ACIT, New Delhi V. M/s Living Media India Ltd., New Delhi

ITA 4459/DEL/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 0037 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2004-2005
• Appeal Filed On: 08-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY VARMA
• Assessee Lawyers: UMASHANKAR
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4 4 59 / DEL/201 5 A.Y. : 20 04 - 05 ACIT, CIRCLE - 15(2), NEW DELHI VS. M/S LIVING MEDIA INDIA LTD., K-9-BLOCK, CONNAUGHT PLACE, NEW DELHI 110 001 (PAN:AAACL0087H) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. VIJAY VARMA, CIT(DR) ASSESSEE BY : SH. SALIL AGGARWAL & SH. UMASHANKAR, ADVOCATES. ORDER PER H.S. SIDHU, JM THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 09/4/2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-V, NEW DELHI O N THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE 2 DISALLOWANCE TO RS. 3,35,872/- INSTEAD OF RS. 98,94,818/- MADE BY THE AO U/S. 14 R/W RULE 8D. 2. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 3. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR FOREGO ANY GROUND(S) OF APPEAL RAISED ABOVE AT T HE TIME OF HEARING. 2. THE BRIEF FACTS OF THE CASE ARE THAT ORIGINAL AS SESSMENT IN THIS CASE WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) AT AN INCOME OF RS. 17,83,64,191/- AS AGAINST THE RETURNED INCOME OF RS. 17,83,39,191/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ADDITION OF RS. 18,04,592/- WAS MADE U/S. 14A OF THE INCOME TAX ACT, 1961. AGGRIEVED BY THE ACTION OF THE AO, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND LD. C IT(A) DELETED THE ABOVE ADDITION. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE PREFERRED AN APPEAL BEFORE THE ITAT ON THIS ISSUE AND THE ITAT IN THE ORDER PASSED IN ITA NO. 581/DEL/2008 HAS SET ASIDE THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION. THE AO VIDE HIS ORDER PASSED U/S. 254/143(3)/147 OF THE I.T. ACT, 1 961 HAS HELD 3 THAT THERE IS NO DISPUTE ON THE FACT THAT A DISALLOWANCE UNDER THE PROVISIONS OF SECTION 14A HAS TO BE MADE. HE FURTHER HELD THAT THE FACT AND THE CIRCUMSTANCES OF THE CASE ARE SUCH THAT I T IS IMPOSSIBLE TO DETERMINE THE EXPENDITURE DIRECTLY RELATABLE TO THE E XEMPT INCOME. THE ASSESSEE HAS MADE THE INVESTMENTS IN THE EARLIER ASSESSMENT YEARS. FURTHER THE COST OF INVESTING THESE F UNDS AND MAINTAINING THE INVESTMENTS CANNOT BE ESTIMATED. IN LI GHT OF ABOVE OBSERVATIONS, THE PARAMETERS AS LAID DOWN IN RULE 8D ARE THE MOST OBJECTIVE ESTIMATE OF THE EXPENSES LIABLE FOR DISALLO WANCE. THE PRINCIPLES LAID DOWN IN RULE 8D REPRESENT THE LEGISLA TIVE WISDOM IN ESTIMATING THE QUANTUM OF DISALLOWANCE IN CASES WHERE THE DIRECT APPORTIONMENT IS NOT POSSIBLE. ACCORDINGLY, THE AO MADE THE DISALLOWANCE OF RS. 98,94,818/- ON ACCOUNT OF EXPEND ITURE RELATABLE TO EXEMPT INCOME UNDER SECTION 14A OF THE ACT VIDE HIS ORDER AND ASSESSED THE INCOME AT RS. 17,83,39,191/- PASSED U/S . 254/143(3)/147 OF THE I.T. ACT, 1961. 3. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE FIL ED APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO HAS PARTL Y ALLOWED THE APPEAL OF THE ASSESSEE VIDE ORDER DATED 9.4.2015 AN D RESTRICTED THE ADDITION IN DISPUTE TO RS. 3,35,872/- MADE U/S. 14A O F THE ACT. 4 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REITERA TED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL AND REQ UESTED THAT THE APPEAL OF THE REVENUE MAY BE ALLOWED. 5. LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE OR DER OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HAS PASSED A W ELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE, HENCE, H E REQUESTED THAT THE APPEAL OF THE REVENUE MAY BE DISMISSED. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECO RDS AVAILABLE ON RECORD ESPECIALLY THE IMPUGNED ORDER. W E FIND THAT THE ASSESSEE BEFORE THE LOWER AUTHORITIES STATED THAT NO BORROWED FUNDS USED FOR INVESTMENT PURPOSE AND ALSO FILED INVESTMEN T CHART FOR LAST 10 YEARS WHICH ESTABLISHES THAT NO BORROWED FUNDS HA S BEEN USED FOR INVESTMENT PURPOSES. ONLY DISALLOWANCE U/S. 14 A ON RULE 8D(2)(III) WAS REQUIRED ON DIVIDEND RECEIVED DURING THE YEAR FROM THOSE SHARES. THEREFORE, THE LD. CIT(A) HAS RIGHTLY HELD THAT DISALLOWANCE MADE BY THE AO IS NOT AS PER LAW AND H E ACCORDINGLY, REDUCED THE AMOUNT OF DISALLOWANCE TO RS. 3,35,872/-, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, THEREFORE, WE AFFIRM THE IMPUGNED ORDER ON THE ISSUE IN DISPUTE INVOLVED IN G ROUND NO. 1 AND ACCORDINGLY REJECT THE SAME. 5 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/09/2017. SD/- SD/- (PRASHANT MAHARISHI) [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 01/09/2017 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 6