Dion Global Solutions Ltd., New Delhi V. DCIT, Circle-7(2), New Delhi

ITA 5218/DEL/2019

AI Insights

The case involves Dion Global Solution Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals) sustaining a disallowance under section 14A of the Income Tax Act, 1961. The disallowance pertained to expenses incurred in earning exempt income, which the assessee contested based on the absence of satisfaction recorded by the assessing officer and the applicability of Rule 8D. The Tribunal, however, did not address these substantive issues due to the moratorium on proceedings against the corporate debtor as per the IBC, following an insolvency petition admitted by the NCLT.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 112984 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-12-2022
• Assessment Year: misc
• Appeal Filed On: 06-06-2022
• Other Referred Cases: Cheminvest Ltd. vs. CIT, CIT vs. Holcim India P. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Revised return; Rule 8D
• Section: 143(3); 142(1); 14A; 143(1); 143(2)

Judgement Text

1 | Page IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “B” BENCH: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA No.5218/Del/2019 [Assessment Year : 2009-10] Dion Global Solution Ltd., 409, Chaudhry Complex, 9 VS Block, Madhuban Road, Shakarpur, New Delhi-110092 PAN-AAACF1917E vs DCIT, Circle-7(2), New Delhi. APPELLANT RESPONDENT Appellant by None Respondent by Shri Akhilesh Gupta, Sr DR Date of Hearing 06.12.2022 Date of Pronouncement 06.12.2022 ORDER PER KUL BHARAT, JM : The present appeal filed by the assessee for the assessment year (“AY”) 2009-10 is directed against the order of Ld.CIT(A)-34, New Delhi dated 28.03.2019. The assessee has raised following grounds of appeal:- 1. “That the Commissioner of Income Tax (Appeals) (‘CIT(A)’) erred on facts and in law in sustaining disallowance of Rs. 6,42,53,631 (net disallowance of Rs. 2,44,49,246) made under section 14A of the Income Tax Act, 1961 (‘the Act’). 1.1. That the CIT(A) erred on facts and in law in not holding that in absence of failure by the assessing officer to record satisfaction in the assessment order in respect of expenditure incurred for earning exempt income, which is an essential requirement under sub-section (2) and (3) of section 14A of the Act, the disallowance made by the assessing officer applying Rule 8D of the Rules, was not sustainable and was liable to be deleted. 2 | Page 1.2. That on the facts and circumstances of the case and in law, the CIT(A) erred in not holding that in terms of the law laid down by the Hon’ble Delhi High Court in the cases of Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Del) and CIT vs. Holcim India P. Ltd. (2014) 272 CTR 282 (Del), no disallowance under section 14A of the Act was required to be made, in respect of investment from which no exempt dividend income was during the relevant year. 1.3. Without prejudice, the CIT(A) erred on facts and in law in not appreciating that the disallowance made under section 14A of the Act cannot exceed exempt income of Rs.65,898 earned during the year. 2. Without prejudice that the CIT(A) erred on facts and in law in sustaining disallowance of Rs.6,42,53,631 made under section 14A of the Act not appreciating that at best the disallowance was required to be restricted to Rs.82,80,326 being expenditure related to earning of exempt dividend income as computed by the appellant after excluding strategic investments wherefrom no dividend income was earned during the year, in the course of appellate proceedings. The appellant craves leave to add, amend, alter or vary, any of the aforesaid grounds of appeal before or at the time of hearing of the appeal.” 2. At the time of hearing, no one attended the proceedings on behalf of the assessee. It is seen from the records that no one has been attended the proceedings since 13.01.2022. Therefore, the appeal is taken up for hearing in the absence of the assessee and is being disposed off on the basis of material available on record. FACTS OF THE CASE 3. Brief facts of the case are that the assessee company filed its return of income through electronic mode, declaring loss of Rs.19,32,583/- on 3 | Page 30.09.2009. Thereafter, the assessee company furnished a revised return loss of Rs.1,31,66,556/- was filed on 31.03.2011. The return of income was processed u/s 143(1) of the Income Tax Act, 1961 (“the Act’). The case was selected for compulsory scrutiny. Thereafter, notice u/s 143(2) of the Act was issued on 26.08.2010 and duly served upon the assessee. Subsequently, a notice u/s 142(1) of the Act was issued on 13.07.2011 to the assessee and duly served upon the assessee. In response thereto, Ld. Authorized Representative (“AR”) of the assessee company attended the assessment proceedings from time to time and details as required, have been filed, perused and placed on record. Thereafter, the assessment was framed u/s 143(3) of the Act vide order dated 26.12.2011 and the Assessing Officer (“AO”) assessed the income of the assessee company at Rs.2,32,07,290/-. 4. It is informed by Ld. Resolution Professional (“RD”) of the assessee company vide letters dated 13.12.2021 and 05.05.2021 that the assessee company has gone into insolvency in the matter of M/s. Mykind Vacations Pvt. Ltd. vs M/s. Dion Global Solutions Ltd. vide Company Petition No.IB- 2695/ND/2019 dated 18.08.2020 by Hon’ble National Company Law Tribunal (“NCLT”). The relevant contents of the order of NCLT is reproduced as under:- 20. “In view of above, we are satisfied that the present application is complete and the Operational Creditor is entitled to claim its dues, establishing the default in payment of the operational debt beyond doubt, and fulfillment of requirements under section 9(5) of the Code. Hence, the present application is admitted. 21. The Applicant has proposed the name of any Interim Resolution Professional. In view of the same, this Bench appoints Mr. Pradeep Kumar Lakhani, having registration no. IBBI/IPA-001/IP- 4 | Page P00541/2017-2018/ 10966, email address is pradeep.lakhani 1967@.gmail.com, mobile no. 9811115617 as the IRP of the Respondent. The IRP is directed to take all such steps as are required under the statute, more specifically in terms of Sections 15,17,18,20 and 21 of the Code. 22. We direct the Operational Creditor to deposit a sum of Rs.2 lacs with the Interim Resolution Professional Mr. Pradeep Kumar Lakhani to meet out the expenses to perform the functions assigned to him in accordance with Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016. The needful shall be done within three days from the date of receipt of this order by the Operational Creditor. The amount however will be subject to adjustment by the Committee of Creditors as accounted for by Interim Resolution Professional and shall be paid back to the Operational Creditor. 23. As a consequence of the application being admitted in terms of Section 9(5) of IBC, 2016, moratorium as envisaged under the provisions of Section 14(1) shall follow in relation to the Respondent prohibiting the respondent as per proviso (a) to (d) of section 14(1) of the Code. However, during the pendency of the moratorium period, terms of Section 14(2) to 14(3) of the Code shall come into force. 24. The Registry is directed to communicate a copy of the order to the Operational Creditor, the Corporate Debtor, the Interim Resolution Professional and the Registrar of Companies, NCR, New Delhi at the earliest but not later than seven days from today. The Registrar of Companies shall update their website by updating the status of ‘Corporate Debtor’ and specific mention regarding the admission of this application must be notified.” 5. A request is made by the Ld. R.P that qua the assessee company, no proceedings can be initiated or continued against the Corporate Debtor due to 5 | Page applicability of moratorium CIRP vide letter dated 05.05.2022. Hence, it is prayed that present proceedings may be dropped. 6. We have heard Ld. Sr. DR and perused the material available on record. Looking to the facts of the case that the assessee company has gone into insolvency proceedings before the Hon’ble NCLT vide order dated 18.08.2020 (supra). We therefore, dismiss the appeal of the assessee with a liberty to approach this Tribunal for restoration of appeal after final order passed by Hon’ble NCLT. Thus, Grounds raised by the assessee are dismissed. 7. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 06 th December, 2022. Sd/- Sd/- (ANADEE NATH MISSHRA) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI