ACIT, New Delhi V. M/s. Paras Buildtech (India) Pvt. Ltd., Gurgaon

ITA 5958/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3552 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 02-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Search and seizure; Earning of tax free income
• Section: 143(3); 153A; 14A; 132; 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO.5958/DEL/2015 A.Y. : 2011-12 ACIT, CENTRAL CIRCLE-14, ROOM NO. 354, E-2, ARA CENTRE, JHANDEWALAN EXTENSION, NEW DELHI 110 055 VS. M/S PARAS BUILDTECH (INDIA) PVT. LTD., 11 TH FLOOR, PARAS TWIN TOWER, GOLD COURSES ROAD, SECTOR-54, GURGAON-122002 (PAN: AAECP1343A) (ASSESSEE) (RESPONDENT) REVENUE BY : MS. ASHIMA NEB, SR. DR ASSESSEE BY : SH. SALIL AGGARWAL, ADV. & SH. SHAILESH GUPTA, ADV. ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THIS APPEAL AGAINST THE IMPUGN ED ORDER DATED 28.8.2015 OF THE LD. CIT(A)-XXVI, NEW DELHI REL EVANT TO ASSESSMENT YEAR 2011-12. 2. THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER: - 1. THAT THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 4,91,863/- ON ACCOUNT OF DISALLOWANCE OF PERSONAL USAGE. 2 2. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 63,78,347/- MADE BY AO U/S. 14A R.W. RULE 8D. 3(A) THE ORDER OF THE CIT(A) IS ERRONEOUS AND NOT TENABLE IN LAW AND ON FACTS. (B) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY / ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE ACTION U/S. 132 OF THE INCOME TAX ACT, 1961 (HEREINAF TER REFERRED AS THE ACT) WAS CARRIED OUT IN THE CASES OF PARAS GROUP O F CASES ON 09.09.2010 BY THE DIRECTORATE OF INCOME TAX (INVESTI GATION), NEW DELHI. THE SEARCH ACTION COVERED VARIOUS BUSINESS PREMISE OF THE GROUP, PROJECT SITES, RESIDENCE OF DIRECTORS, AND OT HER ASSOCIATED ENTITIES. THE ASSESSEE COMPANY WAS INCORPORATED ON 01 .12.2006. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL EST ATES. THE AO ISSUED NOTICE U/S. 143(2) OF THE ACT ON 27.2.2012 TO THE ASSESSEE AND IN RESPONSE TO THE SAME, ASSESSEE FILED A COPY O F THE RETURN DECLARING AT AN INCOME OF RS. 11,78,23,598/- FOR THE AY 2011-12 ALONGWITH A LETTER DATED 20.3.2012, BY STAGING THAT TH E ASSESSEE HAD ALREADY FILED ITS RETURN U/S. 139 OF THE ACT AND TH E SAME MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S. 153A OF THE ACT. 3 IN RESPONSE TO THE VARIOUS STATUTORY NOTICES, THE AR OF THE ASSESEE ATTENDED THE ASSESSMENT PROCEEDINGS FROM TIME TO TIME A ND ALSO FURNISHED THE REQUIRED INFORMATION / DETAILS AND EXPL ANATION AS CALLED FOR. DURING THE YEAR THE ASSESSEE HAS CLAIM ED TELEPHONE, CELL AND LAND LINE INTERNET EXPENSE AMOUNTING TO RS. 16,39,5 46/-. THE AO IS OF THE VIEW THAT ELEMENT OF PERSONAL USAGE OF THE SE EXPENSES CANNOT BE RULED OUT, ACCORDINGLY, HE DISALLOWED 30% OF THESE EXPENSES I.E. RS. 4,91,863/- AND ADDED BACK TO THE I NCOME OF THE ASSESSEE. THE AO HAS ALSO OBSERVED THAT ASSESSEE H AD INCURRED AN EXPENSES OF RS. 60,00,000/- AS INTEREST ON INVESTMENT. THESE EXPENDITURE IS DIRECTLY RELATED TO INCOME AND IT DOES NOT FORM PART OF THE TOTAL INCOME. ACCORDINGLY, HE DISALLOWED A SUM O F RS. 60 LACS AS PER RULE 8D(2)(I) OF I.T. RULES, 1972. FURTHER AS PER RULE 8D(2)(III) AN AMOUNT EQUAL TO 0.5% OF THE AVERAGE VALU E OF INVESTMENT OF RS. 7,56,69,500/- I.E. RS. 3,78,347/- WAS ALSO DISALLOWED BY THE AO AND TOTAL DISALLOWANCE ON ACCOUN T OF EXPENSES INCURRED FOR EARNING EXEMPT INCOME AS PER THE PROVISI ONS OF SECTION 14A R.W. RULE 8D WAS RS,. 63,78,347/- AND ADDED TO THE INCOME OF THE ASSESSEE AND INCOME OF THE ASSSESEE. HE COMPLETED THE ASSESSMENT AT THE TOTAL INCOME OF RS. 12,46,93,808/- V IDE ORDER 28.3.2013 PASSED U/S. 143(3) OF THE ACT. AGAINST THE AF ORESAID ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CI T(A)-XXVI, 4 NEW DELHI, WHO VIDE HIS IMPUGNED ORDER DATED 28.08.2 015 HAS ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED WIT H THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TR IBUNAL. 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 5. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HAS PASSED A WELL REASONED ORDER BY RESPECTFULLY FOLLOWING THE HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS. TAIKISHA ENGINEERING IND IA LTD. (2015) 370 ITR 338 (DELHI), WHICH DOES NOT NEED ANY INTERFE RENCE ON OUR PART AND REQUESTED THAT THE SAME MAY BE UPHELD BY DIS MISSING THE APPEAL OF THE REVENUE. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEV ANT RECORDS, ESPECIALLY THE IMPUGNED ORDER. WITH REGARD TO GROUND NO. 2 RELATING TO DELETION OF ADDITION OF RS. 63,78,347/- MADE BY THE AO U/S. 14A R.W. RULE 8D IS CONCERNED, WE FIND THAT AO H AS PROCEEDED TO MAKE THE IMPUGNED DISALLOWANCE WITHOUT CONFRONTING P ROPOSED DISALLOWANCE TO THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS AND THEREFORE, HAS COMPLETELY IGNORED THE FACTUAL MATRIX OF THE CASE. THE INTEREST AMOUNTING TO RS 60 LAKHS DEBITED IN P&L A/C HAS BEEN PAID TO M/S PINK AND BLUE P LTD IN PURSUANCE O F A WRITTEN 5 AGREEMENT WHEREIN THE ASSESSEE WAS IN AGREEMENT IS BO UND TO DELIVER THE CONSTRUCTED AREA AS PER THE STIPULATED TIME A ND BECAUSE OF NON-FULFILLMENT ON THE PART OF THE ASSESSEE, THE RE QUISITE INTEREST EXPENSE HAD TO BE INCURRED. THIS CLEARLY SHOWS THAT TH E IMPUGNED INTEREST EXPENSE HAS NOTHING TO DO WITH THE INVESTMENT MA DE INTO THE UN-QUOTED SHARES OF ITS SUBSIDIARY COMPANY BY THE ASSESSEE. THEREFORE, THERE IS NO CASE FOR THE CONSEQUENT DISALLO WANCE MADE, HENCE, THE SAME WAS RIGHTLY DELETED BY THE LD. CIT(A) IN HIS IMPUGNED ORDER. WE FURTHER FIND THAT THERE IS NO EX EMPT INCOME CREDITED IN THE P&L A/C DURING THE YEAR UNDER CONSI DERATION AND THEREFORE, NO DISALLOWANCE U/S 14A OF THE ACT WAS WARR ANTED. IT IS ALSO SEEN THAT THE ASSESSEE COMPANY HAS SHAREHOLDERS FUNDS AS ON 31.03.2011 TO THE TUNE OF RS. 46.81 CRORES WHEREAS I NVESTMENT IN THE SHARES OF SUBSIDIARY COMPANIES IS ONLY 15.07 CRO RES. AS SUCH THE SHAREHOLDERS FUNDS ARE SUBSTANTIALLY IN EXCESS OF AM OUNT INVESTED AND THE LOGICAL INFERENCE FROM THE SAME COULD ONLY BE THAT THE IMPUGNED INVESTMENTS HAVE BEEN MADE OUT OF SELF GENER ATED FUNDS AND NOT INTEREST BEARING RESOURCES. THE JUDGEMENT. OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS TAIKISHA ENGI NEERING INDIA LTD 2015 37.0 ITR 338 (DELHI) IS DIRECTLY APPLICABLE TO THE FACTS OF THE CASE. WE ALSO AGREE WITH THE CLAIM OF THE ASSESSEE TH AT THE IMPUGNED INVESTMENTS IN THE SHARES OF THE SUBSIDIARY COMPANIES IS 6 NOT MEANT TO GENERATE DIVIDEND INCOME BUT ARE STRATEGIC I N NATURE TO OBTAIN LONG TERM ADVANTAGE IN TERMS OF CONTROL OF T HE BUSINESS. OUR VIEW IS FORTIFIED BY THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS ORIENTAL STRUCTURAL ENGINEERS PVT LTD 4245/DEL/2011 AND OF ITAT, DELHI IN THE CASE OF ACIT CIRCLE 2(1), NEW DELHI VS. BHARAT HOTEL LTD (IT AT NO. 4959/DEL/20 12 & NO. 5401/DEL/2013, ON WHICH THE LD. CIT(A) HAS ALSO RELI ED. IN VIEW OF THE ABOVE DETAILED ANALYSIS OF THE CASE, THERE IS NO CASE FOR DISALLOWANCE U/S 14A, HENCE, THE SAME WAS RIGHTLY DIRECTED TO BE DELETED BY THE LD. CIT(A), WHICH DOES NOT NEED ANY I NTERFERENCE ON OUR PART, THEREFORE, WE UPHOLD THE WELL REASONED OR DER PASSED BY THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND ACCORDINGL Y REJECT THE GROUND NO. 2 RAISED BY THE REVENUE. 6.1 WITH REGARD TO GROUND NO. 1 IS CONCERNED, RELAT ING TO DELETION OF ADDITION OF RS. 4,91,963/- ON ACCOUNT OF DISALLOWA NCE OF PERSONAL USAGE IS CONCERNED, WE FIND THAT AO HAS MADE A DISAL LOWANCE AT THE RATE OF 30% OUT OF DEBIT UNDER THE HEAD 'TELEPHONE EXP ENSES' LEADING TO DISALLOWANCE OF RS 4,91,863. WE NOTE THAT TH E AO HAS MADE IMPUGNED DISALLOWANCE ON THE BASIS OF OBSERVATI ONS THAT ELEMENT OF PERSONAL USAGE IN RESPECT OF SUCH EXPENSE S COULDN'T BE RULED OUT. THE AR OF THE ASSESSEE HAS CLAIMED THE I MPUGNED DISALLOWANCE, IS ON THE BASIS OF A GENERAL OBSERVATIO NS AND NOTHING OF PERSONAL USAGE HAS BEEN SPECIFICALLY POINTED OUT BY THE AO. WE FURTHER NOTE THAT IT HAS ALSO BEEN CLAIMED THAT NO B ASIS FOR HOLDING 30% OF THE IMPUGNED EXPENSES AS DISALLOWANCE HAS BE EN BROUGHT 7 ON RECORD. HENCE, WE ARE IN AGREEMENT WITH THE CONTEN TIONS OF THE ASSESSEE ON THE ISSUE AS THIS IS THE CASE OF A PRIVA TE LTD. COMPANY WHEREIN THE NORMAL PERSONAL USAGE OF EXPENSES AND TH E CONSEQUENT DISALLOWANCE IS LEGALLY NOT PERMISSIBLE. THERE HAS NOT BEEN ANY LOGICAL BASIS FOR THE AO TO HOLD THE VIEW THAT 30% OF THE IMPUGNED EXPENSES PERTAIN TO PERSONAL USAGE. THEREFORE, DISA LLOWANCE MADE WAS RIGHTLY DIRECTED TO BE DELETED BY THE LD. CIT(A), W HICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, THEREFORE, WE UPH OLD THE WELL REASONED ORDER PASSED BY THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND ACCORDINGLY REJECT THE GROUND NO. 1 RAISED BY THE REV ENUE. 7 IN THE RESULT, THE APPEAL FILED BY THE REVENUE STAN DS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/02/2018. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 01/02/2018 SRBHATNAGAR COPY FORWARDED TO: - 1. ASSESSEE - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHE S