M/s. Vipul Infracon Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 5507/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3833 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 15-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Assessee Lawyers: RAJESH ARORA
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SH.G.D.AGRAWAL, HONBLE PRESIDENT AND SH.K.N.CHARY, JUDICIAL MEMBER ITA NO. 5507/DEL/2015 (ASSESSMENT YEAR: 2010 -11) APPELLANT BY SH. RAJESH ARORA, CA RESPONDENT BY SH. F.R.MEENA, SR.DR DATE OF HEARING 25 . 1 0.2017 DATE OF PRONOUNCEMENT 25 . 1 0.2017 ORDER PER G.D.AGRAWAL, PRESIDENT AGGRIEVED BY THE ORDER DATED 20.07.2015 IN APPEAL N O.233/14-15 PASSING BY THE COMMISSIONER OF INCOME TAX (APPEAL) [IN SHO RT CIT(A)]-I, NEW DELHI FOR 2010-11 ASSESSMENT YEAR, THE ASSESSEE FILED THIS AP PEAL ON THE FOLLOWING GROUNDS:- 1. THE LD.CIT(A) HAS ERRED IN LAW AND FACTS OF THE CA SE IN CONFIRMING THE ACTION OF THE LD.AO FOR INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF INCOME TAX RULES, 1962 (THE R ULES) WITHOUT RECORDING THE SATISFACTION AND DISREGARDING THE SUB MISSIONS AND EXPLANATIONS OF THE APPELLANT COMPANY WHICH IS HIGH LY ARBITRARY, UNJUSTIFIED, UNCALLED FOR AND BAD IN LAW. 2. THE LD.CIT(A) HAS ERRED IN LAW AND FACTS OF THE CAS E IN CONFIRMING THE ACTION OF LD.AO IN COMPUTING THE DISALLOWANCE AMOUN TING TO RS.2,56,169 AND APPLYING RULE 8D OF THE RULES READ WITH SECTION 14A OF THE ACT WHICH IS HIGHLY ARBITRARY, UNJUSTIFIED, BAS ELESS AND BAD IN LAW. VIPUL INFRACON PVT.LTD., 14/185-186, GROUND FLOOR, MAIN SHIVALIK ROAD, MALVIYA NAGAR, NEW DELHI-110017. PAN-AAACT4544M VS DCIT, CENTRAL CIRCLE-02, NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO. 5507/DEL/2015 2 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND ALLIED ACTI VITIES. FOR AY 2010-11 AY, THEY HAVE FILED THEIR RETURN OF INCOME OF RS.15,42,29,59 1/- ON 14.10.2010 AND DURING THE PROCEEDINGS U/S 143(3) OF THE ACT, THE AO MADE THE FOLLOWING DISALLOWANCES:- (I) DISALLOWANCE OF INTEREST PAID RS.22,50,000/- (II) DISALLOWANCE OF RENT RS.16,30,500/- (III) MAINTENANCE INCOME RS.50,32,287/- (IV) DISALLOWANCE OF COMPENSATION EXPENSES RS.1,09 ,17,200/- (V) DISALLOWANCE U/S 14A RS.2,56,169/- 3. IN THE APPEAL PREFERRED BY THE ASSESSEE, LD.CIT( A) SUSTAINED THE ADDITION OF RS.2,56,169/- MADE U/S 14A OF THE ACT AND DELETED A LL OTHER ADDITIONS. THE ASSESSEE IS, THEREFORE, BEFORE US IN THIS APPEAL CH ALLENGING THE ORDER OF THE LD.CIT(A) SUSTAINING THE ADDITION OF RS.2,56,169/-. 4. AT THE OUTSET, ARGUMENT OF THE LD.AR IS THAT THE AUTHORITIES BELOW ERRED IN MAKING AND SUSTAINING THE ADDITION OF RS.2,56,169/- BY INVOKING THE PROVISIONS U/S 14A OF THE ACT, ON THE FACE OF THE SUBMISSION O F THE ASSESSEE THAT IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE DID NOT DERIVE AN Y EXEMPT INCOME. LD. SR. DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BE LOW. 5. LD. AR PLACED RELIANCE ON THE DECISION OF THE HO NBLE JURISDICTIONAL DELHI HIGH COURT IN CHEMINVEST LTD. VS CIT-IV, [2015] 61 TAXMANN.COM 18 (DELHI) FOR THE PRINCIPLE THAT SECTION 14A OF THE ACT ENVISAGES THA T THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME WHICH IS NOT INCLUDED IN THE TOTA L INCOME FOR APPLICATION OF SECTION 14A OF THE ACT AND WHERE THERE IS NO EXEMPT INCOME EITHER RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR, SECTI ON14A OF THE ACT HAS NO ITA NO. 5507/DEL/2015 3 APPLICATION AT ALL. HERE IN THIS MATTER, VIDE PARA GRAPH NO.7.1 OF THE ASSESSMENT ORDER, IT IS FOUND THAT THE ASSESSEE HAS BEEN PLEAD ING BEFORE THE AUTHORITIES THAT IN THE YEAR UNDER CONSIDERATION THEY DID NOT HAVE A NY EXEMPT INCOME. HOWEVER, THE AO WHILE PLACING RELIANCE ON SPECIAL BENCH DECI SION DATED 05.05.2009 OF THIS TRIBUNAL IN THE CASE OF CHEMINVEST LTD. VS ITO 317 ITR 86 WHEREIN IT WAS HELD THAT EXPENDITURE WAS ALLOWABLE TO THE ASSESSEE WITHOUT A NY REQUIREMENT OF EARNING OR RECEIPT OF INCOME. ON THAT ANALOGY, THE AO HOLD TH AT THE EXPENDITURE SHALL BE DISALLOWED WHETHER OR NOT ANY INCOME WAS GENERATED. HOWEVER, IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN CHEMINVEST LTD. (SUPRA) AND ON THE FACE OF THE FACTUAL POSITION THAT THERE IS NO DISPU TE AS TO THE ASSESSEE NOT DERIVING ANY EXEMPT INCOME, WE ARE OF THE CONSIDERED OPINION THAT THE DISALLOWANCE IS NOT PERMISSIBLE WHERE NO EXEMPT INCOME IS RECEIVED OR R ECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. WE, THEREFORE, FIND IT DIFFICULT TO SUSTAIN THE ORDER OF THE LD. CIT(A) ON THE ASPECT OF DISALLOWANCE U/S 14A OF THE ACT. WE, THEREFORE, ALLOWING THE GROUND OF APPEAL AND DIRECT THE AO TO DELETE THE SA ME. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 25 TH OCTOBER, 2017. SD/- SD/- (K.N.CHARY) (G.D.AGRAWAL) JUDICIAL MEMBER PRESIDENT *AMIT KUMAR* DATE:-25.10.2017 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO. 5507/DEL/2015 4