ACIT, New Delhi V. M/s. Feedback Infra Pvt. Ltd., New Delhi

ITA 5980/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4469 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 03-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KUMAR YADAV SENIOR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5980/DEL./2015 (ASSESSMENT YEAR : 2012-13) ACIT, CIRCLE 9 (1), VS. M/S. FEEDBACK INFRA PVT. L TD., NEW DELHI. 311, 3 RD FLOOR, VARDHMAN PLAZA, POCKET 7, PLOT NO.6, SECTOR 12, DWARKA, NEW DELHI-110 070. (PAN : AAACF0066G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GAURAV JAIN, ADVOCATE REVENUE BY : SHRI ARUN KUMAR YADAV, SENIOR DR DATE OF HEARING : 31.08.2017 DATE OF ORDER : 18.09.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, ASSISTANT COMMISSIONER OF INCOME-TAX, C IRCLE 9 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE REV ENUE), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 13.08.2015 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- 3, NEW DELHI, FOR THE ASSESSMENT YEARS 2012-13 ON T HE GROUNDS INTER ALIA THAT :- ITA NO5980/DEL./2015 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.62,58,956/- MADE BY THE A.O ON ACCOUNT OF DISALLOWANCE U/S 14A R.W.R 80 OF THE I.T . RULES. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : DURING SCRUTINY PROCEEDIN GS, ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAS SHOWN INVESTMENT IN EQUITY SHARES TO THE TUNE OF RS.10,54,72,000/- AND RS.26,52,86,250/- AS ON 01.04.2011 AND 31.03.2012 R ESPECTIVELY. AO WHILE EXAMINING THE INVESTMENT IN VIEW OF THE PR OVISIONS CONTAINED UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) OBSERVED THAT THE INVESTMENT IS MORE THA N THE INVESTMENT MADE BY THE ASSESSEE COMPANY DURING THE LAST YEAR. AO CALLED UPON THE ASSESSEE COMPANY TO EXPLAIN AS TO WHY DISA LLOWANCE U/S 14A OF THE ACT SHOULD NOT BE MADE AS PER RULE 8D OF THE INCOME- TAX RULES, 1962 (FOR SHORT THE RULES) QUA INVESTM ENT SHOWN IN THE BALANCE SHEET. AO BEING DIS-SATISFIED WITH THE EXP LANATION FURNISHED BY THE ASSESSEE COMPANY PROCEEDED TO COMP UTE THE DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D O F THE RULES AS UNDER :- 11. IN VIEW OF THE ABOVE, IT IS HELD THAT THE CASE OF THE ASSESSEE IS A FIT CASE FOR COMPUTING THE DISALLOWAN CE U/S 14A IN ACCORDANCE WITH RULE 8D. THE COMPUTATION OF DISALLO WANCE IS AS UNDER: ITA NO5980/DEL./2015 3 I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. NIL II) IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT, AN AMOUNT COMPUTED IN ACCORDANCE WITH THE FOLLOWING FORMULA, NAMELY :- AX B/C WHERE: A- AMOUNT OF EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) INCURRED DURING THE PREVIOUS YEAR; B- THE AVERAGE OF VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR; C- THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE 4,46,06,661/- 100372000+260186250 2 = 180279125/- 1107840069+1894141952 53,57,560/- ITA NO5980/DEL./2015 4 BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. 2 = 1500991011 III) AN AMOUNT EQUAL TO ONE-HALF PER CENT OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. AVERAGE INVESTMENTS: RS.18,02,79,125/- = 0.5% OF RS. 18,02,79,125/- = RS. 9,01,396/- 9,01,396/- DISALLOWANCE(I+II+III)= RS. 62,58,956 3. AO THEREBY MADE DISALLOWANCE TO THE TUNE OF RS.6 2,58,956/- U/S 14A READ WITH RULE 8D. 4. ASSESSEE CARRIED THE MATTER BY WAY OF FILING APP EAL BEFORE THE LD. CIT (A) WHO HAS DELETED THE DISALLOWANCE OF RS.62,58,956/- BY ALLOWING THE APPEAL. FEELING AGGRIEVED, THE REV ENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF CHALLENGING THE IM PUGNED ORDER PASSED BY LD. CIT (A). 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO5980/DEL./2015 5 6. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDER CONTENDED INTER ALIA THAT THE AO HAS WORKED OUT THE DISALLOWANCE UNDER RULE 8D AS PER ACCOUNTS RENDERED BY THE ASSES SEE HAVING BEEN DULY EXPLAINED AT THE SECOND LAST PAGE OF THE ASSESSMENT ORDER; THAT SECTION 114 OF THE EVIDENCE ACT, 1872 R AISES PRESUMPTION IN FAVOUR OF THE REVENUE THAT THERE WAS NON- SATISFACTION OF THE AO AND RELIED UPON THE ORDER OF THE AO. 7. HOWEVER, ON THE OTHER HAND, THE LD. AR FOR THE A SSESSEE TO REPEL THE ARGUMENTS ADDRESSED BY LD. DR CONTENDED I NTER ALIA THAT THE AO PROCEEDED TO INVOKE THE PROVISIONS CONTAINED U/S 14A READ WITH RULE 8D WITHOUT RECORDING HIS DIS-SATISFACTION ; THAT THE ASSESSEE COMPANY HAS NOT EARNED ANY EXEMPT INCOME D URING THE YEAR UNDER ASSESSMENT FORMING PART OF THE TOTAL INC OME AND AS SUCH, SECTION 14A READ WITH RULE 8D IS NOT ATTRACTE D; THAT THE DECISION OF THE ITAT, SPECIAL BENCH, NEW DELHI IN C ASE OF M/S. CHEMINVEST LTD. VS. ITO 317 ITR 86, RELIED UPON B Y THE AO, HAS SINCE BEEN OVERRULED AND THAT THE LD. AR FURTHER RE LIED UPON THE CASE OF HOLCIM INDIA PVT. LTD. ITA NO.486/3024 & ITA NO.299/2014 . 8. UNDISPUTEDLY, THE AO, WITHOUT RECORDING DIS-SATI SFACTION, AS THE WORKING OUT MADE BY THE ASSESSEE THAT NO EXPENS ES HAVE BEEN INCURRED NOR EARNED ANY DIVIDEND INCOME, PROCEEDED TO INVOKE THE ITA NO5980/DEL./2015 6 PROVISIONS CONTAINED U/S 14A READ WITH RULE 8D IN A MECHANICAL MANNER WHICH IS NOT PERMISSIBLE. 9. HONBLE DELHI HIGH COURT IN JUDGMENT CITED AS MAXOPP INVESTMENT LTD. (SUPRA) WHILE DECIDING THE IDENTICAL ISSUE HELD AS UNDER :- SECTION 14A EVEN PRIOR TO THE INTRODUCTION OF SUB- SECTIONS (2) AND (3) WOULD REQUIRE THE ASSESSING OF FICER TO FIRST REJECT THE CLAIM OF THE ASSESSEE WITH REGA RD TO THE EXTENT OF SUCH EXPENDITURE AND SUCH REJECTION MUST BE FOR DISCLOSED COGENT REASONS. IT IS THEN THAT THE Q UESTION OF DETERMINATION OF SUCH EXPENDITURE BY THE ASSESSI NG OFFICER WOULD ARISE. THE REQUIREMENT OF ADOPTING A SPECIFIC METHOD OF DETERMINING SUCH EXPENDITURE HAS BEEN INTRODUCED BY VIRTUE OF .SUB-SECTION (2) OF SE CTION 14A . PRIOR TO THAT, THE ASSESSEE WAS FREE TO ADOPT ANY REASONABLE AND ACCEPTABLE METHOD. SO, EVEN FOR THE PRE- RULE 80 PERIOD, WHENEVER THE ISSUE OF SECTION 14A A RISES BEFORE AN ASSESSING OFFICER, HE HAS, FIRST OF ALL, TO ASCERTAIN THE CORRECTNESS OF THE CLAIM OF THE ASSES SEE IN RESPECT OF THE EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. EVEN WHERE THE ASSESSEE CLAIMS THAT NO EXPENDI TURE HAS BEEN INCURRED IN' RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME, THE ASSESSING OFFICE R WILL HAVE TO VERIFY THE CORRECTNESS OF SUCH CLAIM. IN CA SE, THE ASSESSING OFFICER IS SATISFIED WITH THE CLAIM OF TH E ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, THE ASSESSING OFFI CER IS TO ACCEPT THE CLAIM OF THE ASSESSEE IN SO FAR AS TH E QUANTUM OF DISALLOWANCE UNDER SECTION 14A IS CONCERNED. IN SUCH EVENTUALITY, THE ASSESSING OFFIC ER CANNOT EMBARK UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE FOR THE PURPOSES OF SECTION 14A(1). IN CASE, THE ASSESSING OFFICER IS NOT, ON THE BASIS OF THE O BJECTIVE CRITERIA AND AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY, SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, HE SHALL HAVE TO REJECT THE CLAIM AND STATE THE REASONS FOR DOING SO. HAVING DONE SO, THE ASSES SING OFFICER WILL HAVE TO DETERMINE THE AMOUNT OF EXPEND ITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART ITA NO5980/DEL./2015 7 OF THE TOTAL INCOME UNDER THE ACT. HE IS REQUIRED T O DO SO ON THE BASIS OF A REASONABLE AND ACCEPTABLE METHOD OF APPORTIONMENT. 10. HONBLE APEX COURT IN GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT 394 ITR 449 (SC) THRASHED THE ISSUE IN CONTROVERSY AS TO INVOKING OF THE PROVISIONS CONTAI NED UNDER RULE 8D OF THE RULES BY OBSERVING AS UNDER :- 37. WE DO NOT SEE HOW IN THE AFORESAID FACT SITUAT ION A DIFFERENT VIEW COULD HAVE BEEN TAKEN FOR THE ASSESS MENT YEAR 2002-2003. SUB-SECTIONS (2) AND (3) OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES MERELY PRESCRIBE A FORMULA FOR DETERMINATION OF EXPENDITUR E INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN A SITUATION WH ERE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM O F THE ASSESSEE. WHETHER SUCH DETERMINATION IS TO BE MADE ON APPLICATION OF THE FORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUDGMENT OF THE ASSESSING OFFICER, WHAT THE LAW POSTULATES IS THE REQUIREMENT OF A SATISFACTION IN THE ASSESSING OFFICER THAT HAVING REGARD TO THE ACCOUNT S OF THE ASSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSSI BLE TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. IT IS ONL Y THEREAFTER THAT THE PROVISIONS OF SECTION 14A(2) AN D (3) READ WITH RULE 8D OF THE RULES OR A BEST JUDGMENT DETERMINATION, AS EARLIER PREVAILING, WOULD BECOME APPLICABLE. 11. BY FOLLOWING THE LAW LAID DOWN BY HONBLE APEX COURT IN JUDGMENT CITED AS GODREJ & BOYCE MANUFACTURING COMPANY LTD. (SUPRA) AND HONBLE HIGH COURT OF DELHI IN MAXOPP INVESTMENT LTD. (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE FIN DINGS RETURNED BY AO THAT, DISALLOWANCE U/S 14A IS TO BE MADE EVEN IF NO EXEMPT INCOME HAS RESULTED OR EARNED BY THE ASSE SSEE DURING ITA NO5980/DEL./2015 8 THE YEAR UNDER CONSIDERATION IS NO LONGER A GOOD LAW IN VIEW OF THE JUDGMENT RENDERED BY HONBLE DELHI HIGH COURT I N HOLCIM INDIA PVT. LTD. (SUPRA) AND HONBLE SUPREME COURT IN GODREJ & BOYCE MANUFACTURING COMPANY LTD. (SUPRA) WHEREIN IT IS CATEGORICALLY HELD THAT WHERE THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME FORMING PART OF THE TOTAL INCOME DU RING THE YEAR UNDER ASSESSMENT, SECTION 14A READ WITH RULE 8D IS NOT ATTRACTED. AO PROCEEDED TO INVOKE SECTION 14A READ WITH RULE 8 D WITHOUT RECORDING HIS DIS-SATISFACTION. SO, IN THESE CIRCU MSTANCES, THE LD. CIT (A) BY CONSIDERING ALL THESE FACTS RIGHTLY DELE TED THE ADDITION. SO, FINDING NO ILLEGALITY OR PERVERSITY IN THE ORDE R OF THE LD. CIT (A), WE HEREBY DISMISS THE APPEAL FILED BY THE REVE NUE. ORDER PRONOUNCED IN OPEN COURT ON THIS 18 TH DAY OF SEPTEMBER, 2017. SD/- SD/- (B.P. JAIN) (KULDIP SING H) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 18 TH DAY OF SEPTEMBER, 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-3, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.