ACIT, New Delhi V. M/s. A.K. Capital Services Ltd., New Delhi

ITA 5320/DEL/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1218 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 27-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: VED JAIN CA SHRI ASHISH CHADHA
• Keywords: Gift; Earning of tax free income
• Section: 14A; 37(1); 10

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI KULDIP SINGH , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5320/DEL/2015 (ASSESSMENT YEAR: 2012 - 13 ) ACIT, CENTRAL CIRCLE - 26, NEW DELHI VS. A.K. CAPITAL SERVICES LTD, FLAT NO. N, SAGAR APARTMENTS, 6, TILAK MARG, NEW DELHI PAN: AAACA1096L (APPELLANT) (RESPONDENT) REVENUE BY : SHRI S.S.RANA, CIT DR ASSESSEE BY: SHRI VED JAIN, CA SHRI ASHISH CHADHA, CA DATE OF HEARING 24/09 / 2018 DATE OF PRONOUNCEMENT 2 8 / 1 1 / 2018 O R D E R PER PRASHANT MAHARISHI , A. M. 1 . THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT ( A) - 29, NEW DELHI DATED 02.06.2015 FOR THE ASSESSMENT YEAR 2012 - 13. 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES 1962, AMOUNTING TO RS.2,45,27,811/ - MADE BY THE AO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND OH FACTS IN DELETING THE DISALLOWANCE U/S 14A READ WITH RULE 8D WITHOUT CONSIDERING THE CIRCULAR NO. NO. 5/2014, DATED 11.02.2014 AND WITHOUT APPRECIATING THE FACT THAT THE JUDGMENT OF HON'BLE DELHI HIGH COURT GIVEN IN CASE OF JOINT INVESTMENTS PVT. LTD. V. CIT WAS NOT APPLICABLE IN THE INSTANT CASE AS FACTS AND CONTEXT WERE DIFFERENT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE U/S 14A READ WITH RULE 8D WITHOUT FOLLOWING THE JUDGMENT GIVEN BY THE HONBLE DELHI HIGH COURT IN CASE OF MAXOPP INVESTMENT LTD. V. CIT 347 ITR 272 (DELHI)[2012J WHEREIN THE HONBLE C OURT HAS HELD THAT ONCE THE CORRECTNESS OF CLAIM OF EXPENDITURE U/S 14A SUBMITTED BY THE PAGE | 2 ASSESSEE IS REJECTED BY THE AO THEN THE AO WILL HAVE TO FOLLOW THE DISALLOWANCE UNDER RUL E 8D. 4. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE CIT ( A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.20,12,730/ - BEING BOGUS SALES/BUSINESS PROMOTION EXPENSES WITHOUT APPRECIATING THE FACT THAT THE ONUS WAS ON THE ASSESSEE TO ESTABLISH THAT THE EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PUR POSE OF BUSINESS U/S 37(1) WHICH THE ASSESSEE FAILED TO DISCHARGE DURING THE ASSESSMENT PROCEEDING AS WELL AS DURING THE APPELLATE PROCEEDING. 3 . THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS A COMPANY WHICH FILED ITS RETURN OF INCOME DECLARING INCOME OF INR 45 2396 200/ ON 28 TH /9/2012. ASSESSMENT UNDER SECTION 143 (3) WAS PASSED ON 27/1/2015 AT A TOTAL INCOME OF INR 4 78936740/ . THE LEARNED ASSESSING OFFICER MADE THE ADDITION BECAUSE OF DISALLOWANCE UNDER SECTION 14 A OF THE ACT OF INR 2 4527811/ AND SALES PROMOTION EXPENDITURE OF INR 2 012730/ TO THE RETURNED INCOME. THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX APPEALS WHO DELETED BOTH THE DISALLOWAN CE. THEREFORE THE LEARNED ASSESSING OFFICER IS AGGRIEVED HAS PREFERRED AN APPEAL BEFORE US. 4 . THE 1 ST GROUND OF APPEAL IS WITH RESPECT TO THE DISALLOWANCE DELETED BY THE LEARNED COMMISSIONER OF INCOME TAX APPEALS UNDER SECTION 14 A OF INR 2 4527811/ THE AS SESSEE HAS RECEIVED THE DIVIDEND INCOME OF INR 20 906964, WHICH IS CLAIMED AS EXEMPT UNDER SECTION 10 (34) OF THE ACT. THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE DISALLOWANCE SHOULD NOT BE MADE UNDER SECTION 14 A OF THE INCOME TAX ACT READ WITH RULE 8D OF THE IT RULES 1962. THE ASSESSEE SUBMITTED A CALCU LATION OF DISALLOWANCE OF INR 6 835265 AND RESTRICTED THE SAME TO THE DIVIDEND INCOME OF INR 2906964/ . THE AO NOTED THAT ASSESSEE HAS NOT INCLUDED THE INTEREST EXPENSES OF INR 52821884/ - D EBITED T O THE PROFIT AND LOSS ACCOUNT FULLY. AS THE ASSESSEE HAS REDUCED THE CAR LOAN INTEREST, SERVICE TAX INTEREST ON TAX DEDUCTION AT SOURCE INTEREST FOR THE PURPOSE OF DISALLOWANCE. HE COMPUTED THE DISALLOWANCE OF INR 2 7434775/ UNDER RULE 8D. FROM THIS, HE REDUCED THE ORIGINAL DISALLOWANCE MADE BY THE ASSESSEE OF INR 2 906964/ AND MADE THE ADDITION OF INR 2 4527811/ . PAGE | 3 ON APPEAL BEFORE THE CIT APPEAL, THE ADDITION WAS DELETED FOR THE REASON THAT DISALLOWANCE CANNOT EXCEED THE EXEMPT INCOME. 5 . THE LE ARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE LEARNED ASSESSING OFFICER. 6 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT IT IS HELD BY SO MANY JUDICIAL PRECEDENT AND THE DECISION OF THE JURISDICTIONAL HIGH COURT THAT DISALLOWANCE UNDE R SECTION 14 A, CANNOT EXCEED THE EXEMPT INCOME. HE FURTHER RELIED UPON THE SYNOPSIS SUBMITTED BY HIM. 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND FIND THAT THE DURING THE YEAR THE ASSESSEE HAS RECEIVED THE EXEMPT INCOME OF INR 2 906964/. THE AB OVE AMOUNT HAS BEEN DISALLOWED BY THE ASSESSEE HIMSELF IN THE COMPUTATION OF THE TOTAL INCOME. THE LEARNED COMMISSIONER OF INCOME TAX HAS DELETED THE DISALLOWANCE COMPUTED BY THE LEARNED ASSESSING OFFICER DISREGARDING THE ABOVE PRINCIPLE. THE LEARNED COM MISSIONER OF INCOME TAX APPEALS HAS FOLLOWING THE DECISION OF THE HONOURABLE JURISDICTIONAL HIGH COURT IN CASE OF JOINT INVESTMENTS PRIVATE LIMITED VS. CIT (ITA NUMBER 117/2015 ) DELETED THE ABOVE ADDITION. EVEN THE HONOURABLE DELHI HIGH COURT IN CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VS. ILFS ENERGY DEVELOPMENT LTD 84 TAXMANN.COM 186 HAS ALSO REAFFIRMED THE ABOVE VIEW, EVEN AFTER CONSIDERING THE CIRCULAR ISSUED BY THE CBDT DATED 11/05/2014. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX APPEALS HOLDING THAT DISALLOWANCE UNDER SECTION 14 A. READ WITH RULE 8D CANNOT EXCEED THE EXEMPT INCOME. ACCORDINGLY, GROUND NUMBER 1 TO 3 OF THE APPEAL OF THE REVENUE IS DISMISSED. 8 . GROUND NUMBER 4 OF THE APPEAL IS WITH RESPECT TO THE DELETION OF THE DISALLOWANCE OF INR 2 012730/ BEING BOGUS SALES AND BUSINESS PROMOTION EXPENDITURE DISALLOWED BY THE LEARNED ASSESSING OFFICER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LEARNED AO NOTED THAT THE ASSESSEE HAS CLAIMED BUSINESS SALES PROMOTION EXPENSES TO THE EXTENT OF INR 1 3677085/ . THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF THIS EXPENDITURE. THE ASSESSEE SUBMITTED THAT DETAILS AND ON EXAMINATION OF THE SAME. IT WAS FOUND BY THE LEARNED AO THAT SOME OF PAGE | 4 THE BILLS INCLUDES PURCHASE OF GOLD, FANCY SILVER ITEMS AND CASHEW OF INR 2 012730. THE ASSESSEE SUBMITTED THAT IT HAS CLIENTS SPREAD ACROSS INDIA FROM WHICH THE COMPANY GETS THE BUSINESS AND THEREFORE THESE ARE THE EXPENDITURE FOR MARKETING AND SALES PROMOTION BY GIVING CUSTOMERS A GIFT TO THE CUSTOMERS ON THE POWERFULLY AND NEW YEAR OR SEVERAL OTHER OCCASIONS. THE ASSESSEE DID NOT PRODUCE THE LIST OF PERSONS ARE CLIENTS TO WHOM THE GOLD OR SILVER ITEMS WERE GIFTED AND THEREFORE THE LEARNED ASSESSING OFFICER DISALLOWED THE ABOVE SUM. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS, RELYING ON HIS OWN DECISION FOR ASSESSMENT YEAR 2010 11 DELETED THE ABOVE DISALLOWANCE. 9 . THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARN ED ASSESSING OFFICER. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE COORDINATE BENCH IN ITS OWN CASE FOR ASSESSMENT YEAR 2010 11 AND 2011 12 IN FAVOUR OF THE ASSESSEE AND THEREFORE THE ISSUE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. 10 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FIND THAT IDENTICAL ISSUE HAS BEEN INVOLVED IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 11 AND 2011 12 VIDE GROUND NUMBER 1 FOR ASSESSMENT YEAR 2010 11 AND GROUND NUMBER 1 FOR ASSESSMENT YEAR 2011 12 DECIDED IN ITA NUMBER 1143 AND 1194/DEL/2014 DATED 18/1/2016. ON CAREFUL EXAMINATION OF THE ORDER OF THE COORDINATE BENCH WITH THE FACTS FOR THE PRESENT YEAR BEFORE US, WE FIND THAT THE ISSUE IS IDENTICAL. IN VIEW OF THIS, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH WE ALSO DELETED THE DISALLOWANCE FOR THE CURRENT YEAR. ACCORDINGLY, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX APPEALS IS CONFIRMED. WITH RESPECT TO THE DISALLOWANCE INVOLVED IN GROUND NUMBER 4 CHALLENGED BY THE AO. ACCORDINGLY, GROUND NUMBER 4 OF THE APPEAL IS DISMISSED. 11 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON 2 8 / 1 1 / 2018 . - SD/ - - SD/ - ( KULDIP SINGH ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER PAGE | 5 DATED: 2 8 / 1 1 / 2018 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI