ITO, New Delhi V. M/s. Stainless Investment Limited, New Delhi

ITA 4432/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7422 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 21-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 17-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI H.S. SIDHU : JUDICIAL MEMBER ITA NO. 4432/DEL/2012 ASSTT. YR: 2009-10 INCOME-TAX OFFICER, VS. M/S STAINLESS INVESTMENT L TD., WARD 9(2), NEW DELHI. 86, SFS SHAKTI APARTMENT, ASHOK VIHAR, PHASE III, NEW DELHI.-52. PAN: AAFCS 9433 H ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI RAKESH KUMAR SR. DR RESPONDENT BY : NONE DATE OF HEARING : 21-08-2014 DATE OF ORDER : 28-08-2014. O R D E R PER S.V. MEHROTRA, A.M : THIS APPEAL, BY THE REVENUE, IS DIRECTED AGAINST TH E ORDER DATED 14- 05-2012 PASSED BY THE LD. CIT(A)-XII, NEW DELHI, I N APPEAL NO. 340/11-12, RELATING TO A.Y. 2009-10. SOLE EFFECTIVE GROUND RAI SED IS AS UNDER: THE LD. CIT(A) ERRED IN LAW IN DELETING THE ADDITI ON OF RS. 14,12,532/- MADE BY THE AO U/S 14A OF THE ACT. 2. NONE PUT IN APPEARANCE ON BEHALF OF THE ASSESSEE AT THE HEARING DESPITE ISSUE OF NOTICE FOR HEARING. ACCORDINGLY, W E PROCEED TO DISPOSE OF ITA 4432/DEL/2012 ITO VS. STAINLESS INVESTMENT LTD. 2 THE APPEAL, EX PARTE, QUA THE ASSESSEE, ON MERITS A ND IN THAT PROCESS WE HAVE HEARD LD. DR AND PERUSED THE ENTIRE MATERIAL AVAILA BLE ON RECORD. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IN THE RELEVANT ASSESSMENT YEAR WAS ENGAGED IN THE BUSINESS OF INVE STMENT IN SHARES AND SECURITIES AND ADVANCING LOANS ETC. IT HAD FILED IT S RETURN OF INCOME DECLARING NIL INCOME AFTER CLAIMING SET OFF OF BROUGHT FORW ARD LOSS OF RS. 9,11,209/- AND DECLARING ITS INCOME U/S 115JB OF THE I.T. ACT AT RS. 9,11,209/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD DISALLOWED AN EXPENSE OF RS. 57,21,873 /- ON ACCOUNT OF EXPENDITURE U/S 14A, DONE FOR EARNING EXEMPT INCOME . THE ASSESSING OFFICER EXAMINED THE COMPUTATION FURNISHED BY THE ASSESSEE AS PER RULE 8D AND OBSERVED THAT THE AMOUNT UNDER RULE 8D(2)(III) SHOU LD HAVE BEEN RS. 20,63,312/- AS AGAINST THE AMOUNT CALCULATED BY THE ASSESSEE AT RS. 6,50,880/- IN RESPECT OF ADMINISTRATIVE EXPENSES. T HE REASON GIVEN BY THE ASSESSEE WAS AS PER EXPERT OPINION OBTAINED BY THE MANAGEMENT. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES PLE A IN THE BACK DROP OF THE LANGUAGE OF RULE 8D AND THUS COMPUTING THE DISALLOW ANCE AT RS. 71,34,305/- AND THUS DETERMINED THE TOTAL INCOME AT RS. 23,23,6 41/-. 3.1. BEFORE LD. CIT(A) THE ASSESSEE EXPLAINED THAT THE DISALLOWANCE S PER RULE 8D(2)(III) BEING 0.5% OF THE TOTAL INVESTMENT WORKED OUT BY THE ITA 4432/DEL/2012 ITO VS. STAINLESS INVESTMENT LTD. 3 ASSESSEE AT RS. 6,50,880/-, OUT OF TOTAL EXPENSES O F RS. 7,54,371/-, WAS NOT ACCEPTED BY THE ASSESSING OFFICER ON THE GROUND THE TOTAL DISALLOWANCE AT 0.5% WOULD WORK OUT TO RS. 20,63,312/-. IT WAS SUBM ITTED THAT ASSESSEE HAD CLAIMED ONLY SUM OF RS. 1,03,491/- OUT OF TOTAL ADM INISTRATIVE EXPENSES OF RS. 7,54,371/-, WHICH WAS QUITE REASONABLE HAVING R EGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, AS THE ASSESSEE HAD OTHE R TAXABLE INCOME OF MORE THAN RS. 30 LACS. THE ASSESSEE RELIED ON THE DECISI ON OF HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. 249 CTR 162 AND ALSO ON THE ITAT DELHI ORDER IN THE CASE OF GILLETTE GROUP INDI A LTD. (ITA NO. 267/D/12), WHEREIN IT WAS HELD THAT THE DISALLOWANC E MADE U/S 14A RULE 8D CANNOT EXCEED THE ACTUAL AMOUNT SPENT BY THE ASSESS EE. THE ASSESSEE ALSO RELIED ON THE ORDER OF ITAT MUMBAI IN THE CASE OF SEARCH ENVIRO LTD. ( ITA NO. 3464/ MUM/2011). IT WAS FURTHER SUBMITTED THAT, IN ANY VIEW OF THE MATER THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES C OULD ONLY BE IN A SUM OF RS. 7,54,371/- I.E. THE MAXIMUM AMOUNT SPENT BY THE ASSESSEE. BY NOT DOING SO THE ASSESSING OFFICER HAD DISALLOWED WHAT THE AS SESSEE HAD NOT EVEN CLAIMED. 3.2. LD. CIT(A) FOLLOWING THE DECISION OF HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. (SUPRA ) ALLOWED THE ASSESSEES APPEAL. ITA 4432/DEL/2012 ITO VS. STAINLESS INVESTMENT LTD. 4 4. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR A ND HAVE PERUSED THE RECORD OF THE CASE. WE FIND THAT ASSESSING OFFICER HAS MECHANICALLY APPLIED RULE 8D WITHOUT RECORDING HIS SATISFACTION THAT TH E CLAIM OF THE ASSESSEE WAS NOT CORRECT/ EXIGIBLE. THE MANDATE OF SECTION 14A R EAD WITH RULE 8D IS VERY CLEAR THAT THE ASSESSING OFFICER HAS TO FIRST RECOR D HIS SATISFACTION THAT THE CLAIM MADE BY THE ASSESSEE IS NOT CORRECT AND THEN ONLY HE CAN INVOKE RULE 8D. MERELY BECAUSE ASSESSEE HAD INVOKED RULE 8D AND COMPUTED THE DISALLOWANCE UNDER RULE 8D(2)(II) & (III) DOES NOT IMPLY THAT ASSESSING OFFICER HAS TO APPLY RULE 8D WITHOUT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE CLAIM MADE BY THE AS SESSEE WAS QUITE REASONABLE AND, THEREFORE, LD. CIT(A) RIGHTLY DELET ED THE DISALLOWANCE. WE SO NO REASON TO INTERFERE IN THE ORDER OF LD. CIT(A ). 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 28-08-2014. SD/- SD/- ( H.S. SIDHU ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28-08-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR