M/s. Rathi Graphics Technologies Ltd., New Delhi V. DCIT, New Delhi

ITA 6006/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7172 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 01-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI G.D.AGARWAL, VICE PRESIDENT AND SHRI C .M.GARG,JM ITA NO. 6006/DEL./2012 : ASSTT. YEAR : 2009-10 RATHI GRAPHICS TECHNOLOGIES LTD. 24-1A, MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD NEW DELHI VS DCIT CIRCLE-15(1) NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACR3276L ASSESSEE BY : SH. A.T.PANDA, ADV. REVENUE BY : SH. R.S.NEGI, SR. DR DATE OF HEARING : 01.06.2016 DATE OF PRONOUNCEMENT : 11.07.2016 ORDER PER C.M.GARG, J.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-XVIII, NEW DELHI DATED 14.09.20 12 PASSED IN FIRST APPEAL NO. 294/11-12 FOR AY 2009-10 . ITA NO. 6006/DEL./2012 RATHI GRAPHICS TECHNOLOGIES LTD. 2 2. ALTHOUGH THE ASSESSEE HAS RAISED AS MANY AS FI VE GROUNDS IN THIS APPEAL BUT EXCEPT GROUND NO. 1, OTH ER GROUNDS ARE ARGUMENTATIVE AND SUPPORTIVE TO THE MAI N GROUND WHICH READS AS UNDER :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS)-XVIII, NEW DELHI [BRIEFLY THE CIT(A)] HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 20,82,723/- MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (BRIEFLY THE ACT) READ WITH RULE 8D OF INCOME TAX RULES, 1962. 3. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD, THE LD. COU NSEL OF THE ASSESSEE SUBMITTED THAT THE ORDER PASSED BY THE CIT(A) UPHOL DING THE DISALLOWANCE U/S 14(A) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT), IS NOT IN ACCORDANCE WITH THE RATIO OF THE JU DGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF MAXOPP INV ESTMENT LTD. VS. CIT 347 ITR 272 (DEL), THAT DISALLOWANCE U/S 14A OF THE ACT CAN ONLY BE OUT OF ACTUAL EXPENDITURE. THE LD. COUNSEL FURTH ER POINTED OUT RULE 8D OF THE IT RULES, 1962 IS APPLICABLE ONLY IN A CA SE WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECT NESS OF THE CLAIM OF THE ASSESSED. THE LD. COUNSEL ALSO POINTED OUT THAT THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT IN ABSENCE OF NEXUS BETWEEN BORROWED FUNDS AND INVESTMENTS DISALLOWANCE U/S 14A OF THE A CT CANNOT BE MADE ON PRESUMPTION WITHOUT GRANTING ANY DISSATISFA CTION ABOUT THE ITA NO. 6006/DEL./2012 RATHI GRAPHICS TECHNOLOGIES LTD. 3 CLAIM OF THE ASSESSED REGARDING EXPENSES AND INTERE ST PAID ON BORROWED FUNDS. THE LD. COUNSEL LASTLY POINTED OUT THAT IN VIEW OF RECENT JUDGMENT OF HONBLE JURISDICTIONAL HIGH COUR T OF DELHI IN THE CASE OF CHEMINVEST LTD. VS. CIT 378 ITR 33 (DEL) TH E DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D OF THE RULES C ANNOT BE MORE THAN EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE REL EVANT FINANCIAL PERIOD AND IN THE PRESENT CASE AS NOTED BY THE AO I N PARA 3 IT IS AMPLY CLEAR THAT THE ASSESSED HAS SHOWN DIVIDEND RECEIPT AMOUNTING TO RS. 12,456/- AND THE AMOUNT OF DISALLOWANCE CANNOT BE M ADE GROUND THIS EXEMPT INCOME. 4. REPLYING TO THE ABOVE THE LD. DR STRONGLY SUPP ORTED THE ACTION OF THE AO AS WELL AS THE FIRST APPELLATE ORDER. HOW EVER, HE COULD NOT CONTROVERT THAT AS PER RATIO OF THE RECENT DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF CHEMINVEST LTD. VS. C IT (SUPRA) THE DISALLOWANCE U/S 14A RELEVANT RULE 8D CANNOT BE MAD E MORE THAN EXEMPT INCOME CLAIMED BY THE ASSESSEE. 5. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS NOT RECORDED ANY DISSATISFACT ION FOR MAKING IMPUGNED DISALLOWANCE. THE AO HAS RELIED ON THE DEC ISION OF ITAT DELHI IN THE CASE OF CHEMINVEST LTD. VS. ITO REPORT ED AS (2009) 317 ITR (AT) 0086 FOR MAKING IMPUGNED DISALLOWANCE BUT AS WE HAVE NOTED ABOVE THAT THIS JUDGMENT OF TRIBUNAL HAS BEEN REVERSED BY HONBLE JURISDICTIONAL HIGH COURT OF DELHI. HENCE, IN ORDER TO HUMBLE ITA NO. 6006/DEL./2012 RATHI GRAPHICS TECHNOLOGIES LTD. 4 OPINION THE DISALLOWANCE CANNOT BE MADE MORE THAN E XEMPT INCOME DECLARED BY THE ASSESSED I.E. 12,456/-. RESPECTFULL Y, FOLLOWING RATIO OF THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF CHEMINVEST LTD. VS. CIT (SUPRA) THE DISALLOWANCE U/S 14A OF TH E ACT READ WITH RULE 8D OF THE RULES IS RESTRICTED TO RS. 12,456/- AND THE AO IS DIRECTED TO DELETE THE REMAINING PART OF ADDITION. 6. ACCORDINGLY APPEAL OF THE ASSESSEE IS PARTLY ALL OWED IN THE MANNER AS INDICATED ABOVE. ORDER PRONOUNCED IN THE COURT ON 11/07/2016. SD/- SD/- ( G.D.AGARWAL) (C.M.GARG) VICE PRESIDENT JU DICIAL MEMBER DATED: 11/07/2016 *BINITA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) ITA NO. 6006/DEL./2012 RATHI GRAPHICS TECHNOLOGIES LTD. 5 DATE INITIAL 1. DRAFT DICTATED ON (HAND WRITTEN) 05.07.2016 2. DRAFT PLACED BEFORE AUTHOR 06.07.2016 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.