INDICA INDUSTRIES PVT. LTD., NEW DELHI V. ITO, WARD- 12(2), NEW DELHI

ITA 4831/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4169 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 28-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: INDU SAINI
• Keywords: Earning of tax free income; Tax effect; Rule 8D
• Section: 14A; 80IC; 80IC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI C BEN CH, NEW DELHI [THROUGH VIDEO CONFERENCE] BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO. 4831/DEL/2017 [A.Y 2013-14] M/S INDICA INDUSTRIES PVT. LTD., VS. THE I NCOME TAX OFFICER A-4, GREATER KAILASH, WARD-12(2), PART-I, NEW DELHI. NEW DELHI. PAN: AAACI 0233 Q ITA NO. 4543/DEL/2017 [A.Y 2013-14] THE INCOME TAX OFFICER VS. M/S INDICA INDUSTR IES PVT. LTD., WARD-12(2), A-4, GREATER KAILASH, PART-I, NEW DELHI. NEW DELHI. PAN: AAACI 0233 Q [APPELLANT] [RESPONDENT] ASSESSEE BY : SHRI KAPIL GOEL, ADV REVENUE BY : MS. INDU SAINI, SR. DR DATE OF HEARING : 28.10.2020 DATE OF PRONOUNCEMENT : 29 .10.2020 2 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THE ABOVE CROSS APPEALS BY THE ASSESSEE AND THE REV ENUE ARE PREFERRED AGAINST THE ORDER OF THE CIT(A)-4, NEW DE LHI DATED 01.05.2017 PERTAINING TO A.Y 2013-14. BOTH THESE AP PEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THE BY THIS COMMON ORDER FOR THE SAKE OF BREVITY AND CONVENIENCE. ITA NO. 4543/DEL/2017 [REVENUES APPEAL] 2. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT TH E CIT(A) ERRED IN ALLOWING CLAIM OF DEDUCTION AMOUNTING TO RS. 1,33,1 3,642/- U/S 80IC OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO A S 'THE ACT' FOR SHORT]. 3. A BARE PERUSAL OF THE GROUNDS SHOW THAT THIS APP EAL OF THE REVENUE IS HIT BY THE CBDT CIRCULAR NO. 17/2019 DAT ED 08.08.2019 BY WHICH THE BOARD HAS DIRECTED THE REVENUE NOT TO PRE FER APPEALS BEFORE THIS TRIBUNAL IF THE TAX EFFECT IS LESS THAN RS. 50 LAKHS. IN LIGHT OF THE ABOVE, THIS APPEAL OF THE REVENUE IS DISMISSED. 3 ITA NO. 4831/DEL/2017 [ASSESSEES APPEAL] 4. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT T HE CIT(A) ERRED IN COMPUTING DISALLOWANCE OF RS. 36,98,984/- MADE U/S 14A OF THE ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHOR T] READ WITH RULE 8D OF THE ITAT RULES, 1962 BY THE AO. 5. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT D URING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFI CER NOTICED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.1,07,46,8 24/- WHICH IT CLAIMED AS EXEMPT. THE ASSESSEE WAS ASKED TO FURNIS H WHY THE EXPENSES RELEVANT TO EARNED DIVIDEND INCOME SHOULD NOT BE DISALLOWED U/S 14A OF THE ACT. THE ASSESSEE WAS ALSO ASKED TO FURNISH WORKING OF DISALLOWANCE IN VIEW OF RULE 8D OF THE RULES. 6. IN ITS REPLY, THE ASSESSEE STATED THAT IT HAS SU O MOTO DISALLOWED RS. 9,37,465/- WHICH INCLUDES MANAGEMENT FEES, CUST ODY FEES, AUDIT FEES, PORTFOLIO MANAGEMENT FEES AND OTHER EXPENSES. 4 7. THE REPLY OF THE ASSESSEE DID NOT FIND ANY FAVOU R WITH THE ASSESSING OFFICER WHO MECHANICALLY PROCEEDED TO COM PUTE THE DISALLOWANCE U/S 14A OF THE ACT AND COMPUTED TOTAL DISALLOWANCE AT RS. 39,41,031/-. 8. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) BUT WITHOUT ANY SUCCESS. 9. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT NOWHERE THE ASSESSING OFFICER HAS RECORDED ANY SATI SFACTION FOR MAKING THE IMPUGNED DISALLOWANCE. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESSEE THAT ON IDENTICAL SET OF FACTS, THE TRIBUN AL IN THE IMMEDIATELY PRECEDING A.Y 2012-13 DELETED THE DISALLOWANCE. 10. PER CONTRA, THE LD.DR STRONGLY SUPPORTED THE FI NDINGS OF THE ASSESSING OFFICER. 11. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. IT IS TRUE THAT THE ASSESSING OF FICER HAS NOWHERE RECORDED ANY SATISFACTION IN RESPECT OF THE BOOKS O F ACCOUNTS OF THE ASSESSEE QUA THE EXEMPT INCOME. WE FIND FORCE IN TH E CONTENTIONS OF 5 THE LEARNED AR. ON IDENTICAL SET OF FACTS, THE TRIB UNAL IN ASSESSEES OWN CASE IN ITA NO 1764/DEL/2016 FOR A.Y 2012-13 HA S CONSIDERED A SIMILAR DISALLOWANCE AND HELD AS UNDER: 8. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE RE LEVANT MATERIAL ON RECORD. IT IS FOUND AS AN ADMITTED POSI TION THAT THE ASSESSEE'S INVESTMENTS WERE HANDLED BY PORTFOLI O MANAGERS TO WHOM ONLY A PARTICULAR SUM WAS PAID AS FEES, WHICH ALONG WITH OTHER DIRECT EXPENSES, COMES TO RS.2,42,047/-, BEING THE AMOUNT VOLUNTARILY DISALLO WED BY THE ASSESSEE. 9. SUB-SECTION (2) OF SECTION 14A CLEARLY STIPULATES THAT THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME A S PER RULE 8D IF HE, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE. THE CRUCIAL QUESTION WHICH LO OMS LARGE BEFORE US IS WHETHER THE ASSESSING OFFICER RE CORDED PROPER SATISFACTION BEFORE VENTURING TO MAKE DISALL OWANCE AS PER RULE 8D. IT CAN BE SEEN FROM THE ASSESSMENT ORDER ITSELF THAT THE ASSESSING OFFICER HAS NOWHERE RECOR DED ANY SATISFACTION ABOUT THE INCORRECT CLAIM HAVING BEEN LODGED 6 BY THE ASSESSEE WITH REFERENCE TO ITS ACCOUNTS. TH ERE IS NO DISCUSSION WHATSOEVER ABOUT THE EXAMINATION OF THE ASSESSEE'S CLAIM ABOUT THE ACTUAL INCURRING OF EXPE NSES IN RELATION TO THE EXEMPT INCOME. IT CAN BE SEEN FROM THE IMPUGNED ORDER THAT THE ASSESSING OFFICER EVEN DID NOT CONSIDER THE CORRECT AMOUNT OFFERED BY THE ASSESSEE FOR DISALLOWANCE AT RS.6.46 LAC. IN VIEW OF THE FACT TH AT NO PROPER SATISFACTION WAS RECORDED, IN OUR CONSIDERED OPINION, THE ASSESSING OFFICER DID NOT ACQUIRE ANY VALID JUR ISDICTION FOR COMPUTING DISALLOWANCE U/S 14A. SINCE THE LD. C IT(A) HAS SUSTAINED THE AMOUNT DISALLOWABLE U/S 14A AT RS.6,42,120/-, BEING THE AMOUNT VOLUNTARILY OFFERED BY THE ASSESSEE, WE UPHOLD THE IMPUGNED ORDER TO PRO TANTO . 12. ON FINDING PARITY IN THE FACTS OF THE CASE, RE SPECTFULLY FOLLOWING THE FINDINGS OF THE COORDINATE BENCH, WE DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS. 36,98,984/-. 7 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 4831/DEL/2017 IS ALLOWED WHEREAS THE APPEAL OF THE REVENUE IN ITA NO. 4543/DEL/2017 IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29.10 .2020. SD/- SD/- [ SUCHITRA KAMBLE ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29 TH OCTOBER, 2020 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 8 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 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 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS .10.2020 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT .10.2020 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .10.2020 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER