DCIT, New Delhi V. M/s Motlay Finance Pvt. Ltd., Madhya Pradesh

ITA 5505/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4154 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 25-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALKA GAUTAM
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 5505/DEL/2016 AY: 2009-10 DY.COMMISSIONER OF INCOME TAX, VS M/S MOTLAY FINANCE PVT. LTD., CIRCLE 17(1), NEW DELHI. 41, JARORA COMPOUND, OPP . M.Y. HOSPITAL, INDORE, M.P. (PAN: AABCM2050J) (APPELLANT) (RESPONDENT) APPELLANT BY : MS ALKA GAUTAM, SR. DR RESPONDENT BY: NONE DATE OF HEARING: 03.01.2018 DATE OF PRONOUNCEMENT: 10.01.2018 ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (A)-I, INDORE WHEREIN VIDE ORDER DATED 25.05.2016, THE LD. COMMIS SIONER OF INCOME TAX (A) HAS RESTRICTED THE DISALLOWANCE MADE U/S 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE A CT') TO RS. 41,04,665/- AS AGAINST THE ORIGINAL DISALLOWANCE OF RS. 3,43,49,792/-. THE ASSESSMENT WAS COMPLETED AT A L OSS OF RS. 7,48,550/-. ON APPEAL BY THE ASSESSEE, THE LD. COM MISSIONER OF INCOME TAX (A) RELIED ON THE ORDER OF THE HON'BLE D ELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT PVT. LTD. VS COMMIS SIONER OF ITA NO. 5505/DEL/2016 ASSESSMENT YEAR 2009-10 2 INCOME TAX (A) IN ITA NO. 117/2015 WHEREIN THE HON' BLE HIGH COURT HAD HELD THAT THE DISALLOWANCE U/S 14A OF THE ACT COULD NOT EXCEED THE EXEMPT INCOME. 2. NOW, THE DEPARTMENT IS IN APPEAL AGAINST THE ACT ION OF THE LD. COMMISSIONER OF INCOME TAX (A) AND HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE & IN LAW, THE LD. CI F(A) IS JUSTIFIED IN RESTRICTI NG THE DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME IE RS. 41,04,665/-' AGAINST TOTAL DISALLOWANCE OF RS. 3,33,05,975/- U/S 14A R.W. R 8D OF THE INCOME TAX A CT 1961 WITHOUT CONSIDERING LEGISLATIVE INTEND OF INTRODUCING SECTION 14A BY THE FINANCE ACT, 2001 AS CLARIFIED BY THE CBDT CIRCULAR NO. 5/2014 DATED. 10.02.2014? 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN RESTRICT ING THE DISALLOWANCE U/S 14A BY IGNORING LEGISTATIVE INTEND OF SECTION 14A THAT DISALLOWANCE U/S 14A IS NOT DEPENDENT UPON EARNING OF EXEMPT INCOME AS EXPLAINE D VIDE CBDT CIRCULAR NO. 5/2014 DATED. 10.02.2014? 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN RESTRICT ING THE DISALLOWANCE TO RS. 41,04,665/- OF RS. 3,33,05,975/ - WITHOUT CONSIDERING LEGAL PRINCIPLES THAT ALLOWABIL ITY OF EXPENDITURE UNDER THE ACT IS NOT CONDITIONAL UPON T HE EARNING OF THE INCOME AS UPHELD BY HONBLE SUPREME COURT IN CASE OF C1T VS RAJENDRA PRASAD MOODY (1978 ) 115 ITR 519? 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. C1T(A) IS JUSTIFIED IN NOT UPHO LDING THE DISALLOWANCE U/S 14A R.W. R 8D OF THE INCOME TA X ACT 1961 AMOUNTING TO RS. 3,33,05,975/- WITHOUT ITA NO. 5505/DEL/2016 ASSESSMENT YEAR 2009-10 3 CONSIDERING RATIO DECIDENDI AS UPHELD IN CASES OF C IT VS WALFORT SHARE AND STOCK BROKERS P LTD (2010) 326 IT R 1 (SC) AND MAXOPP INVESTMENT VS CIT (2012) 347 ITR 272 (DELHI) ON APPLICATION OF PROVISIONS OF SECTION 14A OF THE ACT? 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR FORGO ANY GROUND(S) OF APPEAL EITHER BEFORE OR A T THE TIME OF HEARING OF THE APPEAL. 3. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. HOW EVER, LOOKING INTO THE FACTS OF THE CASE, WE DEEM IT FIT TO PROCEED TO HEAR THE APPEAL EX PARTE QUA THE ASSESSEE. 4. THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIA NCE ON THE FINDINGS OF THE ASSESSING OFFICER AND VEHEMENTLY AR GUED THAT THE ASSESSING OFFICER WAS CORRECT IN INVOKING RULE 8D R /W SECTION 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERR ED TO AS 'THE ACT') SO AS TO COMPUTE THE DISALLOWANCE. SHE, HOWE VER, COULD NOT NEGATE THE FACT THAT IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF JOINT INVE STMENT PVT. LTD. VS CIT IN ITA NO. 117/2017, THE DISALLOWANCE U /S 14A CANNOT EXCEED THE EXEMPT INCOME. 5. THE FACTS ARE UNDISPUTED AND HAVING HEARD THE LD . DR AND ALSO AFTER HAVING PERUSED THE IMPUGNED ORDER, WE AR E FULLY IN AGREEMENT WITH THE ACTION OF THE LD. CIT (A) IN FOL LOWING THE DICTA OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JOIN T INVESTMENT VS ITA NO. 5505/DEL/2016 ASSESSMENT YEAR 2009-10 4 CIT (SUPRA) WHEREIN THE HONBLE HIGH COURT HAS HELD IN PARA 9 OF THE SAID JUDGMENT AS UNDER: BY NO STRETCH OF IMAGINATION CAN SECTION 14A OR RU LE 8D BE INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMP T INCOME IS TO BE DISALLOWED. THE WINDOW FOR DISALLOWANCE IS IN DICATED IN SECTION 14A, AND IS ONLY TO THE EXTENT OF DISALLOWI NG EXPENDITURE 'INCURRED BY THE ASSESSEE IN RELATION T O THE TAX EXEMPT INCOME'. THIS PROPORTION OR PORTION OF THE T AX EXEMPT INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT AS H AS HAPPENED IN THIS CASE. 5.1 THEREFORE, RESPECTFULLY FOLLOWING THE RATIO OF THE HONBLE DELHI HIGH COURT AS AFORESAID, WE UPHOLD THE ACTION OF THE LD. CIT (A) AND DISMISS THE GROUNDS RAISED BY THE DEPAR TMENT. 6. IN THE RESULT, THE APPEAL OF DEPARTMENT STANDS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.01.2018. SD/- SD/- (R.S. SYAL) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDIC IAL MEMBER DT. 10 TH JANUARY 2018 GS ITA NO. 5505/DEL/2016 ASSESSMENT YEAR 2009-10 5 COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR