HLS ASIA LTD., NEW DELHI V. Addl.CIT, Special Range-4, NEW DELHI

ITA 5503/DEL/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9823 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 22-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘C’ : NEW DELHI) BEFORE SH. SHAMIM YAHYA, ACCOUNTANT MEMBER AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 5503/Del/2018, A.Y. 2014-15 HLS ASIA LTD. 109, Aurobindo Place, New Delhi Vs. Addl. Commissioner of Income- tax , Special Range-4, C.R.Building, I.P.Estate, New Delhi (APPELLANT) (RESPONDENT) Assessee by None Revenue by Shri Anuj Garg, Sr. DR Date of hearing: 05.09.2022 Date of Pronouncement: 06.09.2022 ORDER PER ANUBHAV SHARMA, JM: The appeal has been filed by the Assessee against order dated 28.05.2018 in appeal no. 54/17-18 passed u/s 250(6) of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’) by Commissioner of Income Tax (Appeals)-35, New Delhi (hereinafter referred to as the First Appellate Authority in short ‘Ld. F.A.A.’) in regard to the appeal before it arising out of assessment order dated 24.12.2017 u/s 143(3) of the Income Tax Act, 1961 passed by Assistant Commissioner of Income Tax, Spl. Range-4, New Delhi (hereinafter referred to as the Ld. Assessing Officer or in short ‘Ld. AO’). ITA No. 1403/Del/2020 Bhudeva Estates Pvt. Ltd. 2 2. The facts in brief are assessee filed return of income of Rs. 29,79,81,295/- on 26.11.2014 and the case was selected for scrutiny. The assessee company is engaged in the business of wire line logging, perforation and related oil field activities for various oil companies operating in India. During the year under assessment, the assesse company had declared income from providing services to these companies and total amount of operational revenue is declared at Rs. 108.84 crore. 2.1 During the assessment proceedings it was noticed that the assessee company had earned exempt dividend income of Rs. 27,77.732/-. The assessee company has made investment of Rs.7436.75 lacs in equity shares however no disallowance u/s 14A has been made though the dividend income earned from such investment shall be exempt from tax. Accordingly, the assessee was asked by the Ld AO, to explain as to why the disallowance u/s 14A should not be made in accordance with the Rule 8D of I.T. Rules, 1962 3. After taking the submissions of the assessee, the Ld. AO made the disallowance of Rs. 37,52,198/- u/s 14A r.w.s. 8D of the I.T.Rules which were sustained by Ld. CIT(A) with following observations in Para 4.3.3. : “4.3.3. The Appellant has exempt income of Rs. 27,77,732/-. In the assessment order, the AO worked out the disallowance u/s. 14A r.w. Rule 8D at Rs. 37,52,198/- and after reducing the suo-moto disallowance done by the appellant of Rs.4,66,712/-, the AO added Rs. 37,52,198/- to the income of the appellant. Therefore, the AO held that Rule 8D of I.T. Rule 1962 is squarely applicable in this case. Since, the Appellant Company could not justify the method adopted by it for determination of disallowance u/s. 14A, the AO correctly held that the method provided under Rule 8D of I.T. Rule, 1962 is applicable in this case. The decision of the Hon'ble Supreme Court In the case of Maxopp Investment Ltd. vs. CIT, New ITA No. 1403/Del/2020 Bhudeva Estates Pvt. Ltd. 3 Delhi (civil Appeal nos. 104-109 of 2015) dated 12.02.2018, the addition u/s. 14A r.w, Rule 8D is applicable in this ease. The working of disallowance u/s I4A r.w Rule 8D at Rs.37,52,198/- is correct. Therefore, addition of Rs.37,52,198/- is upheld. I find no reason to interfere with the AO's order on this issue. Therefore, Ground no. 2 is dismissed.” 4. The assessee is in appeal raising following grounds :- 1. That on the facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) ['CIT(A)’] erred in dismissing, the appeal filed by the appellant against the order dated 24.12.2017 passed under section 143(3) of the Income- tax Act, 1961 (‘the Act’) disallowing Rs.37,52,198 u/s 14Aofthe Act read with Rule 8D of Income Tax Rules,1962 (‘Rules’) 2. That the CIT (A) erred in dismissing the appeal applying the principle laid down in decision of Hon’ble Supreme Court in the case of Maxopp Investment Ltd. without appreciating facts of the case and submissions made by the appellant. 2.1 That the CIT (A) erred on facts, evidences on record and in law in holding that the appellant had failed to justify the method adopted by it for determination of disallowance under section 14A of the Act. 2.2 That the CIT(A) further grossly erred in law and on facts of the case in not appreciating the nature of investments made by the appellant company and arbitrarily proceeding on the basis that all investments made by the appellant company yield exempt income. The appellant craves leave to add to, alter, amend or vary from the aforesaid grounds of appeal at or before the time of hearing.” 5. Heard. At the time of final hearing, non-appeared for the assessee and the record shows that ever since the appeal is listed for hearing on 15.11.2021, non-appeared for the assessee inspite of repeated notices being issued and notices are received back to the report ‘incomplete address’. On perusal of the record of appeal, no further notice is justified. ITA No. 1403/Del/2020 Bhudeva Estates Pvt. Ltd. 4 Ld. DR was heard, who supported the orders of Ld. Tax Authorities below. 6. After giving thoughtful consideration to the matter on record it can be observed that the fact of assessee earning exempt income is not disputed. The assessee’s investments were in 100% debt mutual funds –growth Scheme. Assessee hass made a suo moto disallowance which has been considered by the Tax Authorities below and after putting on record the reasons the Tax Authorities have considered suo moto disallowance to be not at accordance with Rule 8D and thus following the judgment of Hon’ble Supreme Court of India in Maxopp Investment Ltd.(supra) the Addition has been made. There is no apparent reason for another opinion on merits, other than as decided by Ld. Tax Authorities. There is no substance in grounds. The appeal of the assessee is dismissed ex parte. Order pronounced in the open court on 6 th September, 2022. Sd/- Sd/- (SHAMIM YAHYA ) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 6 th .09.2022 *Binita, SR.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI