Kanhaiya Lal Jain, New Delhi V. DCIT, New Delhi

ITA 4544/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3576 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 09-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 09-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANCHAL KHANDELWAL
• Assessee Lawyers: SUYASH RAJ NAHATA
• Keywords: Earning of tax free income
• Section: 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A, NEW DELHI BEFORE SHRI RAJ PAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.- 4544/DEL/2015 ( ASSESSMENT YEAR: 2010-11) KANHAIYA LAL JAIN, KLJ HOUSE, 63, RAMA MARG, NAJAFGARH ROAD, NEW DELHI. VS. DCIT CENTRAL CIRCLE-31 NEW DELHI (ERSTWHILE CC-04). PAN NO: AAFPJ3905N APPELLANT RESPONDENT ASSESSEE BY : SH. SUYASH RAJ NAHATA, CA REVENUE BY : SMT. ANCHAL KHANDELWAL, SR. DR DATE OF HEARING : 21.08.2018. DATE OF PRONOUNCEMENT : 21/08/2018. ORDER PER: N.K. BILLAIYA, AM THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A)-30, NEW DELHI, DATED 22.04.2015 PERTAINING TO THE A.Y. 2010-11. 2 . THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSE SSEE IS THAT THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 14,65,290/- MADE U/S 14A OF THE ACT. 2 ITA NO.-4544/DEL/2015. KANHAIYA LAL JAIN. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACT URING, TRADING AND INVESTMENT. DURING THE COURSE OF SCRUTINY ASSESSME NT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS DERIVED DIVIDEND INCO ME AND LONG TERM CAPITAL GAIN WHICH WERE CLAIMED AS EXEMPT FROM TAXATION. THE AO NO TICED THAT THE ASSESSEE HAS NOT DISALLOWED ANY EXPENDITURE U/S 14A OF THE AC T READ WITH RULE 8D OF THE INCOME TAX RULES. THE AO COMPUTED THE DISALLOWANCE A T RS. 14,65,290/-. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT( A) BUT WITHOUT SUCCESS. BEFORE US, THE COUNSEL FOR THE ASSESSEE S TATED THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING THE EXEMPT INCOME, MOREOV ER, THE LONG TERM CAPITAL GAIN ASSUMED BY THE LOWER AUTHORITIES IS IN FACT A L ONG TERM CAPITAL LOSS OF RS. 97,79,300/-. IT IS THE SAY OF THE LD. COUNSEL THAT THE DISALLOWANCE U/S 14A OF THE ACT IS UN-WARRANTED OF THE FACT OF THE CASE. PER CO NTRA, THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE AO. 5. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUT HORITIES BELOW. IT IS TRUE THAT THE LONG TERM CAPITAL GAIN TAKEN BY THE L OWER AUTHORITIES IS IN FACT LONG TERM CAPITAL LOSS. HOWEVER, WE FIND THAT THE ASSESSE E HAS CLAIMED DIVIDEND INCOME AS EXEMPT U/S 10 AMOUNTING TO RS. 19,15,695/ - THOUGH THE ASSESSING OFFICER HAS TAKEN THE SAME AT RS. 31,932/- ONLY. BE THAT AS IT MAY, THE BALANCE SHEET OF THE ASSESSEE EXHIBITED AT PAGE 26 PAPER BOOK SHOWS THAT THE 3 ITA NO.-4544/DEL/2015. KANHAIYA LAL JAIN. ASSESSEE WAS HAVING OWN CAPITAL OF 48.6 CRORES WHEREAS THE INVESTMENT IS 14.88 CRORES. THEREFORE, IT CAN BE SAFELY CONCLUDED THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS AVAILABLE FOR MAKING THE INVESTMENTS. THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. 313 ITR 340 AND IN THE CASE OF HDFC BANK LTD. 366 ITR 505, SQUARELY APPLIED ON THE FACTS OF THE CASE. 6. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HO NBLE HIGH COURT (SUPRA), WE ARE OF THE OPINION THAT SINCE SUFFICIENT INTEREST FREE FUNDS WERE AVAILABLE WITH THE ASSESSEE, DISALLOWANCE ON THE ACCO UNT OF INTEREST EXPENSES IS UNCALLED FOR. HOWEVER, DISALLOWANCE IN RESPECT OF AD MINISTRATIVE EXPENSES NEED TO BE MADE AND IN OUR CONSIDERED OPINION, A DISALLO WANCE OF RS. 1 LACS SHOULD MEET THE ENDS OF JUSTICE. WE ACCORDINGLY DIRECT TH E AO TO RESTRICT THE DISALLOWANCE TO RS. 1 LACS ONLY. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/8/2018 SD/- SD/- (RAJPAL YADAV) (N.K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21.08.2018 POOJA/- 4 ITA NO.-4544/DEL/2015. KANHAIYA LAL JAIN. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 5 ITA NO.-4544/DEL/2015. KANHAIYA LAL JAIN. DATE OF DICTATION 21/8/2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 21/8/2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 21.8.2018 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 23.8.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 6 ITA NO.-4544/DEL/2015. KANHAIYA LAL JAIN.