.2017 OF THE LD. CIT (A)-3, DEL HI. 2. SINCE, THE ISSUES INVOLVED IN BOTH THE APPEALS A RE COMMON, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY COMMON ORDER. ITA NOS. 4151 & 4152/DEL/2017 CO NO. 196/DEL/2017 DLF BRANDS LTD. 2 3. IN ITA NO. 4151/DEL/2017, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE: 1. LD. CIT (A) ERRED IN LAW IN DELETING THE ADDITI ON OF RS.30,29,304/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. 2. THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITI ON ON ACCOUNT OF OBSOLETE STOCK VALUING RS.1,90,00,000/- MADE BY THE AO WITHOUT APPRECIATING THE FACTS OF THE CASE AS THE A SSESSEE HAS FAILED TO FURNISH THE SUPPORTING QUANTITATIVE DETAI L IN SUPPORT OF ITS CLAIM. 3. THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITI ON OF RS.86,53,353/- ON ACCOUNT OF INTEREST U/S 36(1)(III ) OF THE I.T. ACT MADE BY THE AO WITHOUT APPRECIATING THE FACTS O F THE CASE THAT THE AMOUNT BORROWED HAS BEEN UTILIZED FOR PURP OSE OF BUSINESS. 4. THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITI ON OF RS.2,51,18,850/- MADE BY THE A.O. U/S 14A WITHOUT APPRECIATING THE FACTS OF THE CASE THAT DISALLOWANC E HAS BEEN CORRECTLY WORKED OUT AS PER RULE 8D2(III) OF THE IT RULES BY THE A.O. 4. GROUND NO. 1 IN 4152/DEL/2017 RELATES TO DELETIO N OF THE PRIOR PERIOD EXPENSES CLAIMED BY THE ASSESSEE. THE ASSESS ING OFFICER HELD THAT THE PRIOR PERIOD EXPENSES CANNOT BE ALLOWED IN THE RELEVANT ACCOUNTING YEAR FOR THE PURPOSE OF COMPUTING EARLY PROFITS AND GAINS. IT WAS HELD THAT EVERY ACCOUNTING YEAR IS INDEPENDENT AND SO THE EXP ENSES OF THE EARLIER YEAR CANNOT BE ALLOWED AS DEDUCTION IN THE CURRENT YEAR. BEFORE US DURING THE ARGUMENTS, THE LD. AR SUBMITTED THAT THE EXPENS ES WERE PERTAINING TO BILLS ISSUED BY THE IBM AND RECEIVED IN THE CURRENT YEAR. THESE EXPENSES HAVE NOT BEEN CLAIMED IN THE EARLIER YEAR. SINCE, T HE EXPENSES HAVE BEEN CRYSTALLIZED IN THE CURRENT YEAR ONLY THEY HAVE BEE N CLAIMED IN THE CURRENT YEAR. THE LD. DR STRONGLY ARGUED ON THE ISSUE OF TA XABILITY OF INDIVIDUAL YEARS AS INDEPENDENT AND STAND ALONE YEARS WITH REG ARD TO TAXATION PROVISIONS. ITA NOS. 4151 & 4152/DEL/2017 CO NO. 196/DEL/2017 DLF BRANDS LTD. 3 5. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. FROM THE RECORD, IT TRANSPIRE THAT THE EXPENSES HAVE NOT BEEN CLAIMED IN THE EARLIER YEARS, THEY COULD N OT HAVE BEEN CLAIMED AS THE BILLS HAVE NOT BE RECEIVED IN THE EARLIER YEARS AND THE ASSESSEE HAS BEEN CONTINUOUSLY IN LOSSES FOR THE EARLIER YEAR, C URRENT YEAR AND SUBSEQUENT YEAR, THUS, LEADING TO CONCLUSION THAT T HE REVENUE IS NOT DISADVANTAGED OWING TO CLAIM OF THIS EXPENDITURE IN THE CURRENT YEAR. RELIANCE IS PLACED ON THE JUDGMENT IN THE CASE OF S AURASTRA CEMENT AND CHEMICALS INDUSTRIES LTD. 213 ITR 523 (GUJ.) AND SH RI RAM PISTONS & RINGS LTD. 174 TAXMAN 147 (DEL.), JINDAL DRILLING A ND INDUSTRIES 301 ITR 304 IN ALLOWING THE DEDUCTION ON ACCOUNT OF PRIOR P ERIOD EXPENSES WHICH HAVE NOT BEEN CLAIMED EARLIER OWING TO NON-CRYSTALL IZATION OF AMOUNT. HENCE, WE DECLINE TO INTERFERE WITH THE ORDER OF TH E LD. CIT (A). 6. GROUND NO. 2 OF THE REVENUE APPEAL IN ITA NO. 41 51/DEL/2017 DEALS WITH THE OBSOLETE STOCK, THE ASSESSING OFFICER MADE ADDITION ON THE GROUNDS THAT THE COMPLETE DETAILS OF THE OBSOLETE I NVENTORY HAS NOT BEEN GIVEN. THE ASSESSING OFFICER ALSO HELD THAT THE OBS OLETE STOCK COULD HAVE BEEN SOLD AS SCRAP SALE. THE LD. CIT (A) DELETED TH E ADDITION ON THE GROUNDS THAT THE DETERMINATION OF THE OBSOLETE STOC K IS ON ESTIMATE BASIS. DURING THE ARGUMENTS, BEFORE US THE LD. DR ARGUED T HAT THE AMOUNT DEBITED ON ACCOUNT OF OBSOLETE STOCK CANNOT BE EQUA TED WITH GUARANTEES PROVIDED BY THE MANUFACTURING UNIT ON DEFECTIVE PIE CES WHICH IS A RESULT OF FAULTY MANUFACTURING PROBLEM. IT WAS ARGUED THAT TH E STOCK DEBITED HAS TO BE QUANTIFIABLE INSTEAD OF ON ESTIMATE BASIS. THE L D. AR AGREED TO FURNISH THE DETAILS OF OBSOLETE AND SLOW MOVING STOCK. HENC E, IN THE INTEREST OF JUSTICE THE MATTER IS RESTORE BACK TO THE FILE OF T HE LD. CIT (A) TO GO THROUGH THE DETAILS OF THE STOCK STATEMENT SUBMITTE D BY THE ASSESSEE AND TAKE A DECISION WITH REGARD TO QUANTUM ALLOWABLE IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT, 1961. ITA NOS. 4151 & 4152/DEL/2017 CO NO. 196/DEL/2017 DLF BRANDS LTD. 4 7. GROUND NO. 3 RELATES TO DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER OBSERVE D THAT THE ASSESSEE HAS BORROWED MONIES FROM ITS GROUP COMPANY AND PAID INTEREST OF RS.8.92 CRORES. IT WAS HELD THAT THE BORROWED MONEY HAS BEE N IN TURN GIVEN AS LOANS TO GROUP COMPANIES AND NOT CHARGING INTEREST ON PAR WITH THE INTEREST PAID. THE ASSESSING OFFICER HELD THAT THE AVERAGE COST DEBITED ON INTEREST FREE ADVANCES AN INVESTMENTS IN THE SHAPE OF PURCHASE OF SHARES OR INVESTMENT IN CAPITAL WORK IN PROGRESS AGAINST W HICH THE INTEREST IS NOT ALLOWABLE AS DEDUCTION U/S 36(1)(III). 8. DURING THE ARGUMENTS BEFORE US, THE LD. AR SUBMI TTED THAT THE ASSESSEE HAS GOT SUFFICIENT OWN FUNDS TO THE TUNE O F RS.100 CRORES, AS MENTIONED IN THE ASSESSMENT ORDER AT PARA NO. 5. TH E LD. DR SUPPORTED THE ASSESSING OFFICERS OBSERVATIONS. WE FIND THAT THIS IS A REPEATED ISSUE STANDS ADJUDICATED IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10 IN ITA 4760/DEL/2012 AND ALSO FOR THE A.Y. 2010-11 BY THE TRIBUNAL IN ITA NO. 1749/DEL/2015 DATED 09.04.2018. HENCE, KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY, WE HEREBY DECLIN E TO INTERFERE WITH THE ORDER OF THE LD. CIT (A). 9. GROUND NO. 4 RELATES TO DISALLOWANCE OF AMOUNT U /S 14A. PRIMA FACIE IT WAS BROUGHT TO OUR NOTICE, AN UNDISPUTED FACT TH AT THE ASSESSEE HAS NOT EARNED ANY DIVIDEND OR OTHER EXEMPT INCOME DURING T HE YEAR. HENCE, RELYING ON THE FOLLOWING JUDGMENTS, PCIT VS IL&FS ENERGY DEVELOPMENT COMPANY LTD. (DELH I HIGH COURT) CHEMINVEST LTD. V. COMMISSIONER OF INCOME TAX (2015 ) 378 ITR 33 (DEL), CIT V. CORRTECH ENERGY PVT. LTD. [2015] 372 ITR 97 (GUJ) ITA NOS. 4151 & 4152/DEL/2017 CO NO. 196/DEL/2017 DLF BRANDS LTD. 5 10. WE HOLD THAT THE DISALLOWANCE ON ACCOUNT OF SEC TION 14A IN THE ABSENCE OF EARNING OF ANY EXEMPT INCOME IS UNWARRAN TED. ACCORDINGLY, THE ORDER OF THE LD. CIT (A) IS HEREBY CONFIRMED. 11. REGARDING THE CO NO. 196/DEL/2017 AND GROUND NO . 1 OF REVENUE APPEAL IN ITA NO. 4151/DEL/2017, IT HAS BEEN BROUGH T TO OUR NOTICE THAT THE GROUND NO. 1 STANDS UN-ADJUDICATED BY THE LD. C IT (A). ON GOING THROUGH THE RECORD, WE FIND THAT THE PLEA OF THE AS SESSEE IS CORRECT. BOTH THE PARITIES AGREED TO THE FACTS. HENCE, THE MATTER IS HEREBY REMANDED BACK TO THE FILE OF THE LD. CIT (A) TO ADJUDICATE O N THIS ISSUE IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT. 12. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/12/2019. SD/- SD/- (H. S. SIDHU) (DR . B. R. R. KUMAR) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED: 13/12/2019 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITA NOS. 4151 & 4152/DEL/2017 CO NO. 196/DEL/2017 DLF BRANDS LTD. 6 DATE INITIAL 1. DRAFT DICTATED ON COMPUTER 13.12.2019 PS 2. DRAFT PLACED BEFORE AUTHOR 13.12.2019 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11. DATE OF UPLOADING