DCM Ltd., New Delhi V. DCIT, New Delhi

ITA 4467/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97110 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 21-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Assessee Lawyers: PRADEEP DENODIA
• Keywords: Earning of tax free income; Initiation of penalty proceedings; Assessment record; Notional interest
• Section: 14A; 115JB

Judgement Text

1 ITA NOS. 4 467 & 5176/DEL/2012 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH:B NEW DELHI BEFORE SHRI T.S. KAPOOR, ACCOUNTANT MEMBER & SMT. BEENA PILLAI, JUDICIAL MEMBER I.T.A .NO. 4467/DE L/2012 (ASSESSMENT YEAR-2009- 10) DCM LTD., 6 TH FLOOR, VIKRANT TOWER, 4, RAJINDRA PLACE, NEW DELHI. AAACD1012E VS DCIT, CIRCLE 10(1), NEW DELHI. & I.T.A .NO.-5176/DE L/2012 (ASSESSMENT YEAR-2009- 10) DCIT, CIRCLE 10(1), NEW DELHI. VS DCM LTD., 6 TH FLOOR, VIKRANT TOWER, 4, RAJINDRA PLACE, NEW DELHI. AAACD1012E APPELLANT BY SH. PRADEEP DENODIA, CA & SH. V.P. GUPTA, ADV. RESPONDENT BY SMT. PARWINDER KAUR, SR. DR ORDER PER BEENA PILLAI, JUDICIAL MEMBER : 1. THESE ARE CROSS APPEALS FILED BY THE REVENUE & ASSE SSEE AGAINST THE ORDER DATED 06/07/2012 PASSED BY THE LD . CIT(A)S-XIII, NEW DELHI FOR A.Y. 2009-10. DATE OF HEARING 27.08.2015 DATE OF PRONOUNCEMENT 01.09.2015 2 ITA NOS. 4 467 & 5176/DEL/2012 2. GROUNDS OF REVENUES APPEAL ARE AS UNDER : 1. THAT THE CIT(A) ERRED IN DISALLOWING ALTERNATE CL AIM MADE BY THE APPELLANT ON ACTUAL PAYMENT BASIS IN RESPECT OF FOLLOWING ITEMS OF EXPENSES INCURRED IN RELATION TO REAL ESTATE PROJECT WITHOUT APPRECIATING THAT CLAIM HAD BEEN MADE BY THE APPELLANT FOR THE REASON THAT DEPARTMEN T HAS NOT ACCEPTED ALLOWABILITY OF EXPENSES ON ACCRUAL BA SIS AND APPEALS IN RESPECT THEREOF ARE PENDING FOR ADJUDICA TION BEFORE DELHI HIGH COURT. A) EXPENDITURE IN RESPECT OF APPROVALS AND PERMISSIONS RS. 72,51,725/- B) EXPENDITURE ON REMOVAL OF SQUATTERS RS. 10,00,000 /- 2. THAT THE CIT(A) ERRED IN UPHOLDING ADDITION OF RS. 260.00 LACS AND RS. 75.53 LACS MADE U/S 41(1) OF THE ACT I N RESPECT OF PAYMENT TO BUILDERS AND LIABILITY FOR VACATION O F SQUATTERS ALLOWED IN ASSESSMENT YEAR 2004-05 ON ACCRUAL BASIS WITHOUT APPRECIATING THAT SINCE THE DEPARTMENT IS D ISPUTING ALLOW ABILITY OF THESE LIABILITIES ON ACCRUAL BASIS IN ASSESSMENT YEAR 2004-05 AMOUNTS CANNOT BE INCLUDED IN THE TAXABLE INCOME IN THIS YEAR U/S 41(1) OF THE I. T. ACT. 3. THAT THE CIT(A) ERRED IN DISALLOWING AN AMOUNT OF R S. 11.79 LACS ON ACCOUNT OF ADMINISTRATIVE EXPENSES U/S 14A OF THE INCOME TAX ACT AS AGAINST DISALLOWANCE MADE BY THE APPELLANT COMPANY OF RS. 2.00 LACS IN ITS RETURN OF INCOME. 4. THAT THE CIT(A) ERRED IN UPHOLDING ADDITION ON ACCO UNT OF DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF RS. 9.79 LACS IN DETERMINATION OF BOOK PROFIT FOR THE P URPOSE OF SECTION 115JB OF THE INCOME TAX ACT. 5. THAT THE CIT(A) ERRED IN UPHOLDING THE INITIATION O F PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT IN THE FACTS A ND CIRCUMSTANCES OF THE APPELLANT. 6. THAT THE ORDER PASSED BY THE AO AND UPHELD BY CIT(A ) IS BAD IN LAW. 7. THAT THE APPELLANT COMPANY CRAVES LEAVE TO ALTER, A MEND, VARY AND/OR ADD ANY OF THE GROUNDS OF APPEAL AT ANY TIME HEREIN AFTER. 3 ITA NOS. 4 467 & 5176/DEL/2012 GROUNDS OF ASSESSEES APPEAL ARE AS UNDER : 1. WHETHER THE LD. CIT(A) ON THE FACTS AND CIRCUMSTA NCES OF THE CASE AND IN LAW IS CORRECT IN DELETING THE DEDU CTION OF RS. 2,94,81,000/- ON ACCOUNT OF INTEREST PAYABLE ON ACCRUAL BASIS TO MCD? 2. WHETHER THE LD. CIT(A) ON THE FACTS AND CIRCUMSTANC ES OF THE CASE AND IN LAW IS CORRECT IN DELETING THE DISALLOW ANCE OF RS. 22,32,000/- MADE BY THE AO ON ACCOUNT OF INTERE ST ON INTEREST FREE LOANS? 3. WHETHER THE LD. CIT(A) ON THE FACTS AND CIRCUMSTANC ES OF THE CASE AND IN LAW IS CORRECT IN RESTRICTING THE DISAL LOWANCE TO RS. 9,79,000/- AS AGAINST RS. 1,66,18,000/- MADE BY THE AO U/S 14A OF THE IT ACT? 4. WHETHER THE LD. CIT(A) ON THE FACTS AND CIRCUMSTANC ES OF THE CASE AND IN LAW IS CORRECT IN RESTRICTED THE ADJUST MENT U/S 115JB OF THE I T ACT, 1961, TO RS. 9.79 LACS AS AGA INST THE ADJUSTMENT OF RS. 166.18 LACS MADE BY THE AO? 5. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HE ARING. 3. WE FIRST DEAL WITH THE APPEAL FILED BY THE REVEN UE IN: ITA NO. 4467/DEL/2012. GROUND NO. 1: WHETHER THE CIT(A) ERRED IN DISALLOWING ALTERNATE CLAIM MADE BY THE APPELLANT ON ACTUAL PAYMENT BASIS IN RESPECT OF FOLLOWING ITEMS OF EXPENSES INCURRED IN RELATION TO REAL ESTATE PROJECT WITHOUT APPRECIATING THAT CLAIM HAD BEEN MADE BY TH E APPELLANT FOR THE REASON THAT DEPARTMENT HAS NOT ACCEPTED ALLOWAB ILITY OF EXPENSES ON ACCRUAL BASIS AND APPEALS IN RESPECT TH EREOF ARE PENDING FOR ADJUDICATION BEFORE DELHI HIGH COURT; A) EXPENDITURE IN RESPECT OF APPROVALS AND PERMISS ION RS. 72,51,725/- B) EXPENDITURE ON REMOVAL OF SQUATTERS RS. 10,00, 000/-, 4 ITA NOS. 4 467 & 5176/DEL/2012 4. WE FIND THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF TRIBUNAL IN THE EARLIER ASSESSMENT YEARS ANNEXED TO THE PAPER BOOK AS UNDER; A.Y. 2004-05 AT PAGE 67 TO 68 A.Y. 2005-06 AT PAGE 72 TO 73 A.Y. 2006-07 AT PAGE 81 TO 82 5. THE COORDINATE BENCH HAS PASSED THE ORDER ON ID ENTICAL GROUND FOR A.Y. 2007-08 IN ITA NO. 1895/DEL/2012 WHICH HAS BEEN PRODUCED BEFORE US. THE SAID ORDER FOR A.Y. 2007-0 8 HAS ADJUDICATED THE MATTER RELYING UPON THE ORDER FOR A.Y. 2006-07 AS BELOW: 2.1 IT IS THE COMMON CASE OF BOTH THE PARTIES TH AT THE GROUNDS STAND COVERED IN FAVOUR OF THE ASSESSEE COM PANY BY THE ORDER OF THE TRIBUNAL IN ITA NO. 1983/DEL/09 FOR A.Y. 2005-06 DATED 17.11.2009, A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK ON PAGE NOS. C-3 TO C-10. IN THIS ORDER, RELIANCE HAS BEEN PLACED ON THE ORDERS OF TH E TRIBUNAL FOR EARLIER YEARS IN THE CASE OF THE ASSES SEE. THEREFORE, WE THINK IT FIT TO REPRODUCE THE PARAGRA PH FROM THAT ORDER, WHICH AS DISCUSSED THE ISSUE IN DETAIL. IN REGARD TO GROUND NO. 2 REGARDING INTEREST OF RS. 67.20 LACS PAYABLE TO MCD FOR NONPAYMENT OF FLYOVER COST IN TIME, THE DECISION HAS BEEN AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN REG ARD TO THE ISSUE OF DISALLOWANCE OF RS. 12.21 CRORES BEING THE EXPENSES WHICH HAD BEEN DISALLOWED BY THE AO AS ALS O THE ISSUE OF DISALLOWANCE OF FLYOVER COST OF RS. 13.50 CRORES AND THE ISSUE OF INTEREST PAYABLE TO MCD IN RESPECT OF OUTSTANDING FLYOVER COST, IT IS NOTICED THAT FOR TH E ASSESSMENT YEAR 1993-94 TO 1996-97 THE REVENUE HAS INCLUDED THE INCOME ON THE SALE OF PROPERTY RIGHTS ON THE ENTERING INTO AGREEMENT WITH THE BUYERS AND THE EXP ENSES ON ACCOUNT OF LAND AND DEVELOPMENT INCURRED BY THE ASSESSEE HAS BEEN ALLOWED IN PROPORTION TO THE AREA SOLD BUT APPLYING THE MATCHING PRINCIPLE. IT IS ALSO NO TICED THAT 5 ITA NOS. 4 467 & 5176/DEL/2012 IN THE LATER YEARS, THE ASSESSEE HAS ACCEPTED THE S TAND OF THE REVENUE AND HAS ALSO BEEN FOLLOWING THE SAME PR ACTICE. FOR THE RELEVANT ASSESSMENT YEAR, IT IS NOTICED THA T THE AO HAS CHANGED HIS STAND JUST BECAUSE THE ASSESSEE HAS TRANSFERRED THE COMPLETE RIGHTS IN THE PROJECT AS A WHOLE TO M/S PUREARTH INFRASTRUCTURE LTD. WHEN A PARTICULAR METHOD OF COMPUTATION OF INCOME OF THE ASSESSEE HAS BEEN F OLLOWED AND HAS BEEN ACCEPTED AND IS ALSO FOLLOWED BY THE R EVENUE AND THE ASSESSEE, JUST BECAUSE THE TOTAL RIGHTS IN THE PROJECT HAS BEEN TRANSFERRED, SUCH METHOD CANNOT BE CHANGED AS BY THE CHANGE OF THE METHOD, THE EXPENSES OTHERWISE ALLOWABLE TO THE ASSESSEE, IS NOW BEING DENIED WHIC H IS NOT A PERMISSIBLE ACT. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ACTION OF THE CIT(A) IN DIRECTING THE AO TO ALLOW THE DEDUCTION OF THE SAID EXPENSES IS ON RIGHT FOOT ING AND DO NOT CALL ANY INTERFERENCE. 6. THE FACTS AND CIRCUMSTANCES OF THE ISSUE BEING IDEN TICAL, WE ARE ALSO INCLINED TO FOLLOW THE ORDERS TRIBUNAL IN THE PRECEDING ASSESSMENT YEARS IN ASSESSEES OWN CASE. ACCORDINGL Y THIS GROUND OF REVENUE IS DISMISSED. 7. GROUND NO. 2: WHETHER THE CIT(A) ERRED IN UPHOLDING ADDITION OF RS. 260.00 LACS AND RS. 75.53 LACS MADE U/S 41(1 ) OF THE ACT IN RESPECT OF PAYMENT TO BUILDERS AND LIABILITY FOR VA CATION OF SQUATTERS ALLOWED IN ASSESSMENT YEARS 2004-05 ON ACCRUAL BASI S WITHOUT APPRECIATING THAT SINCE THE DEPARTMENT IS DISPUTING ALLOW ABILITY OF THESE LIABILITIES ON ACCRUAL BASIS IN ASSESSMENT YE AR 2004-05 AMOUNTS CANNOT BE INCLUDED IN THE TAXABLE INCOME IN THIS YEAR U/S 41(1) OF THE I.T. ACT. 8. THE TRIBUNAL HAS DEALT WITH THIS ISSUE IN THE ASSE SSEES OWN CASE AND THE SAME STANDS COVERED IN FAVOUR OF THE A SSESSEE BY THE 6 ITA NOS. 4 467 & 5176/DEL/2012 ORDERS OF TRIBUNAL IN THE EARLIER ASSESSMENT YEARS ANNEXED TO THE PAPER BOOK AS UNDER; A.Y. 2004-05 AT PAGE 69, A.Y. 2005-06 AT PAGE 74, A.Y. 2006-07 AT PAGE 82 A.Y. 2007-08 AT PAGES 13, 14 & 17 9. THE COORDINATE BENCH HAS PASSED THE ORDER ON ID ENTICAL GROUND FOR A.Y. 2007-08 IN ITA NO. 1895/DEL/2012 WHICH HAS BEEN PRODUCED BEFORE US. THE SAID ORDER FOR A.Y. 2007-0 8 HAS ADJUDICATED THE MATTER RELYING UPON THE ORDER FOR A.Y. 2006-07 AS BELOW: 2.2 IN REGARD TO NOTIONAL INTEREST, THE FINDING O F THE TRIBUNAL HAS BEEN AS UNDER: IN REGARD TO THE ISSUE OF DISALLOWANCE OF INTEREST ON THE LOANS OUTSTANDING FROM M/S DCM EMPLOYEES WELFARE TRUST, IT IS NOTICED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2003-04 REFERRED TO SUPRA AND CONSEQUENTLY RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2003-04, THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE STAND UPHELD. 10. THE FACTS AND CIRCUMSTANCES OF THE ISSUE BEING IDEN TICAL, WE ARE ALSO INCLINED TO FOLLOW THE ORDERS TRIBUNAL IN THE PRECEDING ASSESSMENT YEARS IN ASSESSEES OWN CASE. 11. ACCORDINGLY GROUND NO. 1 & 2 OF REVENUE IS DISMISSE D. 12. WE NOW DEAL WITH THE APPEAL FILED BY THE ASSESSEE I N; ITA NO. 4467/D/2012 7 ITA NOS. 4 467 & 5176/DEL/2012 13. IT IS SUBMITTED BY THE LD. AR THAT GROUND NO. 1 & 2 OF THE ASSESSEES APPEAL ARE INCIDENTAL IN NATURE TO GROUN D NO. 1 & 2 OF THE REVENUES APPEAL. AS WE HAVE DISMISSED THE GROUND N O. 1 & 2 OF THE REVENUES APPEAL, GROUND NO. 1 & 2 OF THE ASSESSEE S APPEAL STAND INFRUCTUOUS. 14. THE ONLY ISSUE LEFT FOR ADJUDICATION IS ADDITION IN RESPECT OF SEC.14A DISALLOWANCE. BOTH THE ASSESSEE AS WELL AS REVENUE IS IN APPEAL (BEING GROUND NO.3 ) BEFORE US ON THIS ISSUE. FACTS GERMANE TO DEAL WITH THIS ISSUE ARE AS UNDER: 15. ON PERUSAL OF ASSESSMENT RECORDS IT IS OBSERVED THA T THE ASSESSEE HAD MADE CERTAIN INVESTMENTS, AND IT HAD R ECEIVED DIVIDEND INCOME OF RS. 60,088/- DURING THE YEAR UNDER CONSID ERATION WHICH WAS CLAIMED AS EXEMPT U/S 10(34) OF THE ACT. THE A SSESSEE IN ITS COMPUTATION OF INCOME HAD SUO MOTO DISALLOWED AN AMOUNT OF RS. 10,23,000/- AS PER RULE 8D, CALCULATIONS OF THE SAM E HAS BEEN SUBMITTED BY THE ASSESSEE BEFORE LD. AO. THE AO WO RKED OUT THE DISALLOWANCE AT RS. 166.18 LACS U/S 14A OF THE ACT. THE AO HAD MADE THE DISALLOWANCES U/S 14A AS UNDER: CLAUSE PARTICUL ARS AMOUNT (IN LACS) I. EXPENDITURE DIRECTLY RELATED TO EXEMPT INCOME 751.21 2.00 II. DISALLOWANCE OF INTEREST EXPENDITURE A. INTEREST EXPENDITURE INCURRED DURING THE YEAR B. AVERAGE VALUE OF INVESTMENT C. AVERAGE OF TOTAL ASSETS DISALLOWANCE + AX B/C 6583.5 + 6583.5 2 33105.47 + 36796.98 2 751.21 X 6583.5 34951.22 6583.5 34951.23 141.50 8 ITA NOS. 4 467 & 5176/DEL/2012 III. AGGREGATE OF OPENING & CLOSING VALUE OF INVESTMENT (AVERAGE VALUE OF INVESTMENT)1/2% OF ABOVE AS PER RULE 8D 6583.5 X 0.5% 32 .91 TOTAL DISALLOWANCE (AVERAGE OF (I), (II) & (III) 176.41 ALREADY ADDED BACK IN THE COMPUTATION OF INCOME BY THE ASSESSEE 10.23 ADDITION ON ACCOUNT OF SEC. 14A R/W RULE 8D 166.18 16. IT IS ARGUED THAT OUT OF 751.21 LACS, INTEREST EX PENDITURE TO AN EXTENT OF 681.25 LACS IS DIRECTLY ATTRIBUTABLE TO L OANS, WHICH WAS TAKEN FOR THE PURPOSES OF BUSINESS OF THE COMPANY, NAMELY TEXTILE DIVISION AND I.T. DIVISION. THIS AMOUNT CANNOT BE PROPORTIO NATELY ATTRIBUTED IN TERMS OF RULE 8D. THE AO HAS FURTHER INCLUDED VALU E OF SHARES AMOUNTING TO RS. 42 CRORES WHICH ARE ALLOTTED BY DC M ENGINEERING LTD., PURSUANT TO TRANSFER OF BUSINESS TO THAT COMP ANY UNDER THE SCHEME OF ARRANGEMENT APPROVED BY THE DELHI HIGH CO URT. THEREFORE, THE AMOUNT OF RS. 42 CRORES CANNOT BE INCLUDED IN T HE VALUE OF ASSETS AS WELL AS INVESTMENTS, AS NO FUNDS HAD BEEN INVEST ED BY THE APPELLANT FOR THE ALLOTMENT OF ABOVE SHARES. 17. IN RESPECT OF DISALLOWANCE OF ADMINISTRATIVE EXPENSES THE APPELLANT SUBMITS THAT IT HAD RECEIVED DIVIDEND INC OME DURING THE YEAR TO AN EXTENT OF RS. 60,088/- ONLY, AND THAT THERE H AS BEEN NO TRANSACTION OF PURCHASE AND SALE OF SHARES DURING T HE RELEVANT YEAR UNDER CONSIDERATION. THEREFORE, NO DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES IS WARRANTED. IN ANY CASE, IT NOTICED THAT THE APPELLANT HAS OFFERED A DISALLOWANCE OF RS. 2 LACS OVER AND ABOVE THE INTEREST EXPENSES. 9 ITA NOS. 4 467 & 5176/DEL/2012 18. ON THE OTHER HAND, THE LD. DR PRESENT SUPPORT ED THE STAND OF THE CIT (A) ON THE ISSUE. THE LD. D.R. PLACED RELIA NCE ON THE DECISION OF COORDINATE BENCH IN THE CASE OF T&T MOTORS LTD., IN ITA NO. 6490/DEL/2010 FOR ASSESSMENT YEAR 2009-10. 19. WE HAVE VERIFIED THE ABOVE SUBMISSIONS AND PERUSED THE STATEMENT OF ACCOUNTS SUBMITTED BY THE ASSESSEE IN PAPER BOOK. AS PER THE COMPUTATION THE ASSESSEE HAS OFFERED DISALLOWAN CE ON ACCOUNT OF INTEREST AMOUNTING TO RS. 8.23 LACS AND HAS FURTHER OFFERED DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES TO AN EXTENT OF RS. 2 LACS. THUS, THE TOTAL DISALLOWANCE U/S 14A AS OF FERED BY THE ASSESSEE AMOUNT TO RS. 10.23 LACS. 20. IT IS FURTHER OBSERVED THAT AS PER THE SCHE ME OF RESTRUCTURING AND ARRANGEMENT APPROVED BY THE HONBLE DELHI HIGH COURT, THE ASSETS AND LIABILITIES(INCLUDING LOANS) WERE TRANSFERRED T O A NEW COMPANY AND SHARES WERE ALLOTTED AGAINST THE SAME (CLAUSE 3, 11 OF THE SCHEDULE TO THE ACCOUNTS) . IN RESPECT OF ADMINISTRATIVE EXPENSES, WE FIND TH AT THE ASSESSEE HAS NOT MADE ANY PURCHASE OR SALE OF INVES TMENT IN THE RELEVANT YEAR UNDER CONSIDERATION. STILL TO COVER U P, THE ASSESSEE HAS SUO MOTO DISALLOWED AN AMOUNT OF RS.2,00,000/- (WORKING OF 14 A DISALLOWANCE AT PAGE 34 OF PAPER BOOK). 21. WE FIND FORCE IN THE SUBMISSIONS MADE BY THE LD. AR. WE ALSO FIND THAT THE AO HAS NEITHER RECORDED HIS SATISFACT ION NOR GIVEN REASONS AS TO HOW THE CLAIM OF EXPENDITURE IN RELATION TO T AX FREE INCOME HAS NOT BEEN CORRECTLY MADE BY THE ASSESSEE AS ENVISAGED UN DER SECTION 14A(2). THE LD AO HAS MECHANICALLY INVOKED RULE 8D. SUB-SE CTION (2) OF SECTION 14A OF THE ACT PROVIDES THE MANNER IN WHICH THE AO IS TO 10 ITA NOS. 4467 & 5176/DEL/2012 DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN REL ATION TO INCOME, WHICH DOES NOT FORM PART OF THE TOTAL INCOME. 22. WE FIND THAT THE AO HAS NOT ESTABLISHED ANY NEXUS BETWEEN THE INVESTMENTS MADE AND THE EXPENDITURE INCURRED UNDER THE HEAD INTEREST EXPENDITURE AND ADMINISTRATIVE EXPENSES, B EFORE DISREGARDING THE DISALLOWANCE SUO MOTO MADE BY THE ASSESSEE U/S 14A OF THE ACT VIS A VIS THE DIVIDEND INCOME EARNED AMOUNTING TO RS.68 ,088/-. 23. THE DECISION RELIED UPON BY THE REVENUE IN THE CASE OF T&T MOTORS LTD., IN ITA NO. 6490/DEL/2010 FOR ASSESSMEN T YEAR 2009-10 ARE DISTINGUISHABLE ON FACTS. IN THE CASE OF T&T, T HE ASSESSEE HAD ARGUED THAT THERE CANNOT BE ANY EXPENDITURE THAT CO ULD BE DISALLOWED AGAINST THE EXEMPT INCOME RECEIVED BY THE ASSESSEE THEREIN. THE HONBLE COORDINATE BENCH HAS RECORDED IN PARA 5 THE REIN THAT THE ASSESSEE HAD INCURRED CERTAIN EXPENSES WHICH WAS AT TRIBUTABLE TO THE EARNING OF EXEMPT INCOME. HOWEVER IN THE FACTS OF T HE PRESENT CASE BEFORE US, THE ASSESSEE HAS SUO MOTE DISALLOWED EXPENSES UNDER SECTION 14A OF THE ACT. THE LD.D.R, CONTENDED THAT IN THE E VENT THERE ARE ANY DEFICIENCY LEFT BY THE A.O IN RECORDING PROPER SATI SFACTION, THE SAME CAN BE MADE GOOD BY THE LD.CIT(A). IN THE FACTS OF THE PRESENT CASE THE LD. CIT(A) HAS NOT COMPENSATED FOR THE DEFICIENCY BY TH E A.O IN RECORDING PROPER SATISFACTION. THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO AN EXTENT OF RS. 9.79 LACS. THE LD. CIT(A) FAILS TO A PPRECIATE THE REASONABLENESS OF EXPENDITURE THAT HAS BEEN DISALLO WED VIZ-A-VIZ THE EXEMPT INCOME. IN THE LIGHT OF THE JUDGMENT OF MAXOPP INVESTMENTS LTD. VS. CIT (2012) 374 ITR 272. WE, RESTRICT THE DISALLOWANCE TO 10.23 LACS AS CALCULATED BY THE ASSESSEE. 11 ITA NOS. 4467 & 5176/DEL/2012 24. THE HONBLE DELHI HIGH COURT IN THE CASE O F JOINT INVESTMENT PVT.LTD., VS. CIT, VIDE ITS ORDER DATED 25.02.2015, HAS HELD THAT DISALLOWANCE U/S.14A CANNOT EXCEED THE AMOUNT OF EX EMPT INCOME. THS DELHI HIGH COURT IN THE CASE OF HOLCIM INDIA PVT.LT D., REPORTED IN (2014) 272 CTR 282(DEL), HAS HELD THAT THERE CAN BE NO DIS ALLOWANCE U/S. 14A IN THE ABSENCE OF ANY EXEMPT INCOME. THE RATIONALES BEHIND THESE JUDGMENTS ARE THAT, THE AMOUNT OF DISALLOWANCE SHOU LD NOT EXCEED THE EXEMPT INCOME. 25. IN VIEW OF THE AFORESAID DISCUSSION AND O N THE BASIS OF MATERIAL AND EVIDENCE ON RECORD, TO MEET THE ENDS O F JUSTICE, WE FIND NO PERVERSITY IN THE CALCULATION OF 14 A, DISALLOWANCE BY THE ASSESSEE. THIS GROUND NO.3 IN THE ASSESSEES IS ALLOWED AND THAT O F REVENUE IS DISMISSED. 26. GROUND NO 4: THIS GROUND RAISED BY THE ASSESSEE IS IN RESPECT OF INCLUSION OF THE ADDITION U/S.14A MADE BY THE LD . A.O IN DETERMINING THE BOOK PROFITS U/S115JB. AS THE ADDITION MADE BY THE A.O U/S.14A STANDS DELEATED IN VIEW OF THE AFORESAID REASONING, THIS GROUND NO.4 OF THE ASSESSEES APPEAL BECOMES CONSEQUENTIAL IN NATU RE. 27. GROUND NO . 5: THIS GROUND IS IN RESPECT OF INITIATION OF PENALTY PROCEEDINGS U/S.271(1) ( C) OF THE ACT. SINCE HAS B EEN ALLOWED RELIEF ON ACCOUNT OF DISALLOWANCE U/S.14 A, PENALTY PROCEEDIN GS U/S.271(1) ( C) OF THE ACT BECOMES CONSEQUENTIAL IN NATURE AND NO SPEC IFIC DETERMINATION IS CALLED FOR. 28. THE GROUNDS RAISED BY THE ASSESSEE ARE PA RTLY ALLOWED. 12 ITA NOS. 4467 & 5176/DEL/2012 29. IN THE RESULT, THE REVENUES APPEAL I S DISMISSED AND THE ASSESSEES APPEAL IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 01/09/ 2015 SD/- SD/- (T.S. KAPOOR) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 01/09/2015 *KAVITA, P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 13 ITA NOS. 4467 & 5176/DEL/2012 DATE 1. DRAFT DICTATED ON 27.08.2015 2. DRAFT PLACED BEFORE AUTHOR 28.08.2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 31.08.2015 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 01.09.2015 5. APPROVED DRAFT COMES TO THE SR.PS/PS 01.09.2015 6. KEPT FOR PRONOUNCEMENT ON 01.09.2015 7. FILE SENT TO THE BENCH CLERK 01.09.2015 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.