M/s. SVP Industries Ltd., Muzaffarnagar V. DCIT, New Delhi

ITA 5646/DEL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2763 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 31-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 21-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: BALWANT SINGH
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME - TAX APPELLATE TRIBUNAL, DELHI BENCH G , NEW DELHI BEFORE : S MT. DIVA SINGH , JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 5646/DEL./2013 ASSESSMENT YEAR: 2009 - 10 SVP INDUSTRIES LTD., MANSOORPUR, MUZAFFARNAGAR.(PAN - AAECS3637C) (APPELLANT) VS. D.C.I.T., CIRCLE 19, NEW DELHI. (RESPONDENT) ASSESSEE BY SH. BALWANT SINGH, ADVOCATE REVENUE BY SH. S.S. RANA, CIT/DR ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) - XXXIII, NEW DELHI DATED 24.06.2013 FOR THE ASSESSMENT YEAR 2009 - 10 ON THE FOLLOWING GROUNDS : WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) IS RIGHT IN CONFIRMING THE DISALLOWANCE MADE BY THE AO U/S 14A READ WITH RULE 8D OF INCOME TAX RULES, 1962 WHEN NO EXPENSES WERE INCURRED BY THE ASSESSEE IN EARNING THE SAID EXEMPT DIVIDEND INCOME. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) IS RIGHT IN CONFIRMING THE DISALLOWANCE MADE BY THE AO U/S. 14A READ WITH RULE 8D OF INCOME TAX RULES, 1962 WHEN THE ASSESSING OFFICER DID NOT BRING ANY EVIDENCE ON RECORD TO ESTABLISH THAT ANY EXPENDITURE HAD BEEN INCURRED BY THE ASSESSEE FOR EARNING EXEMPT INCOME. DATE OF HEARING 01.06.2017 DATE OF PRONOUNCEMENT 06.07 .2017 ITA NO. 5646/DEL./2013 2 2 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.09.2009 DECLARING INCOME AT RS.2,24,78,290/ - . THE APPELLANT WAS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF SPIRIT, IMFL AND COUNTRY LIQUOR. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE MADE INVESTMENTS DURING THE YEAR . THE INVESTMENT AT THE BEGINNING OF THE YEAR WAS OF RS.5,34,94,339/ - AND AT THE CLOSE OF THE YEAR THE AMOUNT OF INVESTMENTS INCR EASED TO RS.5,73,51,171/ - . THE AO FURTHER NOTICED THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.2,32,109/ - CLAIMING THE SAME AS EXEMPT NOT FORMING THE PART OF TOTAL INCOME. SINCE THE APPELLANT DID NOT DISALLOW ANY AMOUNT U/S. 14A, THE AO RESORTING TO THE PROVISIONS OF THIS SECTION READ WITH RULE 8D, DISALLOWED THE EXPENDITURE TO THE EXTENT OF EXEMPT INCOME OF RS.2,32,109/ - . THE ADDITION SO MADE BY THE ASSESSING OFFICER STOOD CONFIRMED BY THE LD. CIT(A) VIDE IMPUGNED ORDER. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. THE LD. AR SUBMITTED THAT THE AUTHORITIES BELOW HAVE FAILED TO CONSIDER THE CRUCIAL FACT THAT THE ASSESSEE DID NOT MAKE ANY EXPENDITURE TO EARN THE IMPUGNED DIVIDEND INCOME NOR IS THERE ITA NO. 5646/DEL./2013 3 ANY SATISFACTION TO THIS EFFECT ON THE PART OF THE AUTHORITIES BELOW. AT THE BEGINNING OF THE YEAR THE INVESTMENT WAS RS.5,34,94/339 / - AND AT THE CLOSE OF THE YEAR IT WAS RS.5,73,51,171/ - WHICH SHOWS THAT THERE WAS INCREASE OF RS.38,56,832 / - WHICH WAS MADE OUT OF THE FUNDS AVAILABLE IN THE BANK OF THE ASSESSEE AND THEREFORE, NO COMPONENT OF INTEREST ON THIS AMOUNT WAS INVOLVED. NO EXPENSES HAD BEEN INCURRED IN EARNING THE EXEMPT INCOME OF RS.2,32,109/ - . THE AO WHILE DISALLOWING THE CLAIM OF ASSESSEE HAS NOT BROUGHT ON RECORD ANYTHING TO ESTABLISH THAT THE ASSESSEE HAD INCURRED ANY EXPENSES WHILE EARNING THIS EXEMPT INCOME AND HE HAS NOT GIVEN ANY FINDING IN THIS RESPECT. IT WAS SUBMITTED THAT IN APPELLANT'S OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT Y EAR 2008 - 09 , ITAT 'D' BENCH, NEW DELHI HAS DECIDED THIS ISSUE IN FAVOUR OF THE APPELLANT IN ITA NO.6652/DEL/2013 VIDE ORDER 23 . 09 . 2015 . THEREFORE, THE ACTION OF THE AUTHORITIES BELOW IN DISALLOWING RS.2,32,109/ - AGAINST THE DIVIDEND INCOME U/S 14A READ WIT H RULE 8D WAS NOT JUSTIFIED. RELIANCE IS FURTHER PLACED ON THE FOLLOWING DECISIONS: (I). DECISION OF PUNJAB & HARYANA HIGH COURT IN CIT VS. HERO CYCLES LTD. (ITA NO.331/2009(0&M) DECIDED ON 04.11.2009) . ITA NO. 5646/DEL./2013 4 (II). MAXOPP INVESTMENT LTD. VS COMMISSIONER OF INCOME - TAX NEW DELHI (2011) 15 TAXMANN. COM 390(DELHI HC) (III). CIT VS. WALFORT SHAE AND STOCK BROKERS (P) LTD. 326 ITR 1(SC) 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE LD. AUTHORITIES BELOW AND SUBMITTED THAT THE DECISIONS OF HON BLE PUNJAB & HARYANA HIGH COURT AND OF HON BLE SUPREME COURT ARE NOT APPLICABLE AS THEY PERTAIN TO THE PERIOD PRIOR TO INTRODUCTION OF RULE 8D BY VIRTUE OF NOTIFICATION NO. 45/2008 DATED 24.03.2009 AND THEREFORE, THE AUTHORITIES BELOW HAVE RIGHTLY MADE IMPUGNE D DISALLOWANCE BY RESORTING TO SECTION 14A READ WITH RULE 8D OF THE IT RULES. RELIANCE IS PLACED ON THE DECISION OF DELHI HIGH COURT IN INDIABULLS FINANCIAL SERVICES LTD. VS. DCIT, 76 TAXMANN. COM 268 AND OF ITAT, DELHI BENCH IN VIPIN MALIK VS. ACIT, 45 IT R 589. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD AND WE FIND THAT NO DOUBT, THE SIMILAR ISSUE AS INVOLVED IN THE PRESENT APPEAL STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY ITAT, DELHI BENCH IN THE CASE OF ASSESSEE FOR A.Y. 2008 - 09, BUT IN THE ATTENDING FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT UNLESS THE CONTENTION OF THE ASSESSEE THAT HE HAD ITA NO. 5646/DEL./2013 5 SUFFICIENT FUNDS IN ITS BANK TO INVEST IN SHARES AND THAT INVE STMENT IN SHARES HAS BEEN MADE OUT OF THAT SURPLUS MONEY ALREADY STANDING IN THE BANK ACCOUNT OF ASSESSEE IS VERIFIED, THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED. NONE OF THE AUTHORITIES BELOW HAVE EXAMINED AND VERIFIED THIS ASPECT OF THE CASE NOR HAS RE CORDED ANY FINDING THEREON BEFORE DECIDING THE ISSUE IN QUESTION. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AO FOR DECIDING THE SAME AFRESH IN THE LIGHT OF OBSERVATIONS MADE ABOVE. NEEDLESS TO SAY, THE ASSESSEE SHALL BE GIVEN REASONABLE OPPORTUN ITY OF BEING HEARD. ACCORDINGLY, THE APPEAL DESERVES TO BE ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 06.07.2017 . SD/ - SD/ - ( DIVA SINGH) ( L.P. SAHU ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 06.07.2017 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI