M/s Siddhi Vinayak Aromatics Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 5385/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97065 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 05-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUJIT KUMAR SENIOR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.5385/DEL./2012 (ASSESSMENT YEAR : 2008-09) M/S. SIDDHI VINAYAK AROMATICS PVT. LTD., VS. DCIT, CENTRAL CIRCLE 25, (NOW AMALGAMATED WITH THE COMPANY, NEW DELHI. M/S. SURYA VINAYAK HOSPITALITIES PVT. LTD.), 13 B, 3 RD FLOOR, NETAJI SUBHASH MARG, DARYAGANJ, NEW DELHI 110 002. (PAN : AAECS6671A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJEEV SAXENA, ADVOCATE REVENUE BY : SHRI SUJIT KUMAR, SENIOR ADVOCATE DATE OF HEARING : 05.08.2015 DATE OF PRONOUNCEMENT : 14.08.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS DI RECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I , NEW DELHI DATED 11.07.2012 FOR THE ASSESSMENT YEAR 2008-09. 2. THE SOLITARY GROUND TAKEN BY THE ASSESSEE IS AGA INST THE CONFIRMATION OF DISALLOWANCE MADE U/S 14A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT) OF RS.3,89,691/- DESPITE THE ASSESSEES PLEA THAT THE COMPANY HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. ITA NO.5385/DEL./2012 2 3. DURING THE ASSESSMENT PROCEEDINGS, THE AO HAD AP PLIED THE PROVISIONS OF RULE 8D OF THE INCOME-TAX RULES, 1962 (HEREINAFTER THE RULES) AND COMPUTED A DISALLOWANCE OF RS.3,89,691/ -. FOR DOING SO, THE AO ALSO RELIED ON THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF CHEMINVEST LTD. VS. ITO (2009) 124 TTJ (DEL)(SB) 57 7, WHERE IT HAS BEEN HELD THAT EVEN IF NO EXEMPT INCOME IS EARNED BY THE ASSESSEE THE RELATABLE EXPENSE INCURRED IN RESPECT OF EXEMPTED ASSET IS TO BE DISALLOWED U/S 14A OF THE I.T. ACT, 1961. BEFORE THE CIT (A), THE ASSESSEE STATED THAT DUR ING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS NOT EARNED ANY DIVIDEND OR ANY EXEMPT INCOME AND AS SUCH, THE EXEM PT INCOME EARNED HAS BEEN NIL; AND THEREFORE, WORKING OUT THE EXPENSES IN RESPECT OF NIL INCOME WILL ALSO BE NIL. THE LD. CIT (A) REJECTE D THE SUBMISSIONS OF THE ASSESSEE AND RELYING ON THE RATIO OF THE DECISION I N CHEMINVEST LTD. (SUPRA), THE LD. CIT (A) UPHELD THE ORDER OF THE AO . 4. THE ASSESSEE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US. 5. LD. AR FOR THE ASSESSEE SUBMITTED THAT DURING TH E RELEVANT ASSESSMENT YEAR, THE COMPANY HAS NOT EARNED ANY INC OME BY WAY OF EXEMPT INCOME LIKE DIVIDEND AND AS SUCH, THE EXEMPT INCOME EARNED HAD BEEN NIL AND THEREFORE, WORKING OUT THE EXPENSES IN RESPECT OF NIL INCOME WILL ALSO BE NIL. HE FURTHER STRESSED THAT NO EXP ENDITURE DIRECTLY OR INDIRECTLY WAS INCURRED BY THE ASSESSEE FOR EARNING (NIL) EXEMPT INCOME, THEREFORE, NO DISALLOWANCE U/S 14A R.W. RULE 8D WAS WARRANTED. IN ORDER ITA NO.5385/DEL./2012 3 TO SUPPORT THIS CONTENTION THAT IF THERE IS NO EXEM PT INCOME, NO DISALLOWANCE U/S 14A COULD BE MADE, HE RELIED ON TH E FOLLOWING DECISIONS :- (I) ACIT VS. M. BASKARAN [2014] 50 TAXMANN.COM 13 8 (CHENNAI TRIB.); (II) CIT VS. M/S. SIVAM MOTORS PVT. LTD. (ALLAHABAD HIGH COURT) I.T. APPEAL NO.88 OF 2014 DATED 05.05.2014; (III) CIT VS. CORRTECH ENERGY PVT. LTD. (GUJARAT HI GH COURT) TAX APPEAL NO.239 OF 2014 DATED 24.03.2014; (IV) CIT VS. DELITE ENTERPRISES (BOMBAY HIGH COURT) TAX APPEAL NO.110 OF 2009 DATED 26.02.2009; (V) CIT VS. M/S. LAKHANI MARKETING (PUNJAB & HARYAN A HIGH COURT) ITA NO.970 OF 2008 DATED 02.04.2014; (VI) CIT VS. WINSOME TEXTILES INDUSTRIES LTD. (PUNJ AB & HARYANA HIGH COURT) (319 ITR 204); (VII) HINDUSTAN VACUUM GLASS PVT. LTD. VS. DCIT (IT A NO.5805/DEL/2012 A.Y. 2009-10 GDA/HSS DATED 19.12.2014). IN THE LIGHT OF THE AFORESAID DECISIONS, HE PLEADED THAT THE IMPUGNED ORDER OF THE AUTHORITIES BELOW MAY BE SET ASIDE AND THE A PPEAL OF THE ASSESSEE BE ALLOWED. 7. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND RELIED ON THE DECISION OF SPECIAL BENCH O F THE TRIBUNAL IN M/S. CHEMINVEST LTD. (SUPRA). 8. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND P ERUSED THE MATERIAL ITA NO.5385/DEL./2012 4 ON RECORD. THE LD. AR OF THE ASSESSEE CONTENDED BEF ORE US THAT THE ASSESSEE WAS NOT IN RECEIPT OF ANY EXEMPT INCOME IN THE ASSE SSMENT YEAR UNDER CONSIDERATION , THEREFORE, DISALLOWANCE UNDER SECTI ON 14A READ WITH RULE 8D CANNOT BE MADE TO DISALLOW EXPENSES WHICH HAS NO T BEEN INCURRED BY THE ASSESSEE. THE LD. DR COULD NOT CONTROVERT THE FACT THAT THE ASSESSEE DID NOT EARN ANY EXEMPT INCOME IN THIS RELEVANT ASSESSM ENT YEAR. IN THE SAID FACTUAL CONTEXT, WE NEED TO LOOK AT THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO.3298/DE1/2013 VIDE ORDER DATED 08.12.2014 FOR ASSESSMENT YEAR 2007-08 IN THE CASE OF DCIT, CIRCLE 6 (1), NEW DELHI VS. M/S. MILKFOOD LIMITED, WHEREIN THE TRIBUNAL ON SIMI LAR FACTS AND ISSUE HAS DECIDED THE ISSUE AGAINST THE REVENUE. FOR THE SAKE OF CLARITY, WE REPRODUCE THE RELEVANT FINDING OF THE AFORESAID ORD ER AS UNDER:- '4. APROPOS GROUND NO.1, LD. CIT(A) DELETED THE ADD ITION, INTER ALIA, OBSERVING THAT SINCE IN VIEW OF THE DEC ISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MANUFACTURING LTD. VS. DC IT 328 ITR 81 (ITA 3298/D EL/13 M/S MILK FOOD LTD. (BOM.), RULE 8D WAS NOT APPLICAB LE, THEREFORE, THE DISALLOWANCE MADE BY AO U/S 14A READ WITH RULE 8D COULD NOT BE UPHELD. 5. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSE SSEE HAD NOT EARNED ANY EXEMPT INCOME DURING THE YEAR. THERE FORE, IN VIEW OF THE MATTER, NO DISALLOWANCE COULD BE MADE U /S 14A. IN THIS REGARD, LD. COUNSEL HAS RELIED ON FOLLOWING DE CISIONS:- HON'BLE DELHI HIGH COURT'S DECISION DATED 5-9-201 4 (ITA NOS.486/2014 & ITA NO.299/2014) IN THE CASE OF CIT VS. HOLCIM INDIA P. LTD. ITA NO.5385/DEL./2012 5 HON'BLE PUNJAB & HARYANA HIGH COURT'S DECISION IN CIT VS. M/S LAKHANI MARKETING INCL. (ITA NO. 970/2008 DECIDED ON 2.4.2014) HON'BLE PUNJAB & HARYANA HIGH COURT'S DECISION IN CIT VS. HERO CYCLES LTD. 323 ITR 518; AND HON'BLE PUNJAB & HARYANA HIGH COURT'S DECISION IN CIT VS. WINSOME TEXTILE INDUSTRIES LTD 319 ITR 204. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE AFOREMENTIONED DECISIONS, RELIED UPON BY THE ASSESSEE, WHEREIN A CONSISTENT V IEW HAS BEEN TAKEN THAT WHERE NO EXEMPT INCOME IS EARNED, THERE COULD NOT BE ANY DISALLOWANCE U/S 14A, WE FIND NO MERIT IN TH E GROUND TAKEN BY THE REVENUE. ACCORDINGLY, GROUND NO. 1 IS DISMISSED. 9. AS STATED EARLIER, SINCE THE CONTENTION OF THE A SSESSEE THAT IT HAS NOT EARNED ANY EXEMPT INCOME, WHICH IS NOT CONTROVERTED BY THE REVENUE, THE RATIO OF THE DECISION CITED ABOVE SQUARELY APPLIES AND THUS, WE FIND FORCE IN THE CONTENTION OF THE LD. AR THAT NO DISALLOWANCE W AS WARRANTED U/S 14A OF THE ACT R.W. RULE 8D. RESPECTFULLY FOLLOWING THE A FORESAID DECISION OF THE TRIBUNAL WHICH HAS FOLLOWED THE RATIO OF HONBLE JU RISDICTIONAL AND OTHER HIGH COURTS, WE DELETE THE DISALLOWANCE MADE U/S 14 A OF RS.3,89,691/-. THE GROUND IS ACCORDINGLY ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 14 TH DAY OF AUGUST, 2015. SD/- SD/- (R.S. SYAL) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 14 TH DAY OF AUGUST, 2015 TS ITA NO.5385/DEL./2012 6 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-I, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.