Addl. CIT, Special Range-6, New Delhi V. MMTC Ltd., New Delhi

ITA 5452/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8855 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 25-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAMITA M BISWAS
• Assessee Lawyers: ROHIT JAIN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (E-COURT MODULE) ITA NO. 5452/DEL/2017 : ASSTT. YEAR : 2013-14 ADDL. CIT, SPECIAL RANGE-6, NEW DELHI VS M/S MMTC LTD., CORE-1, SCOPE COMPLEX, LODHI ROAD, NEW DELHI-110003 (APPELLANT) (RESPONDENT) PAN NO. AAACM1433E ASSESSEE BY : SH. ROHIT JAIN, ADV. REVENUE BY : MS. PAMITA M. BISWAS, CIT DR DATE OF HEARING: 23.07.2020 DATE OF PRONOUNCEMENT: 28.07.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE ORDER OF THE LD. CIT(A)-6, DELHI DATED 04.07.20 17. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENU E: 1. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT (A) IS LEGALLY JUSTIFIED IN REDUCING DISALLOWANCE OF RS.10,08,27,210/- TO RS.1,75,000/- U/S 14A OF THE INCOME TAX ACT, 1961 WITHOUT CONSIDERING LEGISLATIVE INTEND OF INTRODUCING SECTI ON 14A BY THE FINANCE ACT 2001 AS CLARIFIED BY THE CBD T CIRCULAR NO. 5/2014 DATED 10.02.2014? 2. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CAS E, LD. CIT (A) IS LEGALLY JUSTIFIED IN REDUCING DISALL OWANCE OF RS.10,08,27,210/- TO RS.1,75,000/- U/S 14A OF TH E INCOME TAX ACT, 1961 WITHOUT CONSIDERING A LEGAL PRINCIPLE THAT ALLOWABILITY OR DISALLOWABILITY OF ITA NO. 5452/DEL/2017 MMTC LTD. 2 EXPENDITURE UNDER THE ACT IS NOT CONDITIONAL UPON T HE EARNING OF THE INCOME AS UPHELD BY HONBLE SUPREME COURT IN CASE OF CIT VS RAJENDRA PRASAD MOODY [1978] 115 ITR 519? 3. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT (A) IS LEGALLY JUSTIFIED IN REDUCING DISALLOWANCE OF RS.10,08,27,210/- TO RS.1,75,000/- U/S 14A OF THE INCOME TAX ACT, 1961 WITHOUT CONSIDERING RATIO DECIDENDI AS UPHELD IN CASES OF C IT VS WALFORT SHARE AND STOCK BROKERS PVT. LTD. [2010] 326 ITR 1 (SC) AND MAXOPP INVESTMENT VS CIT [2012] 347 ITR 272 (DEL.) ON APPLICATION OF PROVISIONS OF SECTION 14A OF THE ACT? 3. ALL THE GROUNDS RELATES TO DELETION OF THE DISAL LOWANCE MADE BY THE ASSESSING OFFICER U/S 14A OF THE INCOME TAX ACT, 1961. THE SHORT ISSUE INVOLVED IN THE CASE IS THAT WHETHER ONLY THOSE INVESTMENTS ARE TO BE CONSIDERED FOR COMPUTIN G THE AVERAGE VALUE OF INVESTMENTS WHICH YIELDED EXEMPT I NCOME DURING THE YEAR. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS A PUBLIC SECTOR UNDERTAKING UNDER THE COMPANIES ACT, 1956 IS A GOVERNMENT OF INDIA PUBLIC SECTOR ENTERPRISES UNDER MINISTRY OF COMMERCE. DURING THE YEAR, THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.11,45,10,723/- FROM TWO ENTITIES NAMEL Y, DIVIDEND FROM FOREIGN SUBSIDIARY MTPL OF RS.10,17,58,599/- WHICH HAS BEEN DULY OFFERED TO TAX U/S 11BBD AND RS.1,27,52,1 24/- BEING THE DIVIDEND RECEIVED FROM LIQUID MF CLAIMED AS EXE MPT. THE AO MADE ADDITION OF RS.10,10,27,210/- ON THE TOTAL DIV IDEND RECEIVED TAKING INTO CONSIDERATION THE AVERAGE VALU E OF THE INVESTMENTS AND INDIRECT EXPENDITURE. ITA NO. 5452/DEL/2017 MMTC LTD. 3 5. THE ISSUE OF DISALLOWANCE OF EXPENSES U/S 14A RE LATING TO NON-DIVIDEND YIELDING INVESTMENTS HAS BEEN ADJUDICA TED BY THE SPECIAL BENCH OF ITAT IN THE CASE OF ACIT VS VREET INVESTMENTS PVT. LTD. IN ITA NO. 502/DEL/2012 FOR THE ASSESSMEN T YEAR 2008-09. BASED ON THIS JUDGMENT, THE LD. CIT (A) HA S RESTRICTED THE DISALLOWANCE U/S 14A TO 0.5% OF THE AVERAGE VAL UE OF INVESTMENTS YIELDING EXEMPT INCOME DURING THE YEAR. THE DISALLOWANCE THUS COMPUTED STANDS AT RS.3,75,000/- OUT OF WHICH THE ASSESSEE HAS ALREADY OFFERED AN AMOUNT OF RS.2,00,000/- AS DISALLOWABLE U/S 14A AND THE LD. C IT (A) HAS CONFIRMED THE ADDITION RS.1,75,000/-. 6. SINCE, THE ORDER OF THE LD. CIT (A) IS IN CONSON ANCE WITH THE ORDER OF THE SPECIAL BENCH OF ITAT (SUPRA), WE HEREBY DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/07/2020. SD/- SD/- (BHAVNESH SAINI) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 28/07/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR