DCIT, New Delhi V. M/s. Airport Authority of India, New Delhi

ITA 4892/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5099 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 06-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 05-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SMT. BEENA A. PILLAI , JM ITA NO. 4892 /DEL/2014 : ASSTT. YEAR : 2010 - 11 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), NEW DELHI VS M/S AIRPORT AUTHORITY OF INDIA, BLOCK - A, RAJIV GANDHI BHAWAN, SAFDARJUNG AIRPORT, NEW DELHI - 110003 (APPELLANT) (RESPONDENT) PAN NO. A AACA6412 ASSESSEE BY : SH. VED JAIN, CA REVENUE BY : SH. ATIQ AHMAD, SR. DR DATE OF HEARING : 07.08 .201 7 DATE OF PRONOUNCEMENT : 08 . 08 .201 7 ORDER PER N. K. SAINI, AM : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 0 2 .06.2014 OF LD. CIT(A) - IV, NEW DELHI. 2. THE ONLY GRIEVANCE OF THE DEPARTME NT IN THIS APPEAL RELATES TO THE DELETION OF DISALLOWANCE MADE BY THE AO U/S 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AMOUNTING TO RS.4,90,88,000/ - . 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE E - FILED ORIGINAL RETURN OF INCOME ON 13.10.2010 BY DECLARING INCOME OF RS.16,28,64,616/ - . THEREAFTER, THE ASSESSEE E - FILED REVISED ITA NO. 4892 /DEL /201 4 AIRPORT AUTHORITY OF INDIA 2 RETURN OF INCOME ON 29.03.2012 DECLARING THE SAME INCOME , THE SAID RETURN WAS PROCESSED U/S 143(1) OF THE ACT. LATER ON, THE CASE WAS SELECTED FOR SCRU TINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD SHOWN DIVIDEND INCOME OF RS.142.50 CRORES WHICH HAD BEEN CLAIMED AS EXEMPT IN THE RETURN OF INCOME. HE ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY DISALLOWANCE U/S 14A O F THE ACT READ WITH RULE 8D INCOME TAX RULES, 1962 MAY NOT BE MADE. THE REPLY OF THE ASSESSEE HAS BEEN INCORPORATED BY THE AO IN PARA 4.2 OF THE ASSESSMENT ORDER DATED 22.03.2013, FOR THE COST OF REPETITION, THE SAME IS NOT REPRODUCED HEREIN. THE AO WAS NO T SATISFIED FROM THE REPLY OF THE ASSESSEE AND MADE THE DISALLOWANCE OF RS.490.88 LACS WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE BY OBSERVING AS UNDER: (4.3) I HAVE GONE THROUGH THE REPLY SUBMITTED BY THE ASSESSEE AND THE CONTENTIONS RAISED BY HIM ON THE ISSUE OF DISALLOWANCE U/S I4A OF THE ACT. I AM NOT SATISFIED WITH THE REPLY OF THE ASSESSEE; THE ASSESSEE HAS INCURRED INDIRECT EXPENSES TO EARN THE DIVIDEND INCOME WHICH ARE NOT ALLOWABLE AS PER THE PROVISIONS OF THE ACT. IN VIEW OF THE REASONS MENTIO NED BELOW, THE REPLY OF THE ASSESSEE IS NOT ACCEPTABLE: I) THE ASSESSEE HAS MADE INVESTMENT IN PURCHASE OF EQUITY FUNDS DURING THE YEAR UNDER CONSIDERATION. FIRST OF ALL, THE ASSESSEE MUST HAVE TAKEN DECISION TO INVEST IN EQUITIES FOR WHICH BOARD RESOLUTI ON IN THIS REGARD WOULD HAVE BEEN PASSED. FURTHER TO MAINTAIN, ITA NO. 4892 /DEL /201 4 AIRPORT AUTHORITY OF INDIA 3 SWITCHING IN AND OUT OF FUNDS OR THEIR REDEMPTION, DECISION AND NECESSARY FORMALITIES WOULD BE REQUIRED. FOR ALL THESE ACTIVITIES, THE ASSESSEE MUST HAVE USED RESOURCES ENTAILING SOME EXPENDITU RE. THEREFORE, IT IS NOT ACCEPTABLE THAT NO EXPENSES ON EARNING EXEMPT INCOME HAVE BEEN INCURRED BY THE ASSESSEE. THEREFORE, I AM SATISFIED THAT ASSESSEE HAS INCURRED EXPENSES IN EARNING EXEMPT INCOME WHICH NEEDS TO BE DISALLOWED U/S 14A R.W RULE 8D. II) THAT THE PROVISIONS OF SECTION 1 4A(1) ARE SUBSTANTIVE IN NATURE. AS PER THE PROVISIONS, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THE ACT. III) THA T THE PROVISIONS OF SUB SECTIONS (2) & (3) OF SECTION 14A ARE PROCEDURAL IN NATURE WHICH PROVIDE FOR COMPUTATION OF DISALLOWANCE. THESE PROVISIONS SEEK TO ACHIEVE THE OBJECTIVES OF SUBSTANTIVE PROVISION CONTAINED IN SUB SECTION (1) OF SECTION 14A. IV) THA T THE VARIOUS COURTS HAVE HELD THAT THE EXPENSES CONNECTED WITH THE EXEMPT INCOME HAVE TO BE DISALLOWED IRRESPECTIVE OF THE FACT THAT THEY ARE DIRECT OR INDIRECT, FIXED OR VARIABLE, MANAGERIAL OR FINANCIAL, IN ACCORDANCE WITH THE PROVISIONS OF THE LAW. HON 'BLE HIGH COURT OF MUMBAI IN THE CASE OF GODREJ AND BOYCE MANUFACTURING COMPANY LIMITED VS. DEPUTY COMMISSIONER OF INCOME TAX AND ANOTHER (234 CTR 1) CONCLUDED THAT: THE PROVISIONS OF SUB - SS. (2) AND (3) OF S. 14A OF THE I.T. ACT, 1961 ARE CONSTITUTIONALL Y VALID; ITA NO. 4892 /DEL /201 4 AIRPORT AUTHORITY OF INDIA 4 THE PROVISIONS OF RULE 8D OF THE I.T. RULES AS INSERTED BY THE I.T (FIFTH AMENDMENT) RULES, 2008 ARE NOT ULTRA VIRES THE PROVISIONS OF SECTION 14A, MORE PARTICULARLY SUB SECTION (2), AND DO NOT OFFEND ART. 14 OF THE CONSTITUTION; THE PROVISION S OF RULE 8D OF THE I.T. RULES WHICH HAVE BEEN NOTIFIED W.E.F. 24 TH MARCH, 2008 SHALL APPLY WITH EFFECT FROM A.Y. 2008 - 09. I) IN THE LIGHT OF ABOVE MENTIONED FACTS AND DISCUSSION, IT IS HELD THAT EXPENSES RELATED TO EXEMPT INCOME ARE TO BE DISALLOWED U/S 14A IN ACCORDANCE WITH RULE 8D OF THE I.T. RULES. THE TOTAL DISALLOWANCE U/S 14A IN ACCORDANCE WITH RULE 8D OF THE I.T. RULES IS WORKED OUT AS UNDER: - CALCULATION OF DISALLOWANCE UNDER RULE 8D I. THE AMOUNT OF EXPENDITURE INCURRED DURING THE YEAR DIRECTLY RELATING TO EXEMPT INCOME - NIL II. THE INTEREST ON BORROWINGS MADE FOR INVESTMENT IN EQUITY FUNDS - 46.98 LAC III. 0.5% OF AVERAGE VALUE OF INVESTMENT INCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOME ON THE FIRST & LAST DAY OF THE PREVIOUS YEAR - A PPLICABLE ACCORDINGLY, THE DISALLOWANCE UPTO 0.5% OF THE AVERAGE OF THE VALUE OF INVESTMENTS U/S 14A READ WITH RULE 8D IS CALCULATED AS UNDER: AVERAGE INVESTMENT 92152.40+85409.47 = 88,780.94 2 AVERAGE TOTAL ASSETS 1628377.81+1367041. 68 = 1,497,709.75 ITA NO. 4892 /DEL /201 4 AIRPORT AUTHORITY OF INDIA 5 AMOUNT OF INTEREST 792.52 DISALLOWANCE DIRECT EXPENSES NIL OUT OF INTERES T 792.52 X 88780.93 1497712.24 46. 9 8 0.5% OF AVERAGE INVESTMENT DISALLOWANCE U/S RULE 8D 443.90 490.88 LAC ACCORDINGLY, AN AMOUNT OF RS.490.88 LAC IS HEREBY DISALLOWED IN VIEW OF THE PROVISION OF SECTION 14A OF THE IT ACT, 1961 AND IS ADDED BACK TO THE INCOME OF THE ASSESSEE. 4 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT (A) AND SUBMITTED THAT THE AO MISAPPLIED THE PROVISIONS OF SECTION 14A OF THE ACT WHILE COMPUTING THE DISALLOWANCE AS PER RULE 8D OF THE INCOME TAX RULES, 1962. IT WAS FURTHER STATED THAT THE INVESTMENT MADE BY THE ASSESSEE IN VARIOUS COMPANIES/ENTITIES WA S FULFILLING ITS BUSINESS OBJECTIVES, IN WHICH THE PROVISIONS OF SECTION 14A OF THE ACT WERE NOT APPLICABLE. IT WAS ALSO STATED THAT THE AO HAD INCORRECTLY OBSERVED THAT THE ASSESSEE RECEIVED DIVIDEND (EXEMPT INCOME) OF RS.142.50 CRORES WHEREAS THE ASSESSE E WAS NOT IN RECEIPT OF ANY EXEMPT INCOME DURING THE CURRENT ASSESSMENT YEAR. ITA NO. 4892 /DEL /201 4 AIRPORT AUTHORITY OF INDIA 6 5 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE DISALLOWANCE BY OBSERVING IN PARAS 5.2 TO 5.3.3 OF THE IMPUGNED ORDER AS UNDER: 5.2 I HAVE CAREF ULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND PERUSED THE ORDER PASSED BY THE AO. THE ASSESSING OFFICER HAS MADE A DISALLOWANCE OF RS.4,90,88,000/ - UNDER SECTION 14A OF THE ACT BY INVOKING RULE 8D TO THE APPELLANT'S INVESTMENT AS PER ANNEXURE - G OF IT S AUDITED BALANCE SHEET FOR THE FINANCIAL YEAR 2010 - 11. THE FACTS IN BRIEF ON THE ISSUE ARE THAT THE APPELLANT HAD MADE AN INVESTMENT OF RS.92,152.40 LACS IN CERTAIN ENTITIES AS PER ANNEXURE - G OF ITS ANNUAL REPORT FOR THE FINANCIAL YEAR 2010 - 11 EXTRACTED HERE UNDER FOR READY REFERENCE: - S/N PARTICULARS AMOUNT IN LAKHS A. TRADE INVESTMENTS (UNQUOTED) IN JOINT VENTURE COMPANIES OF EQUITY CONTRIBUTION IN SHARE CAPITAL OF HYDERABAD INTERNATIONAL AIRPORT LTD. (HIAL) 4,914.00 EQUITY CONTRIBUTION IN SH ARE CAPITAL OF BANGALORE INTERNATIONAL AIRPORT LTD. (BIAL) 4,999.80 DELHI INTERNATIONAL AIRPORT PVT. LTD. 63,700.00 MUMBAI INTERNATIONAL AIRPORT PVT. LTD. 15,600.00 NATIONAL FLYING INSTITUTE. (GONDIA) 2,097.79 MIHAN INDIA PVT. LTD. 490.00 SUB TO TAL 91,801,59 B. NON TRADE INVESTMENT - OTHER (UNQUOTED)(INVESTMENT DEPOSIT SCHEME )(AS PER THE INCOME TAX ACT, 1961) 350.81 TOTAL 92,152.40 5.2.1 THE APPELLANT HAS SUBMITTED BEFORE ME IN ITS WRITTEN AND ORAL SUBMISSIONS THAT THE PROVISIONS OF SECTI ON 14A ARE NOT APPLICABLE IN THE PRESENT CASE ITA NO. 4892 /DEL /201 4 AIRPORT AUTHORITY OF INDIA 7 AND THAT THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 14A IS NOT SUSTAINABLE. IT HAS SUBMITTED BEFORE ME THAT OUT OF THE TOTAL TRADE INVESTMENTS OF RS. 918.02 CRORES A SUM OF RS. 897.04 CRORES WAS T HE AMOUNT OF EQUITY CONTRIBUTION / SHARE APPLICATION OF THE APPELLANT COMPANY IN JOINT VENTURE COMPANIES (WHICH WERE SPECIAL PURPOSE VEHICLES) FOR RUNNING OF VARIOUS AIRPORTS AT HYDERABAD, BANGALORE, DELHI, NAGPUR AND MUMBAI. A SUM OF RS. 20.97 CRORES HAD BEEN INVESTED IN NATIONAL FLYING INSTITUTE, GONDIA WHICH WAS ENGAGED IN TRAINING OF PILOTS. 5.2.2 THE APPELLANT HAD SUBMITTED BEFORE ME AT THE OUTSET THAT THE ASSESSING OFFICER HAS MADE AN INCORRECT OBSERVATION THAT THE APPELLANT WAS IN RECEIPT OF EXEMPT DIVIDEND OF 142.50 CRORES WHEREAS IT WAS NOT IN RECEIPT OF ANY EXEMPT DIVIDEND DURING THE YEAR UNDER APPEAL. THE APPELLANT HAS ALSO SUBMITTED BEFORE ME THAT IT WAS IN RECEIPT OF RS. 940.97 CRORES FROM VARIOUS JOINT VENTURE COMPANIES AS ITS SHARE OF BUSINES S INCOME AND THAT THE INVESTMENT MADE IN JOINT VENTURE COMPANIES WAS A BUSINESS DECISION. IT HAS ALSO SUBMITTED THAT THE INVESTMENT HAD BEEN MADE IN ACCORDANCE WITH THE POLICY LAID DOWN BY THE CIVIL AVIATION MINISTRY ON THE ISSUE IN FULFILLMENT OF ITS OBJE CTIVES AND THAT THERE WAS NO QUESTION OF INVOKING PROVISION OF SECTION 14A TO THE FACTS OF THE CASE. 5.2.3 THE LEARNED AR HAS POINTED OUT BEFORE ME THAT A SUM OF RS. 350.81 LACS REFLECTED AS NON - TRADE INVESTMENT IN SCHEDULE G OF ITS AUDITED BALANCE SHEET WAS THE AMOUNT DEPOSITED UNDER THE INVESTMENT DEPOSIT SCHEME FORMULATED BY THE INCOME TAX DEPARTMENT FOR CLAIMING DEDUCTION OF INVESTMENT ITA NO. 4892 /DEL /201 4 AIRPORT AUTHORITY OF INDIA 8 ALLOWANCE IN EARLIER YEARS. THE APPELLANT HAS SUBMITTED THAT THE INVESTMENT OF 350.81 LACS YIELDED TAXABLE INTEREST IN COME OF RS. 12.28 LACS WHICH HAD BEEN INCLUDED IN ITS INCOME. THE BASIC CONTENTION OF THE APPELLANT IN ITS WRITTEN AND ORAL SUBMISSION HAS BEEN THAT THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE AS THE APPELLANT IS NOT IN RECEIPT OF ANY EXEMPT INCOME AN D INVESTMENTS WERE MADE IN FURTHERANCE OF ITS BUSINESS INTEREST. 5.2.4 THE ASSESSING OFFICER HAS GIVEN HIS FINDINGS IN PARA 4.3 OF THE ASSESSMENT ORDER ON THE ISSUE. THE BASIC THRUST OF THE ASSESSING OFFICER WHILE INVOKING SECTION 14A OF THE ACT IS TO STA TE THAT THE INVESTMENT MADE BY THE ASSESSEE IN EQUITY FUNDS DURING THE YEAR UNDER CONSIDERATION IS SQUARELY COVERED AS THE INVESTMENT WAS CAPABLE OF GENERATING EXEMPT INCOME. 5.2.5 THE ASSESSING OFFICER HAS FURTHER HELD THAT THE ASSESSEE WHILE TAKING THE D ECISION FOR INVESTMENT IN EQUITIES MUST HAVE SWITCHED IN AND SWITCHED OUT FUNDS WHICH REQUIRES SPENDING OF TIME AND RESOURCES EQUIVALENT TO EXPENDITURE. THE CONTENTION OF THE ASSESSING OFFICER IS THAT THE PLEA OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN I NCURRED BY IT FOR MAKING INVESTMENT IS NOT ACCEPTABLE TO HIM. 5.2.6 THE LEARNED AR HAS POINTED OUT BEFORE ME THAT AS IS EVIDENT FROM ANNEXURE G WHICH LISTS THE INVESTMENT MADE BY THE APPELLANT, ONLY A SUM OF RS. 67.42 CRORES HAS BEEN INVESTED DURING THE Y EAR. THE LD. AR FURTHER SUBMITTED THAT THE TRADE INVESTMENTS WERE MADE IN JOINT VENTURE COMPANIES IN ACCORDANCE WITH THE SCHEME FORMULATED BY GOVERNMENT OF INDIA FOR RUNNING OF VARIOUS AIRPORTS AND THE APPELLANT HAD NO OCCASION TO SWITCH IN AND SWITCH OUT ITS FUNDS WITH ITA NO. 4892 /DEL /201 4 AIRPORT AUTHORITY OF INDIA 9 RESPECT TO INVESTMENT IN SHARES OF JOINT VENTURE COMPANIES AS ASSUMED BY THE ASSESSING OFFICER. THE LD. AR POINTED OUT BEFORE ME THAT THE JOINT VENTURE COMPANIES WERE SPECIAL PURPOSE VEHICLES INCORPORATED WITH THE SOLE INTENTION OF RUNNING A ND MAINTAINING AIRPORTS AT NEW DELHI, BOMBAY, HYDERABAD, BANGALORE, NAGPUR. 5.2.7 THE LEARNED AR SUBMITTED THAT THE CONTENTION OF THE ASSESSING OFFICER IS NOT TENABLE AS THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE AS THE INVESTMENT IN JOINT VENTURE C OMPANIES WAS NOT MADE WITH THE INTENTION TO EARN EXEMPT INCOME NOR THE APPELLANT HAD INCURRED ANY EXPENDITURE FOR MAKING INVESTMENT IN JOINT VENTURE COMPANIES. THE BASIC INTENTION TO MAKE INVESTMENT WAS TO EXPAND ITS BUSINESS. THE APPELLANT ALSO SUBMITTED THAT IT HAD NOT MADE INVESTMENT IN SHARES OF JOINT VENTURE COMPANIES (WHICH WERE SPECIAL PURPOSE VEHICLES AND WERE INCORPORATED TO TAKE OVER THE RUNNING AND MAINTENANCE OF VARIOUS AIRPORTS) TO EARN DIVIDEND BUT THE INVESTMENT WAS MADE TO EARN TAXABLE BUSIN ESS INCOME. 5.3 I FIND THAT THE SUBMISSION OF THE APPELLANT THAT IT WAS NOT IN RECEIPT OF ANY EXEMPT DIVIDEND OF RS. 142.5 CRORES AS MENTIONED BY THE ASSESSING OFFICER IN HIS ORDER IS CORRECT. THE APPELLANT HAS CITED BEFORE ME A NUMBER OF JUDGMENTS INCLUD ING THE JUDGMENT OF JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENTAL STRUCTURAL ITA 605/2012 WHEREIN THE DELHI HIAH COURT HELD THAT THE PROVISIONS OF SECTION 14A WERE NOT APPLICABLE IN A CASE WHERE INVESTMENT IS MADE BY A COMPANY IN A SPECIA L PURPOSE VEHICLE TO UNDERTAKE THE DEFINED BUSINESS ACTIVITY. THE APPELLANT HAD INVESTED IN JOINT VENTURE COMPANIES WHICH WERE SPECIAL PURPOSE VEHICLES TO RUN THE VARIOUS AIRPORTS USING THE INFRASTRUCTURE OWNED BY THE AIRPORTS AUTHORITY OF INDIA. ITA NO. 4892 /DEL /201 4 AIRPORT AUTHORITY OF INDIA 10 THE INVES TMENT IN THE SPECIAL PURPOSE VEHICLES (JOINT VENTURE COMPANIES) HAD BEEN MADE BY THE APPELLANT IN TERMS OF OPERATION MANAGEMENT DEVELOPMENT AGREEMENTS (OMDA) WHICH WAS A COMMERCIAL ARRANGEMENT AND WAS TO EARN BUSINESS INCOME. 5.3.1 IT HAS BEEN POINTED OUT TO ME BY THE LD. AR THAT THE APPELLANT WAS IN RECEIPT OF TAXABLE BUSINESS INCOME OF RS.940.97 CRORES AS ITS SHARE OF INCOME FROM THE JOINT VENTURE COMPANIES. THE APPELLANT HAS PLACED RELIANCE ON A DECISION OF DELHI HIGH COURT IN THE CASE OF TULIP HOTELS P VT. LTD 338 ITR 482 TO STATE THAT SECTION 14A IS NOT APPLICABLE TO INVESTMENT MADE PURSUANT TO A BUSINESS DECISION AND THAT ITS INVESTMENT OF RS. 91,801.59 LACS WAS INCIDENTAL TO ITS BUSINESS WHICH SHOULD NOT BE SUBJECT TO DISALLOWANCE UNDER SECTION 14A OF THE ACT. 5.3.2 I FIND FORCE IN THE CONTENTION OF THE APPELLANT THAT ITS INVESTMENT IN JOINT VENTURE COMPANIES AND NATIONAL AIRPORTS INSTITUTE WAS IN FURTHERANCE OF ITS BUSINESS OBJECTIVES AND THE INVESTMENT WAS MADE IN JOINT VENTURE COMPANIES (SPECIAL PU RPOSE VEHICLES SPECIFICALLY INCORPORATED FOR EACH AIRPORT SEPARATELY) AS A BUSINESS DECISION WHICH DID NOT ATTRACT THE PROVISIONS OF SECTION 14A OF THE ACT. 5.3.3 THE CONTENTION OF THE APPELLANT THAT THE INVESTMENT MADE BY IT IN JOINT VENTURE COMPANIES WA S NOT TO EARN EXEMPT DIVIDEND INCOME BUT WAS WITH A BUSINESS OBJECTIVE IS BORNE OUT FROM THE FACTS ON RECORD. THE CONTENTION OF THE APPELLANT THAT SECTION 14A WAS NOT APPLICABLE TO INVESTMENT MADE BY IT IN THE JOINT VENTURE COMPANIES AS THESE WERE FLOATED SPECIFICALLY TO RUN AND OPERATE AIRPORTS AT DELHI, MUMBAI, BANGALORE, HYDERABAD, NAGPUR ETC AND THE APPELLANT HAD ENTERED INTO OPERATION MANAGEMENT DEVELOPMENT AGREEMENT ITA NO. 4892 /DEL /201 4 AIRPORT AUTHORITY OF INDIA 11 (OMDA) WITH THESE JOINT VENTURE COMPANIES FROM WHICH IT WAS IN RECEIPT OF SUBSTANTIAL BUSINESS INCOME HAS MERIT. THEREFORE, NO DISALLOWANCE UNDER SECTION 14A IS CALLED FOR AND I DELETE THE ADDITION OF RS.4.90 CRORES MADE BY THE ASSESSING OFFICER. 6 . NOW THE DEPARTMENT IS IN APPEAL. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO AND RE ITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER DATED 22.03.2013. 7 . IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE FIGURE OF RS.142.50 CRORES ME NTIONED BY THE AO IN THE ASSESSMENT ORDER WAS NOT THE DIVIDEND RECEIVED BY THE ASSESSEE RATHER IT WAS THE FIGURE OF DIVIDEND PROPOSED . A REFERENCE WAS MADE TO PAGE NOS. 27 OF THE ASSESSEE S PAPER BOOK. IT WAS STATED THAT THERE WAS NO EXEMPT INCOME EARNED B Y THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THEREFORE, THE DISALLOWANCE MADE BY THE AO WAS NOT JUSTIFIED AND THE LD. CIT(A) RIGHTLY DELETED THE SAME . THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS HOLCIM INDIA (P.) LTD. (2014) 272 CTR 2 82 (DEL.) CHEMINVEST LTD. VS CIT (2015) 378 ITR 33 (DEL.) RAPID ESTATES PVT. LTD. VS DCIT IN ITA NO. 4137/DEL/2013 DATED 30.05.2016 SH. SURESH VERMA VS ACIT IN ITA NO. 1152/DEL/2013 DATED 14.06.2016 ITA NO. 4892 /DEL /201 4 AIRPORT AUTHORITY OF INDIA 12 KORTEK ELECTRONICS (INDIA) LTD. VS ADDL. CIT IN ITA NO. 1 886/DEL/2013 DATED 18.05.2016 KLJ TOWN PLANNERS (P) LTD. VS ACIT, CC - 04, NEW DELHI (2016) (2) TMI 789 ITA DEL. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE , IT IS NOTICED THAT THE AO WRONGLY MENTIONED THE FIGURE OF RS.142.50 CRORES AS DIVIDEND RECEIVED BY THE ASSESSEE , THE SAID AMOUNT RELATED TO THE PROPOSED DIVIDEND BY THE ASSESSEE AND NOT THE DIVIDEND RECEIVED WHICH IS EVIDENT FROM PAGE NO. 27 OF TH E ASSESSEE S PAPER BOOK I.E. THE COPY OF PROFIT AND LOSS APPROPRIATION ACCOUNT FOR THE YEAR ENDED 31.03.2010 WHICH REVEALED THAT PROPOSED DIVIDEND WAS RS.142.50 CRORES. THE LD. CIT(A) ALSO IN PARA 5.3 OF THE IMPUGNED ORDER CATEGORICALLY STATED THAT THE ASS ESSEE WAS NOT IN RECEIPT OF ANY EXEMPT DIVIDEND OF RS.142.50 CRORES AS MENTIONED BY THE AO IN HIS ORDER. 9. ON A SIMILAR ISSUE THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS CIT (2015) 378 ITR 33 (SUPRA) HELD AS UNDER: THE EXPRES SION 'DOES NOT FORM PART OF THE TOTAL INCOME' IN SECTION 14A OF THE INCOME - TAX ACT, 1961, ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PRE VIOUS YEAR FOR THE PURPOSE OF ITA NO. 4892 /DEL /201 4 AIRPORT AUTHORITY OF INDIA 13 DISALLO WING ANY EXPENDITURE INCURRED IN RELATION TO THE INCOME. IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. IT HAS FURTHER BEEN HELD AS UNDER: THAT NO EXEMPTED INCOME WAS EARNED BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR AND SINCE THE GENUINENESS OF THE EXPENDITURE INCURRED BY THE ASSESSEE WAS NOT IN DOUBT, NO DISALLOWANCE COULD BE MADE UNDER SECTION 14A. 10. IN THE PRESENT CASE ALSO THERE WAS NO EXEMPTED INCOME EARNED BY TH E ASSESSEE. AS SUCH THE DISALLOWANCE MADE BY THE AO WAS RIGHTLY DELETED BY THE LD. CIT(A). WE, THEREFORE, DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 11 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED . ( ORDER PRON OUNCED IN THE COURT ON 08 /0 8 /2017 ) SD/ - SD/ - (BEENA A. PILLAI ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DAT ED: 08 /08 /2017 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR