DCIT, New Delhi V. M/s. Indiabulls Real Estate Ltd., New Delhi

ITA 6153/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4876 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 10-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KUMAR YADAV SENIOR
• Assessee Lawyers: NIPUN JAIN
• Keywords: Earning of tax free income; Commercial expediency
• 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.6153/DEL./2014 (ASSESSMENT YEAR : 2011-12) DCIT, CIRCLE 11 (1), VS. M/S. INDIABULLS REAL ESTA TE LTD., NEW DELHI. M 62 & 63, 1 ST FLOOR, CONNAUGHT PLACE, NEW DELHI 110 001. (PAN : AABCI5194F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NIPUN JAIN, CA REVENUE BY : SHRI ARUN KUMAR YADAV, SENIOR DR DATE OF HEARING : 29.08.2017 DATE OF ORDER : 30.08.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, DEPUTY COMMISSIONER OF INCOME-TAX, CIRC LE 11 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE REV ENUE), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 28.08.2014 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- XV, NEW DELHI, FOR THE ASSESSMENT YEAR 2011-12 ON T HE GROUNDS INTER ALIA THAT :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.6,41,37,885/- MADE U/S 14A OF THE I. T. ACT READ WITH RULE 8D OF THE I.T. RULES. ITA NO.6153/DEL./2014 2 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED EXEMPT DIVIDEND INCOME TO THE TUNE OF RS.1,88,25,804/- DURING THE YEAR UNDER ASSESSMENT. AO, BY INVOKING THE PROVISIONS CONTAINED UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) READ WIT H RULE 8D OF INCOME-TAX RULES, 1962 (FOR SHORT THE RULES), PRO CEEDED TO WORK OUT THE DISALLOWANCE AS UNDER :- CLAUSE PARTICULARS CALCULATION AMOUNT I) EXPENDITURE DIRECTLY RELATED TO EXEMPT INCOME NIL NIL II) DISALLOWANCE OF INTEREST EXPENDITURE A*B/C NIL A. INTEREST EXPENDITURE NIL B. AVERAGE VALUE OF INVESTMENTS INCOME FROM WHICH SHALL NOT FORM PART OF TOTAL INCOME 12,86,03,32,828 OPENING INVESTMENT 12,97,93,32,828 CLOSING INVESTMENT 12,74,13,32,828 C. AVERAGE VALUE OF TOTAL ASSETS 13,33,25,07,170 OPENING ASSETS 12,25,59,98,549 CLOSING ASSETS 14,11,90,15,791 III) HALF% OF AVERAGE INVESTMENT B*0.5% 6,43,01,664 TOTAL DISALLOWANCE U/S 14A 1+2+3 6,43,01,664 ITA NO.6153/DEL./2014 3 3. ASSESSEE CARRIED THE MATTER BY WAY OF FILING AN APPEAL BEFORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION OF RS. 6,41,37,885/- MADE BY THE AO BY ACCEPTING THE APPEAL FILED BY THE ASSESSEE. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE T HE TRIBUNAL BY WAY OF CHALLENGING THE IMPUGNED ORDER PASSED BY LD. CIT. 4. 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. 5. 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 DECISION S RENDERED BY HONBLE APEX COURT IN MAK DATA PVT. LTD. VS. CIT 2013-TIOL- 58-SC-IT AND CIT VS. DAULAT RAM RAWATMULL (1973) 87 ITR 349 (SC) . 6. 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 ITA NO.6153/DEL./2014 4 WITH RULE 8D WITHOUT RECORDING HIS SATISFACTION; TH AT INVESTMENT MADE BY THE ASSESSEE IN ITS SUBSIDIARIES IS FOR COM MERCIAL EXPEDIENCY AND NOT FOR EARNING ANY DIVIDEND NOR ANY DIVIDEND HAS BEEN RECEIVED BY THE ASSESSEE; THAT IN ASSESSEES O WN CASE FOR AY 2010-11, IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 25.05.2017 IN ITA NO.3977/DEL/2014 AND ALSO RELIED UPON THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT 394 ITR 449 (SC). 7. UNDISPUTEDLY, THE AO, WITHOUT POINTING OUT ANY D EFECT IN THE WORKING OUT OF DISALLOWANCE VOLUNTARILY MADE BY THE ASSESSEE TO THE TUNE OF RS.1,63,779/- AND WITHOUT BY RECORDING DIS-SATISFACTION, PROCEEDED TO INVOKE THE PROVISIONS CONTAINED U/S 14 A READ WITH RULE 8D WHICH IS NOT PERMISSIBLE. 8. HONBLE APEX COURT IN GODREJ & BOYCE MANUFACTURE 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 SITUATION A DIFFERENT VIEW COULD HAVE BEEN TAKEN FO R THE ASSESSMENT 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 EXPENDITURE INCURRED IN RELATION T O INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN A SITUATION WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM OF THE ASSE SSEE. ITA NO.6153/DEL./2014 5 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 ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSSIBLE TO GENERATE THE REQU ISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. IT IS ONLY THEREAFTER THAT T HE PROVISIONS OF SECTION 14A(2) AND (3) READ WITH RULE 8D OF THE RULES OR A BEST JUDGMENT DETERMINATION, A S EARLIER PREVAILING, WOULD BECOME APPLICABLE. 9. SIMILARLY, HONBLE HIGH COURT OF DELHI IN CIT VS. TAIKISHA ENGINEERING INDIA LTD. (SUPRA) HELD ON THE IDENTICAL ISSUE AS UNDER:- SECTION 14A OF THE INCOME-TAX ACT, 1961, READ WITH RULE 80 OF THE INCOME-TAX RULES, 1962 - EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TO TAL INCOME (RULE 80) - ASSESSMENT YEARS 2008-09 AND 2009-10 - WHETHER IT IS ONLY WHEN COMPUTATION OR DISALLOWANCE MADE BY ASSESSEE OR CLAIM THAT NO EXPENDITURE WAS INCURRED TO EARN EXEMPT INCOME IS FOUND NOT SATISFACTORY WITH REFERENCE TO ACCOUNTS, THAT COMPUTATION UNDER SUB-RULE (2) OF RULE 80 IS T O BE MADE - HELD, YES - WHETHER WHERE ASSESSEE HAD SUFFICIENT FUNDS FOR MAKING INVESTMENT IN SHARES AN D MUTUAL FUNDS YIELDING EXEMPT INCOME AND SELF OR VOLUNTARY DISALLOWANCE MADE BY ASSESSEE WAS NOT REJECTED AND HELD TO BE UNSATISFACTORY ON EXAMINATION OF ACCOUNTS, ASSESSING OFFICER HAD ERRED IN INVOKING RULE 80(2) AND RECOMPUTING DISALLOWANCE UNDER SECTION 14A - HELD, YES [PARAS 12 AND 18][1N FAVOUR OF ASSESSEE] 10. SO, BY FOLLOWING THE LAW LAID DOWN BY HONBLE A PEX COURT IN JUDGMENT CITED AS GODREJ & BOYCE MANUFACTURE COMPANY LTD. ITA NO.6153/DEL./2014 6 (SUPRA) AND HONBLE HIGH COURT OF DELHI IN CIT VS. TAIKISHA ENGINEERING INDIA LTD. (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS RETURNED BY AO THAT, BALANCE DISALLOWANCE TO THE TUNE OF RS.6,41,37,885/- NEEDS TO BE DISALLOWED AS PER RULE 8D ARE NOT SUSTAINABLE IN THE EYES OF LAW AS THERE IS NOT AN IOTA OF REASONS OF DIS-SATISFACTION RECORDED BY AO AS TO WO RK OUT OF DISALLOWANCE OF RS.1,63,779/- VOLUNTARILY MADE BY T HE ASSESSEE ITSELF BECAUSE SUB-SECTION (2) & (3) OF SECTION 14A WITH RULE 8D OF THE RULES HAS ONLY PRESCRIBED A FORMULA FOR DETERMI NATION OF AN EXPENDITURE TO EARN THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT, WHICH CAN ONLY BE INVOK ED IF THE AO IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE. 11. MOREOVER, THE ASSESSEE HAS COME UP WITH SPECIFI C ARGUMENT THAT IT HAS NOT INCURRED ANY INTEREST COST FOR EARN ING EXEMPT INCOME BUT THIS PLEA OF THE ASSESSEE HAS ALSO BEEN BRUSHED ASIDE BY THE AO WITHOUT RECORDING ANY REASON OF DIS-SATISFACTION. MOREOVER, WHEN THE ASSESSEE IS HAVING AMPLE COST FREE FUNDS TO THE TUNE OF RS.6049.43 CRORES AND HAD NOT MADE INVESTMENT TO EA RN EXEMPT INCOME AS ON 31.03.2011, BUT IN ITS SUBSIDIARIES FO R COMMERCIAL EXPEDIENCY, THE QUESTION OF DISALLOWANCE UNDER RULE 8D DOES NOT ARISE. ITA NO.6153/DEL./2014 7 12. SO, THE AO HAS MADE DISALLOWANCE WITHOUT RECORD ING HIS DISSATISFACTION ON ANY COGENT GROUND AND WITHOUT DI SPUTING THE COMPUTATION OF DISALLOWANCE MADE BY THE ASSESSEE IT SELF RATHER SUBJECTIVELY WRITTEN THAT, THE BALANCE DISALLOWANCE WAS TO BE WORKED OUT IN VIEW OF THE PROVISIONS CONTAINED U/S 14A READ WITH RULE 8D WHICH IS NOT SUSTAINABLE IN THE EYES OF LAW. IN T HE GIVEN CIRCUMSTANCES, THE CASE LAWS RELIED UPON BY THE LD. DR IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CA SE. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE FIND NO ILLEGALIT Y OR PERVERSITY IN THE FINDINGS RETURNED BY LD. CIT (A) AND THE INS TANT APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF AUGUST, 2017. SD/- SD/- (B.P. JAIN) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 30 TH DAY OF AUGUST, 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.