DCIT, New Delhi V. M/s. Anant Overseas Pvt. Ltd., New Delhi

ITA 59/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2873 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 03-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Keywords: Opportunity of being heard
• Section: 14A

Judgement Text

IN THE INCOME - TAX APPELLATE TRIBUNAL, DELHI BENCH A , NEW DELHI BEFORE : SHRI I.C. SUDHIR , JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 59/DEL./2014 ASSESSMENT YEAR: 2010 - 11 D.C.I.T., CENTRAL CIRCLE - 18, NEW DELHI. (APPELLANT) VS. ANANT OVERSEAS PVT. LTD., 305, 3 RD FLOOR, BHANOT CORNER, PAMPOSH ENCLAVE, G.K. - I, NEW DELHI. PAN - AAACA 0234B (RESPONDENT) A PPELLANT BY SH. S.K. JAIN, SR. DR RE SPONDENT BY SH. M.P. RASTOGI ADVOCATE & SH. RAJIV KUMAR, CA ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL OF THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) - III, NEW DELHI DATED 04.10.2013 FOR THE ASSESSMENT YEAR 2010 - 11 ON THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.2,63,00,285/ - OUT OF TOTAL DISALLOWANCE OF RS.2,64,94,305/ - , MADE BY THE AO IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE INCOME - TAX ACT, 1961 READ WITH R ULE 8D OF THE INCOME TAX RULES, 1962. 2. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. DATE OF HEARING 24.05.2017 DATE OF PRONOUNCEMENT 16 .06.2017 ITA NO. 59/DEL./2014 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME DECLARING LOSS OF RS.4,01,53,867/ - ON 20.09.2010. THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE. AS PER INFORMATION SUBMITTED BY THE ASSESSEE, T HE ASSESSEE COMPANY IS A NON - BANKING FINANCIAL COMPANY REGISTERED WITH THE RESERVE BANK OF INDIA. THE ASSESSEE IS AN INVESTMENT COMPANY AND MAIN BUSINESS OF THE COMPANY WAS TO MAKE INVESTMENT AND TO DEAL IN SHARES AND SECURITIES. DURING THE ASSESSMENT YEAR , THE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS.79,72,673/ - AND INTEREST INCOME OF RS.1,85,73,040/ - ON LOANS. THE DIVIDEND INCOME DOES NOT FORM THE PART OF TOTAL INCOME. ACCORDINGLY, THE ASSESSING OFFICER INVOKED SECTION 14A OF THE IT ACT AND THE ASSESSE E WAS ASKED TO EXPLAIN AS TO WHY DISALLOWANCE AS PROVIDED U/S. 14A SHOULD NOT BE MADE. THE ASSESSEE SUBMITTED THE DETAILS AND SUBMISSIONS BEFORE THE ASSESSING OFFICER. THE SUBMISSIONS OF THE ASSESSEE WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND THE ASSES SING OFFICER NOTED THAT THE ASSESSEE HIMSELF HAS NOT DISALLOWED ANY EXPENDITURE WITH RESPECT TO INCOME WHICH DOES NOT FORM THE PART OF TOTAL INCOME. ITA NO. 59/DEL./2014 3 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE AO CALCULATED THE DISALLOWANCE U/S. 14A READ WITH RU LE 8D OF THE IT RULES AND MADE DISALLOWANCE OF RS.2,64,94,305/ - (INDIRECT INTEREST U/R. 8D(II) OF RS.2,63,23,518 AND OTHER ADMINISTRATIVE EXPENSES U/R. 8D(III) OF RS.1,70,787/ - ). 3. AGGRIEVED BY THE ADDITION, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLA TE AUTHORITY AND MADE DETAILED SUBMISSIONS RELYING ON SOME CASE LAWS ALSO. THE ASSESSEE FURTHER SUBMITTED BEFORE THE LD. CIT(A) THAT WITHOUT PREJUDICE TO ABOVE, IT IS ALSO SUBMITTED THAT WHILE ALLOCATING THE INDIRECT INTEREST UNDER RULE 8D(II), LD. AO HAS ALLOCATED THE ENTIRE INTEREST PAID ON LOANS AND DID NOT CONSIDER THE INTEREST RECEIVED AMOUNTING TO RS.1,85,73,040/ - . 4. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, GAVE RELIEF OF RS.2,63,00,285/ - OUT OF DISALLOWANCE MADE U/R. 8 D(II) AND OF RS.12,589/ - OUT OF DISALLOWANCE MADE U/R. 8D(III). THE LD. CIT(A) HAS ALSO CATEGORICALLY NOTED IN HIS ORDER THAT A SUM OF RS.58,693/ - HAS ALREADY BEEN DISALLOWED BY THE APPELLANT ITSELF IN THE COMPUTATION OF TOTAL INCOME U/S. 14A. ITA NO. 59/DEL./2014 4 5. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS MADE A REASONED ORDER, WHICH DOES NOT REQUIRE ANY INTERFERENCE. HE FURTHER SUBMITTED THAT THE LD. AO HAS CORRECTLY APPLIED SECTION 14A IN DISALLOWING THE EXPENDITURE AND CALCULATED THE DISALLOWANCE U/R. 8D OF THE IT RULES. 6. ON THE OTHER HAND, THE LD. AR RELIED ON THE SUBMISSIONS MADE BEFORE THE LD.CIT(A) AS WELL AS THE FINDINGS REACHED BY HIM. 7. AFTER HEARING BOTH THE SIDES AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE FIND FROM THE ORDER OF THE AO THAT HE HAS NOTED IN HIS ORDER AT PARA 4.1 AND 4.3 THAT THE ASSESSEE HAS NOT MADE ANY DISALLOWANCE U/S. 14A HIMSELF WHEREAS THE LD. CIT(A) HAS RECORDED A FINDING AT PARA 6.5 THAT THE ASSESSEE HAS HIMSELF DISALLOW ED RS.58,693/ - U/S. 14A. WE FURTHER OBSERVE FROM THE ORDER OF THE LD. CIT(A) AT PAGE NO. 4 THAT THE ASSESSEE HIMSELF NARRATED THAT WHILE COMPUTING THE DISALLOWANCE U/S. 8D(II) BY THE ASSESSING OFFICER, HE HAS CONSIDERED ONLY THE INTEREST PA ID BUT HE HAS NOT CONSIDERED THE INTEREST RECEIVED ON LOANS AMOU NTING ITA NO. 59/DEL./2014 5 TO RS.1,85,73,040/ - . IT IS CLEAR FROM THE SUBMISSIONS OF THE ASSESSEE MADE BEFORE THE LD. CIT(A) THAT THE DISALLOWANCE MADE BY THE AO BY APPLYING THE PROCEDURE LAID DOWN IN RULE 8D IS RIGHT, BUT THE FIGURE OF INTEREST PAID SHOULD BE TAKEN AFTER NETTI NG THE SAME FROM THE INTEREST RECEIVED ON LOAN. WE, FURTHER OBSERVE THAT BOTH THE AUTHORITIES BELOW ARE IN SHARP CONTRADICTION REGARDING SUO MOTO DISALLOWANCE OF EXPENDITURE MADE BY THE ASSESSEE AS NOTED ABOVE . THEREFORE, THE ISSUE NEEDS TO BE RESTORED TO THE FILE OF AO FOR RE - CALCULATION OF DISALLOWANCE U/R. 8D(II) AFTER CONSIDERING THE INTEREST RECEIVED ON LOANS AMOUNTING TO RS.1,85,73,040/ - . THE AO HAS ALSO TO EXAMINE WHETHER THE ASSESSEE HAS MADE ANY SUO MOTO DISALLOWANCE AS OBSERVED BY THE LD. CIT(A). THE AO IS ALSO DIRECTED TO GIVE RELIEF OF RS.99,505/ - TOWARDS CIRCULATION CHARGES, ROC FILING FEES , SECRETARIAL AUDIT EXPENSES OF CA AND TDS FILING FEE ETC. AS NOTED BY THE LD. CIT(A), AS THESE BEING THE STATUTORY EXPENSES, THE COMPANY IS SUPPOSED TO INCU R UNDER THE LEGAL REQUIREMENTS. ACCORDINGLY, THE MATTER IS RESTORED TO THE FILE OF AO TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF OBSERVATIONS MADE ABOVE. NEEDLESS TO ITA NO. 59/DEL./2014 6 SAY, THE ASSESSEE SHALL BE AFFORDED REASONABLE OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 .06.2017 . SD/ - SD/ - ( I.C. SUDHIR ) ( L.P. SAHU ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16 .06.2017 *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