Jindal Stainless Steelway Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 6167/DEL/2012

• Counselvise Citation: 616720114 RSA 2012
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 08-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV DUDEJA
• Assessee Lawyers: AMIT GOEL
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 143(3); 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI N.K. SAINI AND SHRI I.C. SUDHIR ITA NO. 6167/DEL/2012 ASSESSMENT YEAR: 2009-10 JINDAL STAINLESS STEELWAY LTD., VS. ADDITIONAL CI T, JINDAL CENTRE, RANGE-4, 12- BHIKAJI CAMA PALACE, NEW DELHI. NEW DELHI. (PAN: AABCJ4346C) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AMIT GOE L, CA RESPONDENT BY: SHRI GAURAV DUDE JA, SR. DR DATE OF HEARING : 08.04.2015 DATE OF PRONOUNCEMENT: 28:05.2015 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER O N THE SOLE GROUND THAT THE LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMI NG THE DISALLOWANCE OF INTEREST OF RS.27,96,190 UNDER SEC. 14A MADE BY THE ASSESSING OFFICER. 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVAN CED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIA L AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 2 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF CUTTING/SLITTING OF HR/CR SHEETS. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.926 WHICH IT CLAIM ED EXEMPT UNDER SEC. 10 OF THE INCOME-TAX ACT, 1961. IN RESPONSE TO SHOW -CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER REGARDING THE PROPOSED PROPOR TIONATE DISALLOWANCE UNDER SEC. 14A READ WITH RULE 8D, THE ASSESSEE SUBM ITTED THAT ADDITION UNDER RULE 8D IS WARRANTED ONLY WHEN INTEREST IS IN CURRED WHICH IS NOT ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. I T WAS SUBMITTED THAT NO SUCH EXPENDITURE HAS BEEN INCURRED IN THE CASE OF THE AS SESSEE, HENCE, THERE CANNOT BE ANY DISALLOWANCE UNDER RULE 8D OF THE INC OME-TAX RULES, 1962. THE ASSESSING OFFICER DID NOT AGREE WITH THE ASSESS EE AND OBSERVED THAT THE ASSESSEE HAS NOT MAINTAINED SEPARATE BANK ACCOUNTS IN RESPECT OF INVESTMENT AND OTHER ACTIVITIES. INSTEAD, FUNDS HAVE BEEN USED FROM THE COMMON BANK ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER ACCO RDINGLY MADE DISALLOWANCE OF RS.30,09,361 UNDER SEC. 14A OF THE ACT READ WITH RULE 8D OF THE I.T. RULES. THE LEARNED CIT(APPEALS) HAS UPH ELD THE SAME. 4. IN SUPPORT OF THE GROUND, THE LEARNED AR SUBMITT ED THAT THE DIVIDEND INCOME IS RS.926 ONLY AND 0.5% OF AVERAGE INCOME I. E. RS.2,13,171 WAS 3 OFFERED BY THE ASSESSEE AS A SUO-MOTO DISALLOWANCE UNDER RULE 8D. HE CONTENDED THAT DURING THE LAST ASSESSMENT YEAR IN T HE ASSESSMENT FRAMED UNDER SEC. 143(3) OF THE ACT, NO SUCH DISALLOWANCE WAS MADE. HE REFERRED PAGE NO. 9 OF THE PAPER BOOK I.E. AUDITED STATEMENT OF ACCOUNTS TO SUPPORT HIS CONTENTION THAT THE DIVIDEND WAS EARNED ONLY ON THE MUTUAL FUND OF RS.14,694. THE LEARNED AR SUBMITTED FURTHER THAT AS PER THE DECISION OF HON'BLE JURISDICTIONAL DELHI HIGH COURT RECENTLY DE CIDED ON 25.2.2015 IN ITA NO. 117/2015 IN THE CASE OF JOINT INVESTMENT PV T. LTD. VS. CIT, NO DISALLOWANCE MORE THAN DIVIDEND INCOME/EXEMPT INCOM E CAN BE MADE. HE ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS: 1) CIT VS. HOLCIN INDIA PVT. LTD. ITA NO. 486 AN D 299/2014 DATE OF DECISION 05.09.2014 (DEL.) 2) CIT VS. HDFC BANK LTD. ITA NO. 330 OF 2012 DECISION DATED 23.7.2014 (BOMBAY); 5. THE LEARNED SENIOR DR ON THE OTHER HAND P LACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING GONE THROUGH THE CITED DECISIONS AND THE UNREBUTTED FACTS OF THE PRESENT CASE THAT THE DISALLOWANCE IN QUESTION WAS MADE FOR AN AMOUNT 4 WHICH WAS MORE THAN DIVIDEND INCOME/EXEMPT INCOME E ARNED BY THE ASSESSEE DURING THE YEAR, WE ARE OF THE VIEW THAT T HE ISSUE IS FULLY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE J URISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF JOINT INVESTMENT PVT. LTD. VS. CIT (SUPRA). PARA 9 OF THE SAID DECISION IS BEING REPRODUCED HEREUNDER FOR A READY REFERENCE: 9. IN THE PRESENT CASE, THE A.O. HAS NOT FIRSTLY DISCLOSED WHY THE APPELLANT/ASSESSEES CLAIM FOR ATTRIBUTING RS.2,97, 440 AS A DISALLOWANCE UNDER SEC. 14A HAD TO BE REJECTED. TAI KISHA SAYS THAT THE JURISDICTION TO PROCEED FURTHER AND DETERMINED AMOU NTS IS DERIVED AFTER EXAMINATION OF THE ACCOUNTS AND REJECTION, IF ANY, OF THE ASSESSEES CLAIM OR EXPLANATION. THE SECOND ASPECT IS THERE APPEARS TO HAVE BEEN NO SCRUTINY OF THE ACCOUNTS BY THE A.O. AN ASPECT WHICH IS COMPLETELY UNNOTICED BY THE CIT(A) AND THE ITAT. TH E THIRD, AND IN THE OPINION OF THIS COURT, IMPORTANT ANOMALY WHICH WE CANNOT BE UNMINDFUL IS THAT WHEREAS THE ENTIRE TAX EXEMPT INC OME IS RS.48,90,000, THE DISALLOWANCE ULTIMATELY DIRECTED WORKS OUT TO NEARLY 110% OF THAT SUM, I.E., RS.52,56,197. BY NO STRETCH OF IMAGINATION CAN SEC. 14A OR RULE 8D, WE INTERPRETED SO AS TO MEAN T HAT THE ENTIRE TAX EXEMPT INCOME IS TO BE DISALLOWED. THE WINDOW FOR D ISALLOWANCE IS INDICATED IN SEC. 14A, AND IS ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION T O THE TAX EXEMPT INCOME. THIS PROPORTION OF PORTION OF TAX EXEMPT I NCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT AS HAS HAPPENED IN THIS CASE. 5 7. ALMOST SIMILAR ARE THE FACTS OF THE PRESENT CASE , HENCE, RESPECTFULLY FOLLOWING THE RATIOS OF DECISION OF THE HONBLE JUR ISDICTIONAL HIGH COURT OF DELHI IN THE ABOVE CITED CASE OF JOINT INVESTMENT P VT. LTD. VS. CIT (SUPRA), WE SET ASIDE THE MATTER TO THE FILE OF THE ASSESSIN G OFFICER TO DECIDE THE DISALLOWANCE IN QUESTION AFRESH AS PER THE ABOVE CI TED DECISION AFTER AFFORDING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUND IS THUS ALLOWED FOR STATISTICAL PURPOSES. 9. IN RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 28 .05.2 015 SD/- SD/- ( N.K. SAINI ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28 /05/2015 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR 6 DATE DRAFT DICTATED ON COMPUTER 25 .05.2015 DRAFT PLACED BEFORE AUTHOR 25 .05.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS KEPT FOR PRONOUNCEMENT ON FILE SENT TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.