ACIT, New Delhi V. M/s Oil Industry Development Board, New Delhi

ITA 4417/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2758 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 12-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARAMITA M BISWAS
• Assessee Lawyers: SUSHIL KUMAR GUPTA
• Keywords: Earning of tax free income; Question of law; Rule 8D; Set aside
• Section: 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER AND SH. KULDIP SINGH, JUDICIAL MEMBER ITA NO.4417/DEL/2016 ASSESSMENT YEAR: 2012-13 ACIT CIRCLE 52 (1) NEW DELHI VS M/S. OIL INDUSTRY DEVELOPMENT BOARD, 301, WORLD TRADE CENTRE, BABAR ROAD, NEW DELHI PAN NO. AAAJO0032A (APPELLANT) (RESPONDENT) APPELLANT BY MS. PARAMITA M. BISWAS, CIT DR RESPONDENT BY SH. SUSHIL KUMAR GUPTA, CA DATE OF HEARING: 06/06/2019 DATE OF PRONOUNCEMENT: 12/06/2019 ORDER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 02.05.2016 OF THE CIT(A)-18, NEW DELHI RELATI NG TO A. Y. 2012-13. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER :- PAGE | 2 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.4,65,04,000/- MADE BY THE AO ON ACCOUNT OF 14AOF THE ACT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE OIL INDUSTRIES DEVELOPMENT BOARD (HEREIN AFTER REFERRED AS OIDB) IS AN AUTONOMOUS INSTITUTION UNDER THE AEGIS OF MINIST RY OF PETROLEUM, OIL & NATURAL GAS CONSTITUTED BY AN ACT OF PARLIAMENT CALLED OIL INDUSTRIES (DEVELOPMENT) ACT, 1974 AND I S ENGAGED IN PROVIDING FINANCIAL ASSISTANCE FOR THE DEVELOPMENT OF OIL INDUSTRY. IT FILED ITS RETURN OF INCOME ON 29.09.2012 DECLARI NG INCOME OF RS.4,68,01,50,851/-. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS MADE INVESTMENT IN SHARES/ SECURITIES AMOUNTING TO RS.35 ,882 LACS & RS.150,134 LACS AS ON FIRST AND LAST DAY OF THE YEA R, RESPECTIVELY. THE ABOVE INVESTMENT IS CAPABLE OF YIELDING INCOME WHICH IS EXEMPT U/S. 10 OF THE IT ACT. IN VIEW OF THIS, THE ASSESSEE WAS ASKED TO FURNISH REASONS AS TO WHY PROVISION OF SEC TION 14A OF THE INCOME TAX ACT, 1961 MAY NOT BE INVOKED AND DIS ALLOWANCE AS PER RULE 8D(2) OF THE INCOME TAX RULES, 1962 MAY NOT BE MADE. REJECTING THE VARIOUS EXPLANATION GIVEN BY TH E ASSESSEE AND RELYING ON VARIOUS DECISION THE ASSESSING OFFIC ER APPLYING PROVISIONS OF RULE 14A R/W RULE 8D MADE ADDITION OF RS.465.04 LACS. 4. IN APPEAL THE LD. CIT(A) FOLLOWING HIS ORDER FOR A. Y. 2011-12 DELETED THE ADDITION BY OBSERVING AS UNDER :- 5.24.4 ' I HAVE CAREFULLY CONSIDERED THE MATTER IN THE LIGHT OF THE FOREGOING. APART FROM THE DECISIONS RELIED ON WHICH SUPPORT TH E CONTENTION OF THE AR, I PAGE | 3 FIND THAT IN THE RECENT DECISION OF CHEMINVEST LTD OF HONBLE DELHI HIGH COURT IN [ 2015 ] 61 TAXMANN.COM 118 (DELHI) , THE QUESTION OF LAW BEFORE THE HONBLE HC WAS: WHETHER DISALLOWANCE UNDER SECTION 14 A OF THE ACT CAN BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAS BEEN EARNED A RECEIVE D BY THE ASSESSEE? IN ANSWERING THE SAID QUESTION, THE HONBLE HIGH CO URT AT PARA 23 OF THE ORDER HAS HELD: IN THE CONTEXT OF THE FACTS ENUMERATED HEREINBEFORE , THE COURT ANSWERS THE QUESTION BY HOLDING THAT THE EXPRESSION DOES NOT F ORM PART OF THE TOTAL INCOME IN SECTION 14 A ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME , DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EX PENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, SECTIO N 14 A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. 5.2.4.5 IT IS NOT POSSIBLE TO ACCEPT THAT NO EXPEND ITURE HAS BEEN MADE IN MANAGING THE SHARES OF RS.3,588 CRORE., PARTICULARL Y WHEN THE P & L ACCOUNT SHOWS HUGE ESTABLISHMENT AND ADMINISTRATIVE EXPENSE S, PART OF WHICH COULD BE ATTRIBUTED TO SUCH INVESTMENT. HOWEVER, IN VIEW OF THE JUDGEMENT OF THE HONBLE DE LHI HIGH COURT IN M/S CHEMINVEST LTD(SUPRA),THE ADDITION IN THIS CASE WOU LD NOT BE SUSTAINED. THE SAME IS DIRECTED TO BE DELETED.... 5.2.5 FOLLOWING THE SAME REASONING AND IN VIEW OF A R'S ARGUMENTS (SEE PARA 1.3 OF THE ASSESSMENT ORDER) CLAIMING THAT NO DIVID END WAS EARNED DURING THE YEAR AND WHICH HAS NOT BEEN DISPUTED BY THE AO, THE ADDITION IS DELETED. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BEL OW. WE HAVE PAGE | 4 ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE FOR A. Y. 2010-11 U PHELD THE ORDER OF CIT(A) IN DELETING THE ADDITION BY OBSERVI NG AS UNDER :- 12. THE AO DISALLOWED AN AMOUNT OF RS. 1,62,49,000/ - U/S 14A BY REJECTING THE CONTENTIONS RAISED BY THE ASSESSEE TH AT NO EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE TO EARN THE EXEMPT IN COME DURING THE YEAR UNDER ASSESSMENT. CIT (A) OBSERVED THAT IT CANNOT BE RULED OUT THAT THERE IS A PROXIMATE RELATIONSHIP BETWEEN OFFICE ESTABLISHME NT EXPENDITURE AND INTEREST EXPENDITURE TO THE INVESTMENT RESULTING IN COME NOT CHARGEABLE TO TAX. LD. CIT (A) RELIED UPON ORDER PASSED BY THE TRIBUN AL IN CASE OF CHEMINVEST LIMITED VS. ITO - 124 TTJ 577 (DEL.)(SB) BY HOLDING THAT, IF AN EXPENDITURE IS INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME, IT HAS TO SUFFER DISALLOWANCE IRRESPECTIVE OF THE FACT WHETHER ANY INCOME IS EARNED OR NOT. HOWEVER, THIS DECISION HAS BEEN OVERRULED BY THE HONBLE DELHI HIGH COURT IN CHEMINVEST LTD. VS. CIT - (2015) 378ITR 33 (DELHI). SO, IN THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERE D VIEW THAT WHEN THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER ASSESSMENT, NO DISALLOWANCE IS PERMISSIBLE U/ S 14A OF THE ACT. SO, IN THESE CIRCUMSTANCES, THIS ISSUE IS ALSO SET ASIDE T O THE AO TO DECIDE ACCORDINGLY IN VIEW OF THE DECISIONS RENDERED BY HO NBLE DELHI HIGH COURT IN THE CASE TITLED AS CHEMIVEST LIMITED (SUPR A) IN FAVOUR OF THE ASSESSEE. 7. IT IS PERTINENT TO MENTION HERE THAT THE DECISIO N OF THE TRIBUNAL WAS UPHELD BY THE HONBLE DELHI HIGH COURT AND THE SLP FILED BY THE REVENUE WAS DISMISSED BY HONBLE S UPREME COURT. WE FIND THE LD. CIT(A) DELETED THE DISALLOWA NCE MADE BY THE ASSESSING OFFICER U/S 14A R/W. RULE 8D ON THE G ROUND THAT THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME DUR ING THE YEAR. THE LD. DR ALSO COULD NOT CONTROVERT THE ABOVE FACT UAL FINDINGS PAGE | 5 GIVEN BY THE CIT(A), THEREFORE, FOLLOWING THE DECIS ION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LIMITED (SUPRA), WE HOLD THAT NO DISALLOWANCE U/S. 14A R/W. RULE 8D IS CALLED FOR WHEN THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND INC OME DURING THE YEAR. THE ORDER OF THE CIT(A) IS ACCORDINGLY U PHELD AND GROUND RAISED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.06.2019. SD/- SD/- (KULDIP SINGH) (R.K PAND A) JUDICIAL MEMBER ACCOUNTANT MEMB ER *NEHA* DATE:- 12.06.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 13.06.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER