M/s. Bhushan Energy Ltd., New Delhi V. M/s. ACIT, New Delhi

ITA 563/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87012 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A MISHRA
• Assessee Lawyers: ADITY A KUMARCA
• Keywords: Earning of tax free income
• Section: 14A; 115JB; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER I.T.A .NO S. - 563 & 564 /DEL/201 3 (ASSESSMENT YEAR S - 200 9 - 10 & 2010 - 11 ) M/S BHUSHAN ENERGY LTD. VS. ACIT 1 ST F LOOR, F - BLOCK, CENTRAL CIRCLE - 13 INTERNATIONAL TRADE TOWER, NEW DELHI. NEHRU PLACE, NEW DELHI - 110019 PAN:AA CCB7445H (APPELLANT) (RESPONDENT) ASSESSEE BY: - SH. ASHWANI KUMAR, CA. & SH. ADITY A KUMAR,CA REVENUE BY: - SH. A . MISHRA , CIT . DR DATE OF HEARING: 22 /0 1 /2015 DATE OF PRONOUNCEMENT: /02/2015 ORDER PER C. M. GARG, JM. THESE TWO APPEAL S HA VE BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF CIT (APPEALS) - I NEW DELHI, BOTH DATED 2 6.11 .201 2 IN APPEAL NO.409 //201 1 - 1 2 FOR ASSESSMENT YEAR S 200 9 - 10 & 2010 - 11 RESPECTIVELY. ITA NO. 563/DEL/2013 2. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: 1. THAT THE ORDER DATED 26 - 11 - 2012 PASSED U/S 250 OF THE INCOME TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) I, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 13, NEW DELHI IN ADDING BACK A SUM OF RS.47,36,570/ - UNDER SECTION 14A I.T.A .NOS. - 563 & 564/DEL/2013 2 OF THE INCO ME TAX ACT, 1961 ON ACCOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME WHILE COMPUTING INCOME UNDER THE NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961. 2. THAT THE ORDER DATED 26 - 11 - 2012 PASSED U/S 250 OF THE INCOME TAX ACT, 1961 BY THE LEARNED CO MMISSIONER OF INCOME TAX (APPEALS) I, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO DIRECT THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 13, NEW DELHI TO ENHANCE THE ASSESSED INCOME BY RECALCULATING THE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 TO RS.47,99,535/ - . ITA NO. 564/DEL/2013 3. GROUND S RAISED BY THE ASSESSEE READ AS UNDER: 1. THAT THE ORDER DATED 26 - 11 - 2012 PASSED U/S 250 OF THE INCOME TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) I, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 13, NEW DELHI IN ADDING BACK A SUM OF RS.4,03,33,786/ - UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME WHILE COMPUTING INCOME UNDER THE NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961. 2. THAT THE ORDER DATED 26 - 11 - 2012 PASSED U/S 250 OF THE INCOME TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) I, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO DIRECT THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 13, NEW DELHI TO ENHANCE THE ASSESSED INCOME BY RECALCULATING THE DISALLOWANCE I.T.A .NOS. - 563 & 564/DEL/2013 3 U/S 14A OF THE INCOME TAX ACT, 1961 AFTER VERIFYING THE ACTUAL AMOUNT OF INTEREST EXPENDITURE AND TAKING INTO ACCOUNT THE AMOUNT CALCULATED RULE 8D(2)(III) TO COMPUTE THE DISALLOWANCE UNDER RULE 8D FOR COMPUTING INC OME UNDER THE NORMAL PROVISIONS OF THE ACT. 3. THAT THE ORDER DATED 26 - 11 - 2012 PASSED U/S 250 OF THE INCOME TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) I, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO DIRECT THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 13, NEW DELHI TO ENHANCE THE ASSESSED INCOME BY RECALCULATING THE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 196 AFTER VERIFYING THE ACTUAL AMOUNT OF INTEREST EXPENDITURE AND TAKING INTO ACCOUNT THE AMOUNT CALCULATED RULE 8D(2)(III) FOR COMPUTING BOOK PROFIT FOR THE PURPOSE OF COMPUTING MAT UNDER SECTION 115JB. 4. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APPEAL ARE THAT THE AO MADE ADDITIONS U/S 14A OF THE INCOME TAX ACT 1961, (FOR SHORT THE ACT) READ WITH RULE 8D OF THE INCOME TAX RULES 1962 (FOR SHORT THE RULES) AMOUNTING TO RS. 47,36,570/ - AND RS.4,03,33,786/ - RESPECTIVELY , IN BOTH THE ASSESSMENT YEARS. 5. THE ASSESSEE CARRIED OUT THE MATTER TO THE LD. CIT(A) BUT REMAINED EMPTY HANDED AS THE APPEALS OF THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS WERE DISMISSED. THE LD. CIT(A) ALSO CALCULATED THAT THE AMOUNT OF DISALLOWANCE WORKED OUT BY THE AO WAS NOT CORRECT AND HE ENHANCED THE DISALLOWANCE FROM RS. 46, 84,053/ - TO RS.47,99,535/ - FOR AY 2009 - 10 . I.T.A .NOS. - 563 & 564/DEL/2013 4 6. NOW AGGRIEVED THE ASSESSEE IS BEFORE THIS TRIBUNAL IN THIS SECOND APPEAL WITH THE GROUNDS AS REPRODUCED HEREINABOVE . G ROUND NO S . 1 & 2 IN BOTH THE APPEALS OF THE ASSESSEE 7. WE HAVE HEARD BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD, INTER ALIA, IMPUGNED ORDERS, ASSESSMENT ORDERS AND RATIO OF THE DECISIONS RELIED BY BOTH THE PARTIES. 8. AT THE OUTSET THE LD. ASSESSEE S REPRESENTATIVE (AR) SUBMITTED THAT THE LD. CIT(A) WAS AGAINST THE LAW AND FACTS OF THE CASE INASMUCH AS HE WAS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE AO IN MAKING ADDITION BY INVOKING SECTION 14A OF THE ACT R.W.R. 8D OF THE RULES ON ACCOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME WHILE COMPUTING THE INCOME UNDER NORMAL PROVISIONS OF THE ACT. 9. THE LD. AR FURTHER CONTENDED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN ENHANCING THE DISALLOWANCE WHICH WAS ASS ESSED BY THE AO WITHOUT PROVIDING DUE OPPORTUNITY TO THE ASSESSEE FOR AY 200 9 - 1 0 . THE LD. AR REITERATED THE SAME ARGUMENTS FOR APPEAL RELATED TO AY 2010 - 11 AND ALSO SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED TO DIRECT THE AO TO ENHANCED THE ASSESSED INCOME OF RECALCULATING THE DISALLOWANCE U/S 14A OF THE ACT AFTER VERIFYING THE ACTUAL AMOUNT OF INTEREST INCOME TAKING INTO ACCOUNT THE AMOUNT CALCULATED RU LE 8D (2)(III) TO COMPUTE THE DISALLOWANCE UNDER RULE 8D OF THE RULES FOR COMPUTING INCOME UNDER THE NORMAL PROVISIONS OF THE ACT. I.T.A .NOS. - 563 & 564/DEL/2013 5 10. THE LD. AR FURTHER DRAWN OUR ATTENTION TOWARDS PAPER BOOK PAGE NO. 6 TO 11 FOR A.Y. 2009 - 10 AND PAPER BOOK PAGE NO. 9 & 14 FOR A.Y. 2010 - 11 AND SUBMITTED THAT AS PER SCHEDULE 13 FORMING PART OF FINAL AUDITED ACCOUNTS SUBMITTED BEFORE THE AO , THERE WAS NO EXEMPT INCOME FOR THE ASSESSEE WHICH COULD ATTRACT DISALLOWANCE U/S 14A R.W.R. 8D OF THE RULES. THE LD. AR ALSO PLACED HIS RELIANCE ON THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF CIT VS. HOLCIM INDIA PVT. LTD. DATED 5.9.2014 IN ITA NO.586/2014 AND 299/2014 AND SUBMITTED THAT THE ASSESSEE HAS INVESTED IN THE COMPANY WHICH WERE NOT SHOWING IN TH E PROFIT UNDER BUSINESS STRATEGY AND THERE WAS NO EXEMPT INCOME FOR THE ASSESSEE DURING BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION , THEREFORE, NO DISALLOWANCE CAN BE MADE . 11. THE LD. AR ALSO PLACED RELIANCE ON THE DECISION OF ITAT C BENCH IN THE CAS E OF INTEGRATED DATABASE INDIA, LTD. VS. DCIT DATED 6.2.2015 IN ITA NO.4582/DEL/2013 FOR AY 2009 - 10 AND SUBMITTED THAT TAKING COGNIZANCE OF THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF HOLCIM INDIA PVT. LTD. (SUPRA) IT HAS BEEN HELD THA T WHERE THE ASSESSEE HAD NOT EARNED ANY TAX FREE INCOME THEN IN ABSENCE OF ANY TAX FREE INCOME THE CORRESPONDING EXPENDITURE COULD NOT WORKED OUT FOR DISALLOWANCE U/S 14A R.W.R. 8D OF THE RULES. 12. REPLYING TO THE ABOVE, THE LD. DR SUBMITTED THAT RULE 8D OF THE RULES IS APPLICABLE TO THE AY 2009 - 10 AND 2010 - 11 THEREFORE, THE AO WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT R.W.R. 8D OF THE RULES. THE LD. I.T.A .NOS. - 563 & 564/DEL/2013 6 DR FURTHER SUBMITTED THAT THE ASSESSEE MAY HAVE EARNED INCOME FROM INVESTMENTS IN THE SUBSEQUENT YEAR WHICH WOULD BE EXEMPT THEREFORE, DISALLOWANCE MADE BY THE AO AND UPHELD AND ENHANCED BY THE LD. CIT(A) WAS JUSTIFIED. HOWEVER, THE LD. DR FAIRLY ACCEPTED THAT HE IS UNABLE TO SHOW ANY CONTRARY DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDIA PVT. LTD. (SUPRA). 13. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, AT THE OUTSET , WE NOTE THAT THE LD. AR HAS MADE A STATEMENT AT BAR ON BEHALF OF THE ASSESSEE BEFORE US THAT THE ASSESSEE H AS NOT EARNED ANY EXEMPT INCOME DURING BOTH THE ASSESSMENT YEARS FROM THE INVESTMENT MADE BY THE ASSESSEE DURING RELEVANT PERIOD. 14. WE FURTHER NOTE THAT THE SCHEDULE 13 FORMING PART OF ACCOUNTS SUBMITTING BEFORE THE AO FOR BOTH THE YEARS ALSO SHOW THAT IN THE COLUMN OF OTHER INCOME THE ASSESSEE HAS NOT SHOWN ANY EXEMPT INCOME DURING THESE TWO FINANCIAL YEARS RELEVANT TO THE ASSESSMENT YEARS UNDER CONSIDERATION. WE ALSO OBSERVED THAT THE LD. DR HAS NOT DISPUTED THIS FACT THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING BOTH THE FINANCIAL PERIOD UNDER CONSIDERATION. 15. IN THIS SITUATION, WE FURTHER RESPECTFULLY TAKE NOTE OF THE DECISION OF ITAT C BENCH IN THE CASE OF INTEGRATED DATABASE INDIA LTD. VS. DCIT WHEREIN REFERRING TO THE OBSERVATION S OF HON BLE HIGH COURT OF DELHI IN THE CASE OF HOLCIM INDIA PVT. LTD. (SUPRA) IT HAS BEEN HELD THAT ASSESSEE HAS NOT EARNED ANY TAX FREE INCOME THEN IN ABSENCE OF ANY TAX FREE INCOME THE CORRESPONDING I.T.A .NOS. - 563 & 564/DEL/2013 7 DISALLOWANCE COULD NOT BE WORKED OUT FOR MAKING DISALL OWANCE U/S 14A R.W.R. 8D OF THE RULES. 16. IN THE PRESENT CASE, SIMILAR FACTS AND CIRCUMSTANCES HAVE BEEN NOTED BY US AND THEREFORE, WE ARE INCLINED TO HOLD THAT THE ISSUE DISALLOWANCE U/S 14A OF THE ACT R.W.R. 8D OF THE RULES IN BOTH THE APPEALS IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON BLE JURISDICTION HIGH COURT OF DELHI IN THE CASE OF HOLCIM INDIA PVT. LTD. (SUPRA) AND HENCE, WE REACHED TO A LOGICAL CONCLUSION THE DISALLOWANCE CALCULATED AND MADE BY THE AO AND UPHELD BY THE C IT(A) IN BOTH ASSESSMENT YEARS ARE NOT SUSTAINABLE AND WE DIRECT THE AO TO DELETE THE SAME. ACCORDINGLY, GROUND NOS. 1 & 2 OF THE ASSESSEE IN BOTH THE APPEALS ARE ALLOWED. GROUND NO. 3 OF THE ASSESSEE FOR AY 2010 - 1 1 1 7 . APROPOS GROUND NO.3 FOR AY 2010 - 11 THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE CIT(A) WAS AGAINST THE PROVISIONS OF THE ACT AS MUCH AS HE WAS NOT JUSTIFIED TO DIRECT THE AO TO ENHANCE THE ASSESSED INCOME BY RECALCULATING THE DISALLOWANCE U/S 14A OF THE ACT AFTER V ERIFYING THE ACTUAL AMOUNT OF INVEST EXPENDITURE AND TAKING INTO ACCOUNT THE AMOUNT CALCULATED UNDER RULE 8D(2)(III) FOR COMPUTING BOOK PROFIT FOR THE PURPOSE OF COMPUTING MINIMUM ALTERNATE TAX (MAT) U/S 115JB OF THE ACT. LD. COUNSEL FURTHER POINTED OUT WH EN DISALLOWANCE AND ADDITION U/S 14A OF THE ACT R.W.R. 8D OF THE I.T.A .NOS. - 563 & 564/DEL/2013 8 RULES IS NOT SUSTAINABLE THEN H OW THE REVENUE AUTHORITIES CAN RECALCULATED THE PROFIT FOR PURPOSE OF COMPUTING THE MAT U/S 115JB OF THE ACT. 1 8 . THE LD. DR SUPPORTING THE ACTION OF THE AO AN D CIT(A), CONTENDED THAT WHILE THE AO GOES ON TO INVOKE PROVISIONS OF SECTION 14A OF THE ACT R.W.R. RULE 8D OF THE RULES THEN FOR THE PURPOSE OF COMPUTATION OF MAT U/S 115JB RECALCULATION OF PROFIT IS REQUIRED. 1 9 . IN VIEW OF ABOVE SUBMISSIONS OF BOTH THE SIDES, WE RESPECTFULLY FOLLOW THE DECISION OF ITAT F BENCH DELHI IN ITA 2974/DEL/2013 DATED 09 - 01 - 2015 WHEREIN IT HAS BEEN HELD THAT IN THE ABSENCE OF ANY EXEMPT INCOME, SECTION 14A DISALLOWANCE CANNOT BE ADDED TO BOOK PROFIT U/S 115JB OF THE ACT. ACCORDINGLY, WE ARE INCLINED TO HOLD THAT THE DIRECTION OF THE CIT(A) IN THIS REGARD ARE NOT SUSTAINABLE IN VIEW OF OUR CONCLUSION IN THE EARLIER PART OF THIS ORDER WHERE WE HAVE HOLD THAT NO DISALLOWANCE U/S 14A OF THE A CT R.W.R. 8D OF THE RULES IS SUSTAINABLE. HENCE, GROUND NO.3 OF THE ASSESSEE FOR AY2010 - 11 IS ALSO ALLOWED. 20 . IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 /0 3 /2015. - SD/ - - SD/ - ( PRAMOD KUMAR ) (C. M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 09 /0 3 /2015 *AK VERMA* I.T.A .NOS. - 563 & 564/DEL/2013 9 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR