Orthia Developers Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 4209/DEL/2014

• Counselvise Citation: 420920114 RSA 2014
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 08-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 31-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Assessee Lawyers: NIPUN JAIN
• Keywords: Business income; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

1 IN THE INCOME TAX APPELATE TRIBUNAL DELHI BENCH SMC - 2 : NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 4 209 /DEL/201 4 A.Y. : 20 10 - 11 M/S ORTHIA DEVELOPERS PRIVATE LIMITED VS. INCOME TAX OFFICER, M - 62 & 63, FIRST FLOOR, WARD 13(4), CONNAUGHT PLACE, CR BUILDING, NEW DELHI - 110 001 NEW DELHI (PAN: AABCO2305C) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. NIPUN JAIN, CA DEPARTMENT BY : SH. ROBIN RAWAL, SR. DR DATE OF HEARING : 10 - 07 - 2015 DATE OF ORDER : 07 - 0 8 - 2015 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - X V I , NEW DELHI DATED 28 .5.2014 PERTAINING TO ASSESSMENT YEAR 20 10 - 1 1 . 2. T HE GROUNDS OF APPEAL READ AS UNDER: - I) THE LD. CIT(A) HAS ERRED ON FACTS AND LAW IN THE CIRCUMSTANCES WHILE PARTLY CONFIRMING THE ADDITION MADE BY THE AO AMOUNTING TO RS. 31,000/ - OUT OF THE TOTAL DISALLOWANCE OF RS. 92,712/ - U/S. 14A READ WITH RULE 8D(2)(III), WITHOUT GIVING ANY CONSIDERATION TO THE FACT THAT THE ASSESSEE DID NOT CLAIM ANY EXPENDITURE THAT COULD FALL WITHIN THE AMBIT OF ADMINISTRATIVE EXPENSES RELATABLE TO EARNING OF DIVIDEND INCOME. 2 (II) THE APPELLANT PRAYS THAT HE MAY BE ALLOW ED TO ADD, AMEND, ALTER, PRESS UPON OR FOREGO ANY OF THE ABOVE / OTHER GROUNDS/S OF APPEAL AS THE CIRCUMSTANCES MAY WARRANT, AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE A SSESSEE COMPANY FILED RETURN DECLARING LOSS OF RS. 31 , 000 / - ON 2 8 .9.2010. THE RETURN WAS PROCESSED AND THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 24 .8.2011 WHICH WAS DULY SERVED ON THE ASSESSEE COMPANY. IN RESPONSE THERETO, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FILED THE DETAILS AS ASKED FOR. THE ASSESSEE COMPANY IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF INFRASTRUCTURE. THE SOURCE OF INCOME DECLARED BY THE ASSESSEE ARE BUSINESS INCOME AND DIVIDEND INCOME. AO NOTED THAT ASSESSEE HAS MADE AN INVESTMENT AND EARNED DIVIDEND INCOME THEREFROM. SINCE DIVIDEND INCOME IS A NON - TAXABLE INCOME, THERE IS A DISALLOWANCE U/S. 14A IN RESPECT OF EXPENDITURE FOR EARNING THE EXEMPTED I NCOME. THE ASSESSEE WAS ASKED TO EXPLAIN TO SUBMIT THE AMOUNT OF DISALLOWANCES IN RESPECT OF EXPENDITURE FOR EARNING EXEMPTED INCOME AS PER RULE 8D OF THE I.T. RULES, 1962. IN RESPONSE TO THE SAME, ASSESSEE SUBMITTED ITS REPLY DATED 19.12.2012 WHEREIN IT WAS STATED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME AMOUTING TO RS. 74,167/ - FROM THE INVESTMENT IN UNITS OF MUTUAL FUND. THE ASSESSEE HAD ALREADY MADE THE DISALLOWANCE U/S. 14A AMOUNTING TO RS. 6,29,057/ - BEING THE INTEREST CASE INCURRED FOR IN VESTMENT. THE AO COMPLETED THE ASSESSMENT AT AN INCOME OF RS. 61,712/ - U/S. 143(3) OF THE I.T. ACT, 1961 VIDE ORDER DATED 1 .3.2013 AND MADE THE ADDITION OF RS. 92,712/ - . 3 4 . AGGRIEVED WITH THE AFORESAID ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 28 .5.2014 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5 . AGAINST THE ABOVE MENTIONED IMPUGNED ORDER DATED 28 .5.2014, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. LD. COUNSEL OF THE ASSESSEE HAS REITERATE D THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL AND STATED THAT ADDITION IN DISPUTE AMOUNTING TO RS. 31,000/ - MAY BE DELETED. IN SUPPORT OF HIS CONTENTION, HE FILED THE PAPER BOOK CONTAINING PAGES 1 TO 134 HAVING THE DETAILS OF COPY OF AUDITED BALAN CE SHEET AS ON 31.3.2010 OF THE ASSESSEE COMPANY; COMPUTATION OF INCOME FOR AY 2010 - 11; COPY OF WRITTEN SUBMISSIONS DATED 19.12.2012 FILED BEFORE THE AO AND WRITTEN SUBMISSIONS DATED 27.5.2014 FILED BEFORE THE LD. CIT(A); COPY OF THE DELHI HIGH COURT DECIS ION IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT; COPY OF BOMBAY HIGH COURT DECISION IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT; COPY OF DECISION OF ITAT MUMBAI IN THE CASE OF AVESHESH MERCANTILE PVT. LTD. VS. DCIT AND ITAT KOLKATA DECISION IN R EI AGRO LTD. VS. DCIT. 7 . ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER S OF THE REVENUE AUTHORITIES AND REQUESTED THAT THE SAME MAY BE UPHELD. 8 . I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS, ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES. WITH REGARD TO ISSUE IN DISPUTE RELATING TO DISALLOWANCE U/S 14A, READ WITH RULE 8D IS CONCERNED, I FIND FORCE IN THE ASSESSEE S CONTENTION THAT IN TERMS OF THE PROVISIONS OF SECTION 14A(2), PRESCRIBED METHOD U/R. 8D CAN BE APPLIED ONLY WHERE THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, REGARDING THE EXPENSES INCURRED FOR EARNING EXEMPT INCOME, 4 HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. AS HELD BY THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. MAXOPP INVESTMENT LTD. (ITA NO. 687/2009 D A T E D 1 8 . 1 1 . 2 0 1 1 ) , SUCH A LACK OF SATISFACTION SHOULD BE ON COGENT GROUND. THEREFORE, IN LACK OF SATISFACTION OF THE A O WITH THE CLAIM OF THE A SSESSEE, CANN OT BE HELD TO BE ON ANY COGENT GROUND. IN VIEW OF THIS, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. MAXOPP (SUPRA), IT IS HELD THAT THE A O COULD NOT HAVE AUTOMATICALLY INVOKED THE PROVISION OF RULE 8D. IN VIEW OF THIS, THE DISALLOWANCE MADE U/S 14A READ WITH RULE 8D DESERVE TO BE DELETED. 8.1 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENT AS AFORESAID, I QUASH THE ORDERS OF THE REVENUE AUTHORITIES AND DELETE THE ADDITION AND ACCORDINGLY, ALLOW THE ISSUE IN DISPUTE IN FAVOR OF THE ASSESSEE. 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN CO URT ON 07 / 8 /201 5 . SD/ - [ H.S. SIDHU ] JUDICIAL MEMBER DATE: 07 . / 8 /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 5