DCIT, New Delhi V. M/s. DCM Shriram Consolidated Ltd., New Delhi

ITA 5000/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2819 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 07-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 12-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHI
• Keywords: Earning of tax free income; Question of law
• Section: 14A

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH B, NEW DELHI BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 5000/DEL./2014 ASSESSMENT YEAR: 2010-11 DCIT, CIRCLE 10(1), NEW DELHI. (APPELLANT) VS. DCM SHRIRAM CONSOLIDATED LTD., 5 TH FLOOR, KANCHENJUNGA BUILDING, NEW DELHI (PAN- AAACD0097R) (RESPONDENT) A PPELLANT BY SMT. PARAMITA TRIPATHI, CIT/DR RESPONDENT BY SH. PRADEEP DINODIA & SH. V.P. GUPTA, ADVOCATES. ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)- XIII, NEW DELHI DATED 10.06.2014 FOR THE ASSESSMENT YEAR 2010-11 ON THE GROUND THAT THE LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS.1,33,27,000/- MADE BY THE AO ON ACCOUNT OF DISAL LOWANCE U/S. 14A READ WITH RULE 8D(2)(II) OF I.T. RULES IN RESPECT OF INT EREST. 2. THE ASSESSEE FILED RETURN OF INCOME ON 30.09.201 0, WHICH WAS SUBSEQUENTLY REVISED ON 29.09.2011. THE CASE WAS SE LECTED FOR SCRUTINY UNDER DATE OF HEARING 30.01.2018 DATE OF PRONOUNCEMENT 16 .03.2018 ITA NO. 5000/DEL./2014 2 THE CASS AND STATUTORY NOTICES WERE ISSUED TO THE A SSESSEE. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE HAS SHOWN TAX FREE DIVIDEND INCOME OF RS.1,80,70,884/- ON LONG-TE RM INVESTMENT AND HAS CLAIMED EXEMPTION U/S. 10(34) OF THE IT ACT. THE AS SESSING OFFICER ISSUED SHOW CAUSE NOTICE AS TO HOW THE DISALLOWANCE U/R. 8 D BE NOT MADE. IN REPLY, THE ASSESSEE VIDE ITS LETTER DATED 11.02.2013 HAS S TATED THAT THERE WAS NO EXPENDITURE INCURRED BY IT IN RESPECT OF INTEREST W HICH IS RELATABLE TO INVESTMENT ON WHICH EXEMPT INCOME HAS BEEN EARNED. DURING THIS YEAR, THE ASSESSEE HAD MADE INVESTMENT ONLY OF RS.4.16 CRORES AND TOWARDS ADMINISTRATIVE EXPENSES, HE SUO MOTO MADE DISALLOWA NCE OF RS.8,89,292/- WHICH REPRESENTS SALARY OF TWO OF ITS EMPLOYEES WHO HAVE BEEN ASSIGNED THE JOB OF ATTENDING THE ACTIVITIES IN RESPECT OF MAKIN G INVESTMENT, WHICH WERE DIFFERENT FROM OTHER ACTIVITIES THEY WERE REGULARLY DOING. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND RELYING ON SOME CASE LAWS MADE FRESH CALCULATION FOR DISALLOWANCE U/S. 1 4A AS PER RULE 8D(2)(II) OF RS.1,33,27,000/- AND 8D(2)(III) OF RS.28,62,000/-. THE TOTAL DISALLOWANCE CALCULATED BY THE ASSESSING OFFICER WAS RS.1,70,78, 290/- AND THE ASSESSEE HAD HIMSELF DISALLOWED A SUM OF RS.8,89,290/-. THEREFOR E, THE ASSESSING OFFICER MADE NET DISALLOWANCE OF RS.1,61,89,000/-. THE LD. CIT(A) IN APPEAL, DELETED THE ADDITION OF RS.1,33,27,000/- U/R. 8D(2)(II) AND IN RESPECT OF ADDITION U/R. ITA NO. 5000/DEL./2014 3 8D(2)(III) RESTRICTED THE ADDITION TO RS.21,93,500/ -, THEREBY PARTLY ALLOWING THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE IMPUGN ED ORDER, THE REVENUE IS IN APPEAL BEFORE US CHALLENGING THE DELETION OF ADD ITION OF RS.1,33,27,000/- MADE BY ASSESSING OFFICER U/R 8D(2)(II). 3. THE LEARNED DR SUBMITTED THAT THE ASSESSING OFFI CER WAS JUSTIFIED TO MAKE DISALLOWANCE U/R. 8D(2)(II). THE ASSESSEE HAD PAID INTEREST DURING THE YEAR AND THEREFORE, HE HAD HUGE AMOUNT OF LOANS ON WHICH INTEREST HAS BEEN PAID. THEREFORE, THE CALCULATION REACHED BY THE ASS ESSING OFFICER IS CORRECT. HE RELIED ON THE FOLLOWING CASE LAWS : (I). INDIABULLS FINANCIAL SERVICES LTD. VS. DCIT, 7 6 TAXMANN.COM 268(DELHI) (II). GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT, 394 ITR 449(SC). (III). NAHAR SPINNING MILLS LTD. VS. CIT, 82 TAXMAN N.COM 154 (P&H) (IV). DCIT VS. RIRAJ PROFILES LTD., 156 ITD 72 (V). NYK LINE INDIA LTD. V. ACIT, 175 TTJ 180 (VI). SUPER AUTO FORGE (P) LTD. VS. ACIT, 156 ITD 4 67 (VII). VIPIN MALIK VS. ACIT, 45 ITR 589. 4. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT THE ASSESSEE HAS INVESTED RS.14.98 CRORES, ON WHICH INCOME EARNED IS TAXABLE. HE DREW OUR ATTENTION ON PAPER BOOK PAGE 17 WHICH WAS SUBMITTED BEFORE THE L OWER AUTHORITIES. HE ALSO REITERATED THE SUBMISSIONS MADE BEFORE THE CIT (A). THE LD.AR SUBMITTED THAT THE ASSESSEE HAD HUGE AMOUNT OF SHARE HOLDERS FUNDS, OUT OF WHICH ITA NO. 5000/DEL./2014 4 CURRENT YEARS INVESTMENT HAS BEEN MADE. HE ALSO RE FERRED TO PAPER BOOK PAGE 30, ANNEXURE-A, IN WHICH THE DATES OF INVESTMENT HA S BEEN MENTIONED. HE FURTHER SUBMITTED THAT THE HONBLE JURISDICTIONAL H IGH COURT HAS DISMISSED THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2008- 09 ON THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. AR HAS ALSO RELIED ON VARIOUS CASE LAWS, AS PLACED IN THE PAPER BOOK. IN VIEW OF THIS, THE L D. CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE U/R 8D(2)(II) OF RS.1,33,27,000/- . 5. AFTER HEARING BOTH THE SIDES AND PERUSING THE MA TERIALS AVAILABLE ON RECORD, WE OBSERVE THAT THE ASSESSEE HAS MADE INVES TMENT DURING THE FINANCIAL YEAR OF RS.4.16 CRORES. IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 ON THE SIMILAR FACTS AND CIRCUMSTANCES, THE HONBLE JURISDICTIONAL HIGH COURT HAS DISMISSED THE APPEAL OF THE REVENUE IN ITA NO. 939 AND 940 OF 2015. THE FINDINGS OF HONBLE HIGH COURT ARE AS UND ER : 6. THE SECOND ISSUE CONCERNS THE CLAIM OF THE ASSES SEE THAT IT INCURRED NO EXPENDITURE, OTHER THAN THE ADMINISTRATIVE EXPENSES , FOR EARNING DIVIDEND INCOME. UNDER SECTION 14A(2) OF THE ACT READ WITH R ULE 8D OF THE INCOME TAX RULES, 1962 (RULES), THE ASSESSING OFFICER (A.O. ) IS REQUIRED TO MAKE AN ENQUIRY IF HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. IN THE PRESENT C ASE IT HAS BEEN AVERRED BY THE ASSESSEE, AND NOT CONTRADICTED BY THE REVENU E, THAT NO INTEREST EXPENDITURE HAS BEEN INCURRED BY IT FOR EARNING THE EXEMPT INCOME. THERE WAS NO BASIS FOR THE A.O. TO HAVE DISALLOWED ANY PA RT OF SUCH INCOME ON THAT SCORE. ITA NO. 5000/DEL./2014 5 7. NO SUBSTANTIAL QUESTION OF LAW ARISES FOR DETERM INATION BY THE COURT. 6. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE HIGH COURT, WE UPHOLD THE ACTION OF THE LD. CIT(A). ACCORDINGLY, THE APPEAL O F THE REVENUE DESERVES TO BE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2018. SD/- SD/- (BHAVNESH SAINI) ( L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16 TH MARCH, 2018. *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI