OPG Securities Pvt. Ltd., New Delhi V. DCIT, Circle- 19(1), New Delhi

ITA 599/DEL/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 9117 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 25-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ROHIT JAIN
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 36 (1) (iii)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.599/DEL/2018 ASSESSMENT YEAR: 2013-14 OPG SECURITIES PVT. LTD. OPG HOUSE, 4/10, ASAF ALI ROAD, NEW DELHI -110002 VS DCIT CIRCLE 19 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. ROHIT JAIN, ADVOCATE RESPONDENT BY MS. RAKHI VIMAL, SR. DR DATE OF HEARING: 06/01/2021 DATE OF PRONOUNCEMENT: 08/01/2021 ORDER PER N. K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE CIT(A)-38, NEW DELHI DATED 23.10.2017 PERTAININ G TO A.Y. 2013-14. 2 2. THE ASSESSEE IS AGGRIEVED BY TWO ADDITIONS FIRST DISALLOWANCE U/S.14A AND SECOND DISALLOWANCE OF INTEREST U/S. 36 (1) (III) OF THE ACT. 3. BRIEFLY STATED THE APPELLANT IS A MEMBER OF BOMB AY STOCK EXCHANGE AND NATIONAL STOCK EXCHANGE AND IS INDULGE IN THE BUSINESS OF SHARE TRADING. DURING THE COURSE OF TH E SCRUTINY ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSE SSEE HAS EARNED DIVIDEND INCOME OF RS.364490/-. THE AO NOTI CED THAT THE ASSESSEE HAS NOT DISALLOWED ANY EXPENSES FOR EARNIN G THE EXEMPT INCOME U/S. 14A OF THE ACT. 4. THE AO WAS OF THE FIRM BELIEF THAT DISALLOWANCES U/S.14A R.W RULE 8D HAS TO BE MADE AND ACCORDINGLY COMPUTED THE DISALLOWANCE AT RS.13.59 LACS. 5. ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE CIT(A) AND VEHEMENTLY CONTENDED THAT NO EXPENDITURE WAS INCURR ED FOR EARNING THE EXEMPT INCOME. IT WAS CONTENDED THAT T HE APPELLANT IS DOING SHARE TRADING BUSINESS AND EARNING OF DIVI DEND INCOME IS INCIDENTAL. 6. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS THE CIT(A) WAS OF THE OPINION THAT THE DISALLOWANCE MADE BY TH E AO IS EXCESS AND DRAWING SUPPORT FROM THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT PRIVATE LIMITED 2015, 3 3 TMI 155 RESTRICTED THE DISALLOWANCE TO THE EXTENT OF THE EXEMPT INCOME AMOUNTING TO RS.364690/-. 7. BEFORE US THE COUNSEL FOR THE ASSESSEE VEHEMENTL Y STATED THAT NO SATISFACTION WAS RECORDED BY THE AO BEFORE INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. THE COUNSEL FURTHER DREW OUR ATTENTION TO THE DECISION OF THE TRIBUNAL IN AS SESEES OWN CASE FOR EARLIER ASSESSMENT YEAR AND POINTED OUT THAT TH E TRIBUNAL HAS, ON IDENTICAL SET OF FACTS, DELETED THE DISALLOWANCE U/S. 14A OF THE ACT. 8. PER CONTRA THE DR STRONGLY SUPPORTED THE FINDING S OF THE AO AND STATED THAT BY NOT ACCEPTING THE CONTENTION OF THE ASSESSEE THE AO HAS IMPLIEDLY RECORDED HIS SATISFACTION. TH E DR FURTHER STATED THAT THERE IS NO ERROR IN THE FINDINGS OF TH E CIT(A). 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. IN SO FAR AS CONSIDERING TH E INTEREST PART IN THE DISALLOWANCE MADE BY THE AO U/S.14A READ WITH R ULE 8 D IS CONCERNED, IN OUR CONSIDERED OPINION SINCE THE ASSE SSEE HAD SUFFICIENT OWN INTEREST FREE FUNDS NO DISALLOWANCE SHOULD HAVE BEEN MADE CONSIDERING THE INTEREST. IN SO FAR AS T HE DISALLOWANCE OF ADMINISTRATIVE EXPENSES IS CONCERNED WE FIND THA T THE CIT(A) HAS RESTRICTED DISALLOWANCE TO THE EXTENT OF THE EX EMPT INCOME RELYING UPON THE DECISION OF THE HONBLE JURISDICTI ONAL HIGH COURT OF DELHI. WE ARE OF THE OPINION THAT SUCH DISALLOWA NCE 4 IS REASONABLE AND NEED NO INTERFERENCE. GROUND NO.1 IS ACCORDINGLY DISMISSED. 10. DURING THE ASSESSMENT PROCEEDINGS THE AO NOTICE D THAT THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCES TO ITS SI STER CONCERN. THE AO WAS OF THE FIRM BELIEF THAT THE INTEREST INC URRED BY THE ASSESSEE ON THE LOANS BORROWED BY IT NEED TO BE PRO PORTIONATELY DISALLOWED AND ACCORDINGLY DISALLOWED RS.3315127/-. 11. ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) B UT WITHOUT ANY SUCCESS. 12. BEFORE THE COUNSEL FOR THE ASSESSEE VEHEMENTLY STATED THAT ON IDENTICAL SET OF FACTS THE TRIBUNAL IN EARLIER A SSESSMENT YEAR HAS DELETED THE ADDITION. 13. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. FACTS EMANATING FROM THE ASSESSMENT ORDER S HOW THAT ON THE FIRST DAY OF THE ACCOUNTING YEAR THE LOANS AND ADVANCES WERE RS.15.70 CRORES AND IN THE LAST DAY OF THE ACCOUNTI NG YEAR LOANS AND ADVANCES HAVE BEEN REDUCED TO RS.9.55 CRORES. THIS MEANS THAT NO FRESH LOANS / ADVANCES WERE GIVEN DURING TH E YEAR UNDER CONSIDERATION. FURTHER THE INTEREST FREE FUNDS AVA ILABLE WITH THE ASSESSEE IS AROUND RS.38 CRORES, THEREFORE, IT CAN BE SAFELY CONCLUDED THAT THE LOANS AND ADVANCES GIVEN TO THE SISTER CONCERN HAVE BEEN GIVEN OUT OF OWN INTEREST FREE FUNDS. ON THESE FACTS NO 5 DISALLOWANCE NEED TO BE MADE, WE ACCORDINGLY DIRECT THE AO TO DELETE THE ADDITION OF RS.33,15,127/-. GROUND NO.2 IS ACCORDINGLY ALLOWED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. SD/- SD/- (SUDHANSHU SRIVASTAVA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOU NTANT MEMBER *NEHA* DATE:- 08.01.2021 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGI STRAR ITAT NEW DELHI DATE OF DICTATION 07.01.2021 DATE ON WHICH T HE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 08.01.2021 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 08.01.2021 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS 08.01.2021 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 08.01.2021 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 08.01.2021 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 08.01.2021 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 08.01.2021 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER