ACIT, New Delhi V. M/s. Bhushan Energy Ltd., New Delhi

ITA 4640/DEL/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1022 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 31-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL GULATI
• Keywords: Earning of tax free income; TDS; Rule 8D
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DLEHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NOS. 4640/DEL/2016, 4398 & 4399/DEL/2017 ASSESSMENT YEARS: 2012-13, 2013-14 & 2014-15 ACIT, CENTRAL CIRCLE-3, VS. BHUSHAN ENERGY LTD., NEW DELHI. 1 ST FLOOR, INTERNATIONAL TRADE TOWER, NEHRU PLACE, NEW DELHI. C.O. NO. 160/DEL/2019 (IN ITA NO. 4640/DEL/2016) ASSESSMENT YEAR: 2012-13 BHUSHAN ENERGY LTD., VS. ACIT, CENTRAL CIRCLE-3, 1ST FLOOR, INTERNATIONAL TRADE TOWER, NEW DELHI NEHRU PLACE, NEW DELHI. PAN : AACCB7445H (APPELLANT) (RESPONDENT) REVENUE BY : SH. SATPAL GULATI, CIT/DR ASSESSEE BY : SH. ASHWANI KUMAR, CA SH. RAHUL CHAURASIA, CA DATE OF HEARING: 05/07/2021 DATE OF ORDER : 08/07/2021 ORDER PER K. NARASIMHA CHARY, J.M. CHALLENGING THE ORDERS DATED 23.06.2016 FOR A.Y. 20 12-13 AND DATED 11.04.2017 FOR A.YRS. 2013-14 & 2014-15, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-23, NEW DELHI (LD. CIT(A)), IN 2 THE CASE OF BHUSHAN ENERGY LTD. (THE ASSESSEE), T HE REVENUE FILED THESE THREE APPEALS. THE ASSESSEE HAS ALSO FILED CROSS-OB JECTIONS IN APPEAL FOR A.Y. 2012-13, WHICH HAS BEEN WITHDRAWN BY LD. AR OF ASSESSEE. 2. BRIEF FACTS OF THE CASE RELEVANT FOR DISPOSAL OF ALL THESE APPEALS ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSIN ESS OF POWER GENERATION. FOR ALL THESE THREE ASSESSMENT YEARS, T HE ASSESSEE DERIVED EXEMPT INCOME AND MADE SUO MOTO DISALLOWANCE U/S. 14A OF RS.5,00,045/- FOR ASSESSMENT YEAR 2012-13, RS.1,25, 81,066/- FOR ASSESSMENT YEAR 2013-14 AND RS.1,28,76,558/- FOR AS SESSMENT YEAR 2014- 15. ASSESSING OFFICER, HOWEVER, CALCULATED DISALLOW ANCE U/S. 14A OF THE INCOME TAX ACT (THE ACT) READ WITH RULE 8D OF THE INCOME-TAX RULES (THE RULES) AT RS.21,28,28,842/- FOR ASSESSMENT Y EAR 2012-13, RS.27,14,75,759/- FOR ASSESSMENT YEAR 2013-14 AND R S.13,53,28,564/- FOR ASSESSMENT YEAR 2014-15 AND MADE AN ADDITION OF RS. 21,23,28,797, RS.25,88,94,693/- AND RS.12,24,52,006/- FOR ASSESSM ENT YEARS 2012-13 TO 2014-15 RESPECTIVELY. ASSESSING OFFICER ALSO RECOMP UTED THE BOOK PROFITS U/S. 115JB OF THE ACT BY ADDING THIS AMOUNT DETERMI NED U/S. 14A READ WITH RULE 8D. 3. IN APPEAL, LD. CIT(A) ON REAPPRAISAL OF THE MATE RIAL AVAILABLE ON RECORD AND ALSO BY REQUIRING SOME CLARIFICATIONS FR OM THE PARTIES, REACHED A CONCLUSION ON FACTS THAT THE ASSESSEE IS NOT LIAB LE TO ALLOCATE ANY INTEREST AMOUNT TO THE EXEMPT INCOME, BUT THE ASSES SEE IS LIABLE TO DISALLOW THE ADMINISTRATIVE EXPENSES RELATABLE TO T HE EXEMPT INCOME UNDER RULE 8D(2)(III) OF THE RULES. INASMUCH AS THE ASSESSEE IS NOT LIABLE TO ALLOCATE INTEREST COMPONENT, CIT(A) DELETED THE SAME COMPUTED U/R. 8D(2)(II) FOR ALL THE THREE YEARS, BUT UPHELD THE D ISALLOWANCE SO FAR AS THE 3 CALCULATION U/R. 8D(2)(III) IS CONCERNED. SINCE TH E ASSESSEE ALREADY DISALLOWED THE SAME, CIT(A) ALLOWED THE APPEALS IN TOTO AND ALSO DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE MAT PAYABLE BY ASSESSEE AFTER EXCLUDING THIS DISALLOWANCE U/S. 14A READ WITH RULE 8D. 4. AGGRIEVED BY THE SAME, THE REVENUE IS IN THESE A PPEALS ON IDENTICAL GROUNDS. 5. HAVING HEARD THE COUNSEL ON EITHER SIDE, WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF SUCH SUBMISSIONS. IN SO FAR AS THE DISALLOWANCE UNDER RULE 8D(2)(I) IS CONCERNED, THE ASSESSING OFF ICER DID NOT MAKE ANY DISALLOWANCE. IN SO FAR AS THE DISALLOWANCE FOR A.Y . 2012-12 U/R 8D(2)(II) IS CONCERNED, ON VERIFICATION OF THE DETAILS OF EXPEND ITURE DEBITED IN THE ACCOUNTS OF ASSESSEE, LD. CIT(A) FOUND THAT THE ASS ESSEE HAS SUBMITTED THE DETAILS OF EXPENDITURE DEBITED IN THE ACCOUNTS AND THAT OUT OF THE TOTAL EXPENDITURE OF RS. 12,232.75 LAKH A SUM OF RS . 11,152.03 LAKH IS ENTIRELY RELATABLE TO ITS MANUFACTURING/BUSINESS AC TIVITIES OF THE APPELLANT COMPANY, AND THEREFORE ONLY RS. 1,080.72 LAKH MAY B E ALLOCATED IN ACCORDANCE WITH S. 14A OF THE ACT, AND ACCORDINGLY THE APPELLANT HAS COMPUTED RS.1,21,36,000/- AS THE AMOUNT WHICH MAY B E ALLOCATED AS PER RULE 8D(2)(III) OF THE RULES; THAT AS REGARDS THE I NTEREST EXPENSES, VIDE ORDER SHEET DT. 08.06.2016 THE APPELLANT'S AR WAS A SKED TO SUBMIT DETAILS OF THE INTEREST EXPENSES OF RS. 17.98 CRORE DEBITED IN ACCOUNTS, WHICH HAVE BEEN SUBMITTED ACCORDING TO WHICH INTEREST CLA IMED ARE INTEREST PAID ON TERM LOAN OF RS. 166.08 CRORE, INTEREST ON ECB (EXTERNAL COMMERCIAL BORROWING) OF RS. 11.50 CR., INTEREST ON OD AGAINST CC LOAN OF RS.66.64 LAKH, AND INTEREST ON FLC (FOREIGN LETTER OF CREDIT) (RS.35.97 CRORE BEING INTEREST RELATED TO PROJECT UNDER COMMISSION AND BOOKED IN 4 ACCOUNTS AS PRE-OPERATIVE EXPENSES); THAT AS PER NO TE-4 & 8 OF THE AUDITED ACCOUNTS THE AMOUNT OF TERM LOAN IS RS. 116 5.35 CRORE AND RS.625.00 CRORE INCLUDING FLC OF RS.347.73 CRORE, A ND THE CC LOAN IS RS.2.43 CRORE, DETAILED EXPLANATION BEING GIVEN IN THE FOOT NOTES ACCORDING TO WHICH THESE LOANS ARE FOR VARIOUS PHAS ES OF POWER PROJECTS AT ORISSA; THAT SUCH INTEREST EXPENSES IS NOT ALLOC ABLE TO THE EXEMPT INCOME; AND THAT THERE IS NO NEXUS BETWEEN THE INTE REST PAID AND CLAIMED AS EXPENDITURE AND THE EXEMPT INCOME AND TH EREFORE NO DISALLOWANCE U/R 8D(2)(II) OF THE RULES IS CALLED F OR. 6. IN RESPECT OF ASSESSMENT YEARS 2013-14 AND 2014- 15, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD SUBMITTED THE DETAIL S OF EXPENDITURE DEBITED IN THE ACCOUNTS AND THE EXPENDITURE ENTIREL Y RELATABLE TO ITS MANUFACTURING/BUSINESS ACTIVITIES OF THE APPELLANT COMPANY, AND THEREFORE ONLY RS. 21539.69 LAKH AND RS. 18582.93 L AKH RESPECTIVELY IN THE ABOVE TWO ASSESSMENT YEARS COULD BE ALLOCATED IN AC CORDANCE WITH S. 14A OF THE ACT, AND ACCORDINGLY THE APPELLANT HAS COMPU TED RS.66,34,106/- AND RS.28,99,215/- RESPECTIVELY IN THE ABOVE TWO AS SESSMENT YEARS AS THE AMOUNT WHICH MAY BE ALLOCATED AS PER RULE 8D(2)(III ) OF THE RULES; THAT THE COMPUTATION OF THE APPELLANT SUBMITTED IN THE W S DT. 10.04.2017 IS INCORRECT IN AS MUCH AS THE DISALLOWABLE EXPENDITUR E UNDER RULE 8D(2)(III) OF THE INCOME TAX RULES,1962 WOULD BE RS.2,12,04,09 5/- AND RS. 1,37,23,450/- RESPECTIVELY IN THE ABOVE TWO ASSESSM ENT YEARS BEING 0.5% OF THE AVERAGE VALUE OF INVESTMENT OF RS.274,46,90, 000/- AND RS.424,08,19,000/- RESPECTIVELY IN THE ABOVE TWO AS SESSMENT YEARS; THAT AS REGARDS THE INTEREST EXPENSES, VIDE ORDER SHEET DT. 10.03.2017 THE APPELLANTS AR WAS ASKED TO SUBMIT DETAILS OF THE I NTEREST EXPENSES 5 DEBITED IN ACCOUNTS, WHICH HAVE BEEN SUBMITTED, ACC ORDING TO WHICH INTEREST CLAIMED ARE INTEREST PAID ON TERM LOAN OF RS.213.20 CRORE AND RS.206.63 CRORE, INTEREST ON ECB (EXTERNAL COMMERCI AL BORROWING) OF RS. 7.88 CRORE AND RS.7.37 CR., INTEREST ON OD AGAINST CC LOAN OF RS.80.24 & RS.437.21 LAKH, AND INTEREST ON FLC (FOREIGN LETTER OF CREDIT) OF RS.2.30 CRORE AND RS.1.34 CRORE RESPECTIVELY IN THE ABOVE T WO ASSESSMENT YEARS BESIDE INTEREST U/S 234C AND INTEREST ON TDS; THAT AS PER DETAILED EXPLANATION GIVEN IN THE FOOT NOTES OF THE AUDITED ACCOUNTS THESE LOANS ARE FOR VARIOUS PHASES OF POWER PROJECTS AT ORISSA; THAT THE INTEREST EXPENSES IS NOT ALLOCABLE TO THE EXEMPT INCOME; AND THAT THERE IS NO NEXUS BETWEEN THE INTEREST PAID AND CLAIMED AS EXPE NDITURE AND THE EXEMPT INCOME AND THEREFORE NO DISALLOWANCE U/R 8D( 2)(II) OF THE RULES IS CALLED FOR. 7. WHILE APPLYING THE LAW LAID DOWN BY HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INDIAN SUGAR EXIM CORP ORATION LTD. (2012- TIOL-137-HC-DEL-IT), CIT VS. TAIKISHA ENGINEERING I NDIA LTD. (370 ITR 338)(DELHI) DATED 25.11.2014 AND CIT VS. HDFC BANK LTD. (336 ITR 505) (BOM), LD. CIT(A) DIRECTED THE DELETION OF INTEREST COMPONENT U/R.8D(2)(II) OF THE RULES FOR ALL THESE THREE YEARS. 8. IN SO FAR AS THE FINDINGS OF FACTS BY THE LD. CI T(A) ARE CONCERNED, IT IS NOT DISPUTED BY THE REVENUE BEFORE US THAT ANY O F THESE FACTS IS INCORRECT OR CONTRARY TO THE RECORD. WHEN ONCE THE CIT(A) REACHED A FACTUAL CONCLUSION THAT THE INTEREST EXPENSE INCURR ED BY ASSESSEE IS NOT ALLOCABLE TO THE EXEMPT INCOME, IN THE ABSENCE OF A NY MATERIAL TO THE CONTRARY, WE FIND IT DIFFICULT TO DISTURB THE SAME. FURTHER, LEARNED CIT(A) APPLIED THE BINDING PRECEDENTS TO THESE FACTS. IN T HESE CIRCUMSTANCES, WE 6 DO NOT FIND ANY ILLEGALITY OR IRREGULARITY IN THE F INDINGS OF THE LD. CIT(A) IN DELETING THE INTEREST COMPONENT U/R. 8D(2)(II) OF T HE RULES. THOUGH THE CIT(A) CONFIRMED THE ADDITION OF DISALLOWANCE UNDER RULE 8D(2)(III), THE ASSESSEE HAD ALREADY SUO MOTO DISALLOWED THE SAME AND IT DOES NOT REQUIRE ANY INTERFERENCE. 9. COMING TO THE DIRECTION OF THE LD. CIT(A) TO REC OMPUTE THE MAT PAYABLE BY ASSESSEE AFTER EXCLUDING THE DISALLOWANC E U/S. 14A OF THE ACT, SUCH A FINDING IS FORTIFIED BY THE DECISION OF SPEC IAL BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. VIREET INVESTMENT (P) LTD R EPORTED IN (2017) 82 TAXMANN.COM 415 (DELHI-TRIB.) (SB). WE, THEREFORE, CONFIRM THE SAME AND DISMISS THE APPEALS OF THE REVENUE. THE CROSS OBJEC TIONS FILED BY THE ASSESSEE ARE ALSO DISMISSED AS WITHDRAWN. 10. IN THE RESULT, THE APPEALS OF THE REVENUE AND C ROSS-OBJECTION OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF JULY, 2021. SD/- SD/- (PRASHANT MAHARISHI) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 08/07/2021 AKS