Eldeco Housing & Industries Ltd., New Delhi V. ACIT, Noida

ITA 6109/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5879 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 29-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Keywords: Earning of tax free income; Rule 8D
• Section: 153A; 14A; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B , NEW DELHI BEFORE S H. SUDHANSHU SRIVASTAVA , JUDICIAL MEMBER AND S H . PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 610 7 TO 6110 /DEL/201 6 ( ASSESSMENT YEAR: 20 1 0 - 1 1 TO 2013 - 14 ) ELDECO HOUSING & INDUSTRIES LTD. 201 - 202, 2 ND FLOOR, PLOT NO.3, SPLENDOR FORUM, DISTRICT CENTRE, JASOLA, NEW DELHI PAN NO.AAACE4554G VS ACIT CENTRAL CIRCLE NOIDA (APPELLANT) (RESPONDENT) APPELLANT BY SH. SANJAY KUMAR, CA RESPONDENT BY MS. NIDHI SRIVASTAVA, CIT DR DATE OF HEARI NG: 0 7 / 11 /201 9 DATE OF PRONOUNCEMENT: 06/02/2020 ORDER PER PRASHANT MAHARISHI , AM: 1 . THESE ARE THE FOUR APPEALS PERTAINING TO ONE ASSESSEE FOR ASSESSMENT FOUR YEAR S 2010 - 11 TO 2013 - 14 ON SINGLE ISSUE OF DISALLOWANCE CONFIRMED BY THE LD CIT(A) - IV, KANPUR U/S 14A OF THE ACT. IMPORTANT TO NOTE THAT ASSESSEE HAS EARNED EXEMPT INCOME OF RS. 131380/ - FOR ASSESSMENT YEAR 2010 - 11. THE AO HAS DISALLOWED EXPENDITURE OF RS. 1740908/ - , HAS EARNED EXEMPT INCOME OF RS. 29928/ - FOR ASSESSMENT YEAR 2011 - 12 AND DISALLOWANCE IS RS. 1 629107/ - , THE EXEMPT INCOME FOR ASSESSMENT YEAR 2013 - 14 IS RS. 146868/ - AND DISALLOWANCE OF RS. 1557560/ - AND FOR ASSESSMENT YEAR 2012 - 13, THE EXEMPT INCOME IS RS. 2068 AND DISALLOWANCE OF RS. 1369731/ - . 2 . WE FIRST TAKE THE FACTS FOR ASSESSMENT YEAR 2010 - 11 . THE ASSESSEE IS A LISTED COMPANY ENGAGED IN REAL ESTATE DEVELOP ERS PROMOTERS AND BUILDERS ACTIVITIES . THE LD AO MADE THE DISALLOWANCE U/S 14A OF THE ACT AMOUNTING TO RS. 1740908/ - TO THE RETURN INCOME OF RS. 62793273/ - FILED ON 21.05.2013 AND PAGE | 2 ASSESSED VI DE ORDER DATED 24.03.2014 U/S 153A OF THE ACT AT RS. 64534181/ - . THE ABOVE DISALLOWANCE WAS CHALLENGED BEFORE THE LD CIT(A) WHO CONFIRMED THE SAME. THEREFORE, THE ASSESSEE IS IN APPEAL BEFORE US. 3 . THE LD AR SUBMITTED THAT THE ASSESSEE HAS RECEIVED DIVIDEND INCOME DURING THE YEAR OF RS. 131380/ - FROM UNION BANK AND PUNJAB NATIONAL BANK LTD ONLY. HE SUBMITTED THAT THE TOTAL INVESTMENT MADE BY THE ASSESSEE IN THESE TWO COMPANIES IS MERELY RS. 295000/ - . HE SUBMITTED THAT AT THE MOST AVERAGE VALUE OF INVESTMENT IS ONLY RS. 2 9 5000/ - ONLY . WITH RESPECT TO THE INTEREST EXPENDITURE , HE SUBMITTED THAT AGAINST THE INVESTMENT OF RS. 12.72 CRORES THE INTEREST FREE FUNDS ARE TO THE TUNE OF RS. 44 CRORES AND THEREFORE, THERE CANNOT BE ANY DISALLOWANCE ON ACCOUNT OF INTERES T. HENCE, DISALLOWANCE MADE BY THE AO AND LD CIT(A) IS ERRONEOUS. 4 . THE LD DR VEHEMENTLY SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 5 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IN THE PRESENT CASE THE ASSESSEE HAS INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVE OF RS. 44.87 CRORES WHICH EXCEEDS THE INVESTMENT MADE BY THE ASSESSEE FOR EARNING EXEMPT INCOME BY THREE TIMES, NATURALLY THERE CANNOT BE ANY DISALLOWANCE OF INTEREST UNDER RULE 8D. HENCE, THE DISALLOWANCE OF RS. 1104372/ - MADE ON ACCOUNT OF INTEREST UNDER RULE 8D BEING IN DIRECTLY ATTRIBUTABLE TO THE EXEMPT INCOME DESERVES TO BE DELETED. FURTHER , RS. 6365326/ - IS DISALLOWED BEING 0.5 % OF AVERAGE VALUE OF INVESTMENT. FOR THIS SUM ONLY 0.5% OF INVESTMENT WHICH YIELDED TAX EXEMPT INCOME IS TO BE CONSIDERED. ACCORDINGLY THE LD AO DIRECTED TO RETAIN THE ADDITION ONLY 0.5% OF RS. 295000/ - . IN THE RESULT APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2010 - 11 IS PARTLY ALLOWED. 6 . COMING TO THE APPEAL OF THE ASSES SEE FOR ASSESSMENT YEAR 2011 - 12, ARGUMENTS OF BOTH THE PARTIES ARE SAME. IN THIS YEAR , ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 29928/ - ONLY. THE SHARE CAPITAL AND FREE RESERVE IS RS. 50.41 CRORES AGAINST THE INVESTMENT OF RS. 8.7 3 CRORES. THE TOTAL INVESTMENT IN THE SHARE S FROM WHICH DIVIDEND IS RECEIVED IS ALSO RS. 2.95 LAKHS. THEREFORE, FOR THE REASON GIVEN BY US FOR ASSESSMENT YEAR 2010 - 11 WE DIRECT THE LD AO TO DELETE THE PAGE | 3 DISALLOWANCE OF INTEREST RS. 109240/ - AND FURTHER RESTR ICT THE DISALLOWANCE OF % OF AVERAGE INVESTMENT OF RS. 536704/ - TO RS. 1475/ - ONLY. ACCORDINGLY, ITA NO. 6108/DEL/2016 FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2011 - 12 IS ALSO PARTLY ALLOWED. 7 . FOR ASSESSMENT YEAR 2012 - 13 THE ASSESSEE HAS EARNED EXEMPT I NCOME OF RS. 2068/ - ONLY WHERE THE INVESTMENT IN THE SHARES YIELDING EXEMPT INCOME WERE ONLY RS. 1.11 LAKHS AND THE SHARE CAPITAL WAS FAR MORE THAN INVESTMENT, WE DIRECT THE LD AO TO DELETE THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 930565/ - AND RESTR ICT EXPENSES DISALLOWANCE TO 0.5% OF INVESTMENT IN PUNJAB NATIONAL BANK OF RS. 111060/ - . ACCORDINGLY, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8 . FOR ASSESSMENT YEAR 2013 - 14 THE ASSESSEE HAS EARNED THE EXEMPT DIVIDEND INCOME OF RS. 146868/ - OF AVERAGE VALUE OF INVESTMENT OF RS. 295060/ - AND THE INTEREST FREE FUNDS WERE RS. 64.17 CRORES AND TOTAL INVESTMENT OF RS. 8 CRORES. FOR THE SIMILAR REASONS , WE DIRECT THE LD AO TO DELETE THE INTEREST EXPENDITURE DISALLOWED OF RS. 1136535/ - UNDER RULE 8D AND TO RESTRICT THE EXPENSES DISALLOWED OF 0.5% OF AVERAGE VALUE OF INVESTMENT OF RS. 295060/ - TO RS. 1475/ - ONLY. ACCORDINGLY, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 9 . IN THE RESULT ALL THE APPEALS ARE DISPOSED OFF. ORDER PRONOUNCED IN THE OPEN COURT ON 06/02/2020 . - SD/ - - SD/ - ( SUDHANSHU SRIVASTAVA ) (PRASHAN T MAHARISHI ) JUDICIAL MEMBER ACCOUNTANT MEMBER * AK KEOT * DATE: - 06/02/2020 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI