ACIT, New Delhi V. M/s. Bharti Infratel Ltd., New Delhi

ITA 4736/DEL/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3426 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 05-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S K JAIN; RAVI JAIN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDEN T & SHRI K.N. CHARRY, JUDICIAL MEMBER ITA NO.-4736/DEL/2012 ( ASSESSMENT YEAR: 2008-09) ACIT CIRCLE 2(1), ROOM NO. 398D C.R. BUILDING, NEW DELHI. VS BHARTI INFRATEL LTD. NO. 1, ARAVALI CRESCENT, NELSON MANDELA ROAD, VASANT KUNJ, PHASE-III, NEW DELHI. AADCB0274F ITA NO.-2823/DEL/2013 ( ASSESSMENT YEAR: 2009-10) ACIT CIRCLE 2(1), ROOM NO. 398D C.R. BUILDING, NEW DELHI. VS BHARTI INFRATEL LTD. NO. 1, ARAVALI CRESCENT, NELSON MANDELA ROAD, VASANT KUNJ, PHASE-III, NEW DELHI. AADCB0274F & ITA NO.-4941/DEL/2012 ( ASSESSMENT YEAR: 2008-09) BHARTI INFRATEL LTD. NO. 1, ARAVALI CRESCENT, NELSON MANDELA ROAD, VASANT KUNJ, PHASE-III, NEW DELHI. AADCB0274F VS DCIT CIRCLE 2(1) NEW DELHI. ASSESSEE BY SH. RAVI JAIN, CIT DR & SH. S.K. JAIN, DR REVENUE BY SH. ANIL BHALLA, CA DATE OF HEARING 19.04.2017 DATE OF PRONOUNCEMENT 21.04.2017 2 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 ORDER PER BENCH: ITA NO. 4736 AND 4941/DEL/2012 ARE DIRECTED AGAINST THE ORDER DATED 25.06.2012 IN APPEAL NO. 161/2010-11 WH EREAS ITA NO. 2823 OF 2013 IS AGAINST THE ORDER DATED 27.02.2 013 IN APPEAL NO. 183/DEL/2011-12 PASSED BY THE COMMISSIONER OF I NCOME TAX (APPEALS)-V, NEW DELHI. 2. FACTS GIVING RISE TO ALL THESE APPEALS ARE THAT M/S BHARTI INFRATEL LTD. IS A PASSIVE INFRASTRUCTURE SERVICE P ROVIDER AND ENGAGED IN PROVIDING TELECOM INFRASTRUCTURE SUPPORT SERVICES TO TELECOMMUNICATION COMPANIES PROVIDING MOBILE SERVIC ES. THE SUPPORT SERVICES ARE BEING PROVIDED BY OFFERING PAS SIVE EQUIPMENTS LIKE TOWERS, GREEN SHELTERS, DG SETS, UPS ETC. INST ALLED AT SITES ON NON EXCLUSIVE BASIS. THE COMPANY TAKES ON A LEASE CERTAIN PREMISES FOR THE PURPOSE OF INSTALLATION OF THE PAS SIVE EQUIPMENT FOR PROVIDING INFRASTRUCTURE SUPPORT SERVICES TO VA RIOUS TELECOMMUNICATION COMPANIES LIKE AIRTEL, IDEA, VODA FONE, ETC. AND ENTERS INTO LIVE AND LICENSE AGREEMENT WITH LANDLOR DS FOR A PERIOD RANGING BETWEEN 15 TO 20 YEARS WITH THE STIPULATION THAT THE 3 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 LICENSE FEE INCREASABLE BY 15% AT THE EXPIRY OF EVE RY 5 YEARS. HOWEVER, THE COMPANY HAS BEEN ADOPTING THE ACCOUNT POLICY IN RESPECT OF LEASES AS PRESCRIBED BY THE ACCOUNTING S TANDARD-19 ISSUED BY THE ICAI WHICH SAYS THAT IF THE PAYMENT T ERMS INCLUDE FIXED ESCALATION CLAUSE IN NON-CANCELLABLE LEASE, T HE EFFECT OF SUCH INCREASE IS RECOGNIZED ON A STRAIGHT LINE BASIS. I N VIEW OF THIS THERE WILL BE SOME DIFFERENCE IN THE ACTUAL LEASE AMOUNT THAT IS ACCRUED AND THE AMOUNT DEBITED/CREDITED TO THE P &L A/C DUE TO THE FOLLOWING OF AS-19. THE DIFFERENCE IS CALLED THE L EASE EQUALIZATION AMOUNT AND THE COMPANY HAS BEEN DEBITING OR CREDITI NG THIS DIFFERENCE TO THE LEASE REVENUE EQUALIZATION ACCOUN T, DEPENDING UPON THE FACT WHETHER THE ACTUALLY ACCRUED LEASE AM OUNT IS LESSER OR GREATER THAN THE AMOUNT ARRIVED BY WAY OF STRAIG HT LINE BASIS. 3. FOR AY 2008-09 THE DIFFERENCE BETWEEN THE LEASE ACCRUED AND THE AMOUNT DEBITED TO THE RENT ACCOUNT IN RESPECT O F THE PROPERTY TAKEN ON LEASE WAS RS. 8,60,42,238/- AND THIS AMOUN T WAS FIRST DEBITED TO THE RENT ACCOUNT IN THE PROFIT AND LOSS ACCOUNT AND SUBSEQUENTLY ADDED BACK TO THE COMPUTATION OF INCOM E, SINCE THIS PARTICULAR AMOUNT IS NOT THE RENT THAT WAS ACCRUED, BUT A NOTIONAL 4 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 RENT DEBITED AS PER AS-19. SO FAR AS THIS ADDING B ACK OF THE AMOUNT OF RS. 8,60,42,238/- IS CONCERNED, AO HAS AC CEPTED THE SAME, THOUGH SUCH AMOUNT WAS NOT REALLY ACCRUED. 4. SIMILARLY IN RESPECT OF THE ASSETS GIVEN ON LEAS E, THE LEASE EQUALIZATION AMOUNT THAT WAS CREDITED TO REVENUE WA S RS. 28,59,91,766/- AND SINCE THIS IS ALSO SIMILARLY NOT ACCRUED BUT CREDITED ON NOTIONAL BASIS IN VIEW OF AS-19, THE SA ME WAS REDUCED IN THE COMPUTATION OF INCOME. HOWEVER, THE AO REJE CTED THE SAME AND ADDED THE SAME BACK TO THE INCOME OF THE ASSESS EE. 5. IN RESPECT OF THE SAME YEAR THE ASSESSEE HAD AN INCOME OF RS. 52,15,095/- WHICH DOES NOT FORM PART OF TOTAL INCOM E AND THE AVERAGE INVESTMENT VALUE FOR EARNING SUCH INCOME WA S RS. 15,96,57,16,500/-. THE ASSESSEES CONTENTION IS TH AT FOR EARNING THIS INCOME THEY HAVE INCURRED AN EXPENDITURE OF RS . 5,21,510/- WHICH IS 10% OF THE INCOME. AO REJECTED SUCH ESTIM ATE OF 10% AS THE EXPENDITURE RELATABLE TO EARNING OF THE EXEMPT INCOME AND PROCEEDED TO CALCULATE THE SAME UNDER RULE 8D(2) OF THE RULES AND DISALLOWED THE SUM OF RS. 7,98,28,582/-. 5 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 6. THUS, THE AO MADE AN ADDITION OF RS. 7,93,07,072 /- U/S 14A OF THE ACT AND RS. 28,59,91,766/- WHILE DENYING THE DEDUCTION OF THE LEASE EQUALIZATION CHARGES. 7. AGGRIEVED BY SUCH ADDITIONS THE ASSESSEE CARRIED THE MATTER IN APPEAL AND BY WAY OF AN ORDER DATED 25.06.2012 L D. CIT (A) ALLOWED THE APPEAL IN SO FAR AS THE ADDITION IN RES PECT OF 14A OF THE ACT IS CONCERNED BUT CONFIRMED THE ADDITION IN RESP ECT OF THE LEASE EQUALIZATION CHARGES. 8. CHALLENGING THE DENIAL OF THE REDUCTION OF THE N OTIONAL ENTRY ON ACCOUNT OF LEASE EQUALIZATION INCOME THE ASSESSE E PREFERRED ITA NO. 4941/DEL/2012 AND THE DELETION OF THE ADDITION IN RESPECT OF SECTION 14A THE REVENUE PREFERRED ITA NO. 4736/DEL/ 2012. 9. SIMILARLY IN RESPECT OF THE AY 2009-10 AO MADE A N ADDITION OF RS. 121,66,79,662/- REJECTING THE REDUCTION OF T HE LEASE EQUALIZATION CHARGES AND IN APPEAL LD. CIT (A) DELE TED THE SAME. THEREFORE, THE REVENUE IS IN APPEAL BEFORE US IN IT A NO. 2823/DEL/2013. 6 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 ITA NO. 4941/DEL/2012 & 2823/DEL/2013: 10. ADVERTING TO THE LEASE EQUALIZATION CHARGES, IT IS THE ARGUMENT OF THE LD.AR THAT THE ASSESSEE HAS BEEN FOLLOWING T HE MERCANTILE SYSTEM OF ACCOUNTING AS SUCH THE TAX LIABILITY IS O NLY ON SUCH AMOUNT WHICH IS ACTUALLY ACCRUED TO THE ASSESSEE DU RING THE YEAR BUT BECAUSE OF THE ACCOUNTING POLICY OF THE COMPANY IN RESPECT OF THE LEASE TO FOLLOW AS-19, THE LEASE PAYABLE OR REC EIVABLE HAS TO BE DEBITED OR CREDITED TO THE PROFIT AND LOSS ACCOUNT ON STRAIGHT LINE BASIS. THE DIFFERENCE BETWEEN THE ACCRUED LEASE AN D THE LEASE ARRIVED ON STRAIGHT LINE BASIS IS CALLED LEASE EQUA LIZATION CHARGES. FOR THE INITIAL YEARS LEASE EQUALIZATION CHARGES WI LL BE MORE THAN THE ACTUAL AMOUNT OF LEASE ACCRUED AS SUCH FOR SUCH YEARS LEASE AMOUNT ARRIVED ON STRAIGHT LINE BASIS IS CREDITED T O THE PROFIT AND LOSS ACCOUNT BUT THE LEASE EQUALIZATION CHARGES ARE REDUCED IN THE COMPUTATION OF INCOME. SIMILARLY AS THE YEARS PASS ED ON, AT ONE POINT OF TIME ACTUAL LEASE ACCRUED WILL EXCEED THE LEASE AMOUNT ON STRAIGHT LINE BASIS AS SUCH FROM SUCH POINT OF TIME THE LEASE EQUALIZATION CHARGES WILL BE ADDED TO THE COMPUTATI ON OF INCOME. THIS IS HOW THE DIFFERENCE BETWEEN THE ACTUAL LEASE PAYABLE OR 7 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 RECEIVABLE AND THE LEASE ON STRAIGHT LINE ARE ACCOU NTED FOR. LD. COUNSEL SUBMITS THAT FOR THE AY 2008-09 AO HAS ACCE PTED THE ADDING BACK OF RS. 8,60,42,238/- IN RESPECT OF THE PROPERTY TAKEN ON LEASE BUT HE DENIED THE SIMILAR ADJUSTMENTS IN R ESPECT OF THE PROPERTY GIVEN ON LEASE. HE SUBMITS THAT IN RESPEC T OF THE AY 2009-10 LD. CIT (A) APPRAISED THE MATTER IN A PROPE R PROSPECTIVE AND DELETED THE ADDITIONS MADE ON ACCOUNT OF THE LE ASE EQUALIZATION CHARGES. LD. AR VEHEMENTLY SUPPORTS T HE ORDER OF THE LD. CIT (A) IN RESPECT OF THE AY 2009-10 AND PRAYED TO QUASH THE ORDERS OF THE AUTHORITIES BELOW IN RESPECT OF THE L EASE EQUALIZATION CHARGES FOR THE YEAR 2008-09. PER CONTRA, LD. DR V EHEMENTLY RELIED ON THE ASSESSMENT ORDERS IN RESPECT OF BOTH THE YEARS AND ALSO ON THE ORDER OF THE LD. CIT (A) IN RESPECT OF THE AY 2008-09. HE PRAYED TO DISMISS THE ITA NO. 4941/DEL/2012 AND TO ALLOW ITA NO. 2823/DEL/2013. 11. WE HAVE CAREFULLY GONE THROUGH THE RECORD. LD. AR VIDE PAGE 8 OF THE SYNOPSIS DEMONSTRATED BEFORE US IN A TABUL AR FORM HOW THE LEASE EQUALIZATION CHARGES ARE DEALT WITH. AS COULD BE SEEN FROM THE ORDER OF THE LD. CIT(A) IN RESPECT OF THE AY 2009-10, A 8 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 SIMILAR EXERCISED WAS UNDERTAKEN BEFORE HIM. LD. A R SUBMITTED THAT IN CASE OF A LEASE FOR 15 YEARS ON AN INITIAL RENT OF RS. 1000/- WITH A STIPULATION OF INCREASE OF LEASE AMOUNT AT 2 .5% EVERY YEAR THE RENT WILL BE RS. 1,000/- FOR THE FIRST YEAR, WH EREAS IT IS RS.1,413/- IN THE 15 TH YEAR. TOTAL LEASE AMOUNT RECEIVABLE IN THESE 15 YEARS IS RS. 17,932/-. FOR THE PURPOSE OF ARRIV ING THE STRAIGHT LINE LEASE AMOUNT, THIS RS.17,932/- IS DIVIDED BY 1 5 AND THE RESULT IS 1,195/- FOR EVERY YEAR. THEREFORE, FOR THE FIRS T YEAR ACTUAL LEASE ACCRUED IS RS. 1,000/-, WHEREAS THE AMOUNT THAT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT BY FOLLOWING AS-19 IS RS. 1 ,195/- I.E. WITH THE INCREASE OF RS. 195/- WHICH IS ADDED ON NOTIONA L BASIS. THEREFORE, WHILE COMPUTING THE INCOME THIS NOTIONAL LY ADDED AMOUNT OF RS. 195/- IS REDUCED. SIMILARLY FOR THE 15 TH YEAR THE ACTUAL LEASE AMOUNT ACCRUED WILL BE RS. 1,413/-, WH EREAS LEASE ON STRAIGHT LINE BASIS WILL BE ONLY RS. 1,195/-, WHICH IS LESS BY RS.218/-. THEREFORE, THIS RS. 218/- IS ADDED BACK WHILE COMPUTING THE INCOME. THIS IS THE MECHANISM DEVISE D TO ACCOUNT FOR THE DIFFERENCE THAT ARISES BY FOLLOWING AS-19 W ITH REFERENCE TO THE ACTUAL LEASE AMOUNT THAT IS ACCRUED. THIS IS E XACTLY THAT WAS APPROVED BY THE LD. CIT (A) IN RESPECT OF THE YEAR 2009-10. 9 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 12. IN RESPECT OF THE YEAR 2008-09 ALSO ITS NOT IN DISPUTE THAT IN RESPECT OF THE PROPERTY TAKEN ON LEASE, THE ASSESSE E DEBITED THE STRAIGHT LINE BASIS LEASE AMOUNT TO RENT ACCOUNT IN THE PROFIT AND LOSS ACCOUNT AND BECAUSE SUCH AMOUNT IS LESS THAN T HE ACTUAL AMOUNT THAT WAS RECEIVED BY RS. 8,60,42,238/- THEY ADDED IT BACK IN THE COMPUTATION OF INCOME, AND THE SAME WAS ACCE PTED BY THE AO. HAVING ACCEPTED THIS ADJUSTMENT OF THE LEASE E QUALIZATION CHARGES IN RESPECT OF THE PROPERTY TAKEN ON RENT AN D HAVING ACCEPTED THE PROPOSITION THAT WHEN THE AMOUNT ACTUA LLY ACCRUED EXCEEDS THE AMOUNT THAT WAS DEBITED TO THE RENT ACC OUNT, SUCH EXCEEDED PORTION HAS TO BE ADDED BACK TO THE COMPUT ATION OF INCOME, THE AO SHOULD HAVE REALIZED THAT THE NATURA L COROLLARY FOR THIS IN RESPECT OF THE PROPERTY GIVEN ON LEASE WOUL D BE THAT WHERE THE LEASE EQUALIZATION CHARGES THAT ARE CREDITED TO THE REVENUE ARE GREATER THAN THE ACTUAL RENT ACCRUED, SUCH EXCESS P ORTION SHALL BE REDUCED IN THE COMPUTATION OF INCOME. ACCEPTING TH E LEASE EQUALIZATION CHARGES ADJUSTMENT IN RESPECT OF THE P ROPERTY TAKEN ON RENT AND REJECTING THE SAME IN RESPECT OF THE PR OPERTY GIVEN ON RENT DOES NOT FIT IT INTO ANY LOGIC AND IT IS NOT P ERMISSIBLE FOR THE REVENUE TO FOLLOW THE RULE OF CONVENIENCE I.E. WHER EVER THE AMOUNT 10 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 IS ADDED BACK IT IS ACCEPTED AND WHEREVER THE AMOUN T IS REDUCED IT IS REJECTED. 13. WITH THIS VIEW OF THE MATTER, WE FIND THAT THE APPROACH OF THE LD. CIT (A) TO THIS LEASE EQUALIZATION CHARGES IN R ESPECT OF THE AY 2009-10 IS PERFECTLY LOGICAL AND LEGAL AND WE DO NO T FIND ANY ILLEGALITY OR REGULARITY IN THE REASONS GIVEN BY HI M. WE, THEREFORE, UPHOLD THE FINDINGS OF THE LD. CIT (A) IN RESPECT O F THE AY 2009-10 AND ON THAT VERY ANALOGY WE REJECT THE APPROACH THE AUTHORITIES IN RESPECT OF THESE LEASE EQUALIZATION CHARGES FOR THE AY 2008-09. WE, THEREFORE, FIND THAT ITA NO. 4941/DEL/2012 HAS TO BE ALLOWED AND ITA NO. 2823/DEL/2013 HAS TO BE DISMISSED. ITA NO. 4736/DEL/2012 14. AS STATED ABOVE, THIS APPEAL IS PREFERRED BY TH E REVENUE IN RESPECT OF THE DELETION MADE BY THE CIT IN RESPECT OF THE AMOUNT ADDED BY THE AO BY APPLICATION OF SECTION 14A READ WITH RULE 8D OF THE RULES. ACCORDING TO AO WITH THE AVERAGE INV ESTMENT OF RS. 15,96,57,16,500/- THE ASSESSEE EARNED A SUM OF RS. 52,15,095/- AND THE CONTENTION OF THE ASSESSEE THAT THE EXPENDI TURE INCURRED WAS ONLY AT 10% I.E. 5,21,510/- CANNOT BE ACCEPTED. AO DEALT WITH 11 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 THIS MATTER IN PARAGRAPH NO. 3 AND ACCORDING TO US IT CANNOT BE SAID THAT AO HAS NOT RECORDED ANY REASONS OR SATISF ACTION. VIDE PARAGRAPH NO. 3.6 OF HIS ORDER THE AO RECORDED A SA TISFACTION TO THE FOLLOWS EFFECT: 3.6 I AM ALSO SATISFIED WITHIN THE MEANING OF RUL E 8D(1) OF THE IT RULES THAT THE CLAIM OF THE ASSESSE E COMPANY THAT IT HAD ONLY INCURRED EXPENDITURE OF RS. 5,21,510/- FOR EARNING THE INCOME WHICH DO NOT FORM PART OF THE TOTAL INCOME TO THE TUNE OF RS. 52,15,0 95/- AND HAVING AVERAGE INVESTMENTS VALUE EARNING EXEMPT INCOME TO THE TUNE OF RS. 15,96,57,16,500/- FOR EARNING THE SAME, IS NOT INCORRECT CONSIDERING THE F ACTS AND CIRCUMSTANCES OF THE CASE. 15. THOUGH LD. AR PLACED RELIANCE ON: 1. MAXOPP INVESTMENT LIMITED 347 ITR 272 (DEL); 2. TAIKISHA ENGINEERING INDIA LTD. (2015) 54 TAXMANN.C OM 198 (DEL.); 3. CONTINENTAL CARRIERS 2012-TIOL-467-ITAT-DEL; 4. KALYANI STEELS ITA NO. 1733/PN/2012; 5. PRIYA EXHIBITORS (2012) 27 TAXMAN.COM (DEL.) SINCE WE FIND THAT THERE IS SUFFICIENT RECORDING OF REASONS BY THE AO TO THE EFFECT THAT THE EXPENDITURE OFFERED BY THE A SSESSEE FOR EARNING THE TAX EXEMPT INCOME IS NOT ACCEPTABLE, TH ESE DECISIONS ARE NOT AT ALL HELPFUL TO THE CASE OF THE ASSESSEE. 16. IN THIS MATTER THE TOTAL TAX EXEMPT INCOME OF T HE ASSESSEE IS RS. 52,15,095/- WITH THE AVERAGE INVESTMENT VALUE O F 12 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 RS.15,96,57,16,500/-. WE FIND THAT THE AO HAS RIGH TLY REACHED A CONCLUSION THAT THE EXPENDITURE AT RS. 5,21,510/- O FFERED BY THE ASSESSEE CANNOT BE ACCEPTED. HOWEVER, BY CALCULATI NG THE DISALLOWANCE UNDER RULE 8D(2) THE AO REACHED THE DI SALLOWANCE AT RS. 7,98,28,582/- WHEREAS THE LD. CIT (A) FELT THAT THE ACTION OF THE AO IN INVOKING RULE 8D WAS ARBITRARY IN AS MUCH AS THE PROFIT AND LOSS ACCOUNT SHOWS THE EXPENDITURE OF PERSONNEL AT RS. 1.67 CRORES AND AN ADMINISTRATIVE AND OTHER AT RS. 1.32 CRORES AS SUCH PUT TOGETHER IT COMES 2.99 CRORES. ACCORDING TO TH E LD. CIT (A) WHEN THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE IN RESPECT OF PERSONNEL, ADMINISTRATIVE AND OTHER WAS ONLY RS. 2. 99 CRORES, INVOCATION OF SECTION 14A WAS AGAINST THE SPIRIT OF THE SECTION. 17. ON THIS ASPECT LD. AR ARGUED THAT INVESTMENT TO A TUNE OF RS. 2,017/- CRORES WAS MADE AT THE VAGUE END OF THE FIN ANCIAL YEAR AND OFFERING OF 10% OF THE EARNINGS AS EXPENDITURE IS JUST AND PROPER; WHEREAS LD. DR SUBMITS THAT THEY NEED NOT A LWAYS BE ANY PROPORTION BETWEEN THE EXPENDITURE AND INCOME AND M ANY TIMES IT IS POSSIBLE THAT EXPENDITURE MAY EXCEED THE INCOME DEPENDING THE BUSINESS VICISSITUDES, AS SUCH OFFERING OF EXPENDIT URE AT 10% IS 13 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 WHOLLY BASELESS. HE PRAYED TO UPHOLD THE ORDER OF THE AO ON THIS ASPECT. 18. ON A CAREFUL PERUSAL OF THE MATERIAL, WE ARE OF THE CONSIDERED OPINION THAT INSOFAR AS THE FINDING OF THE AO IS TH AT OFFERING OF 10% EXPENDITURE HAS NO BASIS AND CANNOT BE ACCEPTED, IS CONCERNED IT DOES NOT ADMIT OF ANY INTERFERENCE INASMUCH AS ADMI TTEDLY, NO SEPARATE ACCOUNTS ARE BEING MAINTAINED IN RESPECT O F THE EXPENDITURE INCURRED IN RESPECT OF THE INCOME EXEMP T FROM TAX. THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. HO LCIM INDIA P LTD 272 CTR 282 AND CHEMINVEST LTD VS. CIT (2015) 3 78 ITR 33 (DELHI) HELD THAT WHERE NO EXEMPTED INCOME WAS EARN ED BY THE ASSESSEE IN THE RELEVFGANT ASSESSMENT YEAR NO DISAL LOWANCE COULD BE MADE UNDER SECTION 14A OF THE ACT. FURTHER, AT THE SAME TIME IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN JOINT INVESTMENTS P. LTD. VS. CIT (2015) 372 ITR 694 DISA LLOWANCE OF EXPENDITURE U/S 14A OF THE ACT CANNOT EXCEED THE AM OUNT OF TAX EXEMPT INCOME, AS SUCH DISALLOWANCE OF EXPENDITURE AT RS. 7,98,28,582/- AS AGAINST THE EXEMPT INCOME OF RS. 5 2,15,095/- 14 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 CANNOT BE SUSTAINED. WE, THEREFORE, DIRECT THE AO TO LIMIT THE DISALLOWANCE TO THE TAX EXEMPT INCOME. 19. IN THE RESULT, ITA NO. 4941/DEL/2012 IS ALLOWED AND ITA NO. 2823/DEL/2013 IS DISMISSED AND ITA NO 4736/DEL/2012 IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 21.04.2017 SD/- SD/- (G.D. AGRAWAL) (K. NARSIMHA C HARRY) VICE PRESIDENT JUDICIAL MEMBER DATED: 21.04.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI 15 ITA NOS.4736 & 4941/DEL/2012 & 2823/DEL/2013 DRAFT DICTATED ON 19.04.2017 DRAFT PLACED BEFORE AUTHOR 19.04.2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 21.04.2017 KEPT FOR PRONOUNCEMENT ON 21.04.2017 FILE SENT TO THE BENCH CLERK 21.04.2017 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.