Sapna Cans P.Ltd, New Delhi V. Addl.CIT, Range-22, New Delhi

ITA 6105/DEL/2019

AI Insights

The case involves Sapna Cans P. Ltd., the appellant, contesting an assessment order that disallowed Rs.19,69,340 under Section 14A of the Income Tax Act, 1961, for the assessment year 2014-15. The disallowance was initially made by the Assessing Officer, which was upheld by the Commissioner of Income Tax (Appeals)-VIII, New Delhi. The primary contention was whether the disallowance was justified given the minimal exempt income earned and the financial structure of the company, which had sufficient own funds to cover the investments that generated exempt income. The Tribunal, referencing decisions from the Supreme Court, found in favor of the appellant, leading to the reversal of the disallowance.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 121707 (ITAT-DELHI)
• Duration Of Justice: 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 11-12-2022
• Assessment Year: misc
• Appeal Filed On: 17-12-2022
• Other Referred Cases: Joint Investment Pvt. Ltd. (2015) 59 taxmann.com 295 (SC), South Indian Bank in Civil Appeal Nos. 9606, 9609, 9610, 9611, 9615 of 2011 and others, judgment and order dated 9 September, 2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G” DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA No.6105/DEL/2019 Assessment Year 2014-15 Sapna Cans P. Ltd., 811-812, Aggarwal Cyber Plaza-I, Netaji Subhash Place, Pitampura, New Delhi. vs. Addl.CIT, Range-22, New Delhi. TAN/PAN: AABCS0709C (Appellant) (Respondent) Appellant by: Shri Suresh Singhal, CA Respondent by: Shri Abhishek Kumar, Sr.DR Date of hearing: 12 12 2022 Date of pronouncement: 20 12 2022 O R D E R PER PRADIP KUMAR KEDIA - A.M.: The captioned appeal has been filed by the Assessee against the order of the Commissioner of Income Tax (Appeals)-VIII, New Delhi [‘CIT(A)’ in short] dated 03.05.2019 arising from the assessment order dated 11.11.2016 p assed b y th e Asse ssin g Offic er (AO) u n d er Sectio n 1 4 3 (3 ) o f th e In co me Tax Ac t, 1 9 6 1 (th e Act) co n cern in g AY 2 01 4 -15. 2. As per its grounds of appeal, the assessee has challenged the disallowance of Rs.19,69,340/- by wrongly invoking the Section 14A of the Act. 3. When the matter was called for hearing, the ld. counsel for the assessee made two folds submissions (i) the assessee has earned meager exempt income of Rs.864/- in the form of dividend and thus in the light of the decision of the Hon’ble Supreme Court in the case of Joint Investment Pvt. Ltd. (2015) 59 ITA No. 6105/DEL/2019 2 taxmann.com 295 (SC), no disallowance is called for. (ii) the assessee at its disposal of Rs.9.55 crore has its own funds as against non current investment of Rs.4.54 crore, a small part of which has given rise to the exempt income. Thus, in the light of the decision of the Hon’ble Supreme Court in South Indian Bank in Civil Appeal Nos. 9606, 9609, 9610, 9611, 9615 of 2011 and others], judgment and order dated 9 September, 2021, no disallowance on account of interest expenses under Rule 8D(2) amounting to Rs.19,69,340/- is permissible. 4. We find prima facie merit in the plea of the assessee on both counts. Neither the assessee has earned any exempt income of any relevance nor the investment exceeds the own funds. Thus, the presumption arises in favour of the assessee that the investment is carried out attributable to interest free own fund. Thus, the disallowance made under Section 14A requires to be reversed and cancelled. 5. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 20 th December, 2022. Sd/- Sd/- [KUL BHARAT] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: December, 2022 Prabhat