ITO, WARD- 20(2), NEW DELHI V. PUSHPANJALI FINCON PVT. LTD., NEW DELHI

ITA 4305/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4147 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 30-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH KUMAR GUPTA SENIOR
• Assessee Lawyers: NIPUN JAIN
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4305/DEL./2017 (ASSESSMENT YEAR : 2013-14) ITO, WARD 20 (2), VS. M/S. PUSHPANJALI FINCON (P) LTD., NEW DELHI. M 62 & 63, 1 ST FLOOR, CONNAUGHT PLACE, NEW DELHI 110 001. (PAN : AAFCP2690B) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NIPUN JAIN, CA REVENUE BY : SHRI SATISH KUMAR GUPTA, SENIOR DR DATE OF HEARING : 18.02.2020 DATE OF ORDER : 20.02.2020 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, ITO, WARD 20 (2), NEW DELHI (HEREINAFTE R REFERRED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL SOU GHT TO SET ASIDE THE IMPUGNED ORDER DATED 21.04.2017 PASSED BY THE COMMI SSIONER OF INCOME - TAX (APPEALS)-7, NEW DELHI QUA THE ASSESS MENT YEAR 2013-14 ON THE GROUND THAT :- ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION O F RS.2,21,57,375/- MADE BY THE AO U/S 14A OF THE INCO ME TAX ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE AO AFTE R RECORDING HIS SATISFACTION UNDER THE PROVISIONS OF SECTION 14 A, HAD AFTER ITA NO.4305/DEL./2017 2 RECORDING HIS SATISFACTION UNDER THE PROVISION OF S ECTION 14A HAD CORRECTLY COMPUTED THE DISALLOWANCE UNDER THE RULE 8D OF THE INCOME TAX RULES. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUE AT HAND ARE : THE ASSESSEE IS INTO THE BUSINESS OF PRO VIDING CONSULTANCY RELATING TO INVESTMENT, ACQUIRING, HOLDING PROCURIN G, PURCHASING ALL TYPES OF SECURITIES. ASSESSING OFFICER (AO), BY IN VOKING THE PROVISIONS CONTAINED UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) READ WITH RULE 8D OF THE INCOME-TAX RULES, 1 962 (FOR SHORT THE RULES), PROCEEDED TO MAKE DISALLOWANCE OF RS.2,21, 57,375/- ON THE GROUND THAT THROUGHOUT THE YEAR, ASSESSEE HAD OWN F UNDS UNDER THE SHARE CAPITAL AND RESERVE & SURPLUS TO THE TUNE OF RS.397 /- CRORES WHEREAS MADE INVESTMENT DURING THE YEAR UNDER ASSESSMENT TO THE TUNE OF RS.400 CRORES LEADING TO THE CONCLUSION THAT REMAINING INV ESTMENT OF RS.2.28 CRORES HAS BEEN MADE FROM THE BORROWED FUNDS BEARIN G INTEREST COST AND THEREBY ASSESSED THE TOTAL INCOME AT RS.2,32,64,940 /-. 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS RESTRICTED THE DISALLOWANCE MADE BY THE AO U/S 14A OF THE ACT TO RS.1,70,151/- I.E. TO THE EXTENT OF DIVI DEND INCOME CLAIMED AS EXEMPT INCOME BY PARTLY ALLOWING THE APPEAL. FEELI NG AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF F ILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS RELIED UP ON AND ORDERS PASSED ITA NO.4305/DEL./2017 3 BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF TH E FACTS AND CIRCUMSTANCES OF THE CASE. 5. UNDISPUTEDLY, ASSESSEE COMPANY HAS RECEIVED/CLAI MED EXEMPT DIVIDEND INCOME TO THE TUNE OF RS.1,70,151/- DURING THE YEAR UNDER ASSESSMENT. IT IS ALSO NOT IN DISPUTE THAT THE ASS ESSEE COMPANY HAS MADE SUO MOTO DISALLOWANCE OF RS.1,69,625/- U/S 14A OF T HE ACT. IT IS ALSO NOT IN DISPUTE THAT DURING THE YEAR UNDER ASSESSMEN T, THE ASSESSEE COMPANY HAS OWNED SHARE CAPITAL AND RESERVE & SURPL US TO THE TUNE OF RS.397 CRORES AS AGAINST THE INVESTMENT OF RS.400 C RORES. 6. IN THE LIGHT OF THE AFORESAID FACTS, LD. CIT (A) PROCEEDED TO RESTRICT THE DISALLOWANCE U/S 14A TO RS.1,70,151/- BY RETURNING FOLLOWING FINDINGS :- 3.4 THE FACTS ARE SIMILAR IN THE PRESENT APPEAL AN D I DO NOT SEE ANY REASON TO DEVIATE THE PRINCIPLE FOLLOWED BY THE CIT(APPEALS), WHEREBY DISALLOWANCE MADE WAS DELETED . ADMITTEDLY, THE APPELLANT HAS DISCLOSED DIVIDEND IN COME OF RS.1 ,70,051/- DURING THE YEAR, WHICH IS CLAIMED AS EXEM PT. HOWEVER, DISALLOWANCE COMPUTED IS FAR AND EXCESS OF THE EXEM PT INCOME CLAIMED. THE HON'BLE DELHI HIGH COURT IN THE CASE O F JOINT INVESTMENT (P) LTD. VS. CIT 2015/(3) TMI 155 HAS HE LD THAT DISALLOWANCE U/S 14A CANNOT EXCEED THE EXEMPT INCOM E. THE HON'BLE DELHI BENCH OF THE ITAT IN THE CASE OF MIS GANGA KAVERI CREDIT & HOLDING (P) LTD. VS. ACIT, CIRCLE 1 2(1), NEW DELHI IN ITA NO. 919/DEL/2014 IS ALSO HELD THAT DIS ALLOWANCE U/S 14A CANNOT EXCEED THE AMOUNT OF DIVIDEND INCOME. RE SPECTFULLY FOLLOWING THE DECISIONS CITED ABOVE AND THE ORDER O F THE LD. CIT(APPEALS) QUOTED IN PARA 3.3, THE DISALLOWANCE U /S 14A IS RESTRICTED TO RS.1 ,70,1511- I.E. TO THE EXTENT OF DIVIDEND INCOME CLAIMED AS EXEMPT. THE AO IS DIRECTED TO DELETE TH E BALANCE DISALLOWANCE. THIS GROUND OF APPEAL IS RULED PARTL Y IN FAVOUR OF THE APPELLANT. 7. PERUSAL OF THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) GOES TO PROVE THAT THERE IS NO ILLEGALITY OR PERVERSITY IN THE FINDINGS RETURNED BY ITA NO.4305/DEL./2017 4 THE LD. CIT (A) AS IT IS SETTLED PRINCIPLE OF LAW T HAT DISALLOWANCE U/S 14A CANNOT EXCEED THE EXEMPT INCOME EARNED BY THE ASSES SEE. HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT. LTD. VS. CIT (2015) 372 ITR 694 (DEL.) HELD THAT, THE DISALLOWANCE MORE THAN EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEA R UNDER ASSESSMENT CANNOT BE MADE. CONSEQUENTLY, THE APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 20 TH DAY OF FEBRUARY , 2020. SD/- SD/- (O.P. KANT) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 20 TH DAY OF FEBRUARY, 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-7, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.