M/s. Spectra Punj Finance Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 625/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6573 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 29-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G NEW DELHI BEFORE SH. H.S. SIDHU , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 625 /DEL/ 2014 ASSESSMENT YEAR: 2009 - 10 M/S. SPECTRA PUNJ FINANCE PVT. LTD., 17 - 18, NEHRU PLACE, NEW DELHI. VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 9(1), NEW DELHI PAN : AAACS3351H (APPELLANT) (RESPONDENT) APPELLANT BY SH. RAJAT JAIN & SH. AKSHAT JAIN, CA RESPONDENT BY SH. N.K. BANSAL, SR.DR DATE OF HEARING 29.09.2016 DATE OF PRONOUNCEMENT 02.12.2016 ORDER PER O.P. KANT , A. M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - XI, NEW DELHI, DATED 28.11.2013, RAISING THE FOLLOWING GROUNDS OF APPEAL: 1 . (A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT S CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED BOTH IN FACT AND IN LAW IN CONFIRMING ESTIMATED DISALLOWANCE OF EXPENSES OF RS 13,50,032/ - OUT OF RS 15,59,546/ - UNDER SECTION 14 A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D MADE BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACTS THAT THE EXPENSES CLAIMED BY THE APPELLANT WAS INCURRED IN RELATION TO INCOME WHICH WAS INCLUDIBLE 2 ITA NO. 625/DEL/2014 AY: 2009 - 10 IN TOTAL INCOME AND NO EXPENSES WAS INCURRED BY THE APPELLANT IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. 1 . (B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT S CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED BOTH IN FACT AND IN LAW IN CONFIRMING ESTIMATED DISALLOWANCE OF EXPENSES OF RS 13,50,032/ - OUT OF RS 15,59,546/ - UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D MADE BY THE ASSESSING OFFICER BY DEDUCING THAT THE APPORTIONMENT OF DIRECT AND INDIRECT EXPENDITURE TOWARDS TAXABLE A ND EXEMPT INCOME FOR DETERMINING DISALLOWANCE UNDER SECTION 14A SHOULD BE AS PER RULE 8D IRRESPECTIVE OF THE FACT THAT THERE IS NO NEXUS BETWEEN EXPENSES INCURRED AND EXEMPTED INCOME EARNED. 1.(C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLAN T S CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED BOTH IN FACT AND IN LAW IN CONFIRMING ESTIMATED DISALLOWANCE OF EXPENSES OF RS 13,50,032/ - OUT OF RS 15,59,546/ - UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D MADE BY THE AS SESSING OFFICER BY ASSUMING THAT RULE 8D OF THE INCOME TAX RULES, 1962 EMPOWERS ASSESSING OFFICER TO DISALLOW EVEN SUCH EXPENSES WHICH ARE INCURRED IN RELATION TO TAXABLE INCOME. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT S CASE, THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED BOTH IN FACT AND IN LAW IN HOLDING THAT PREMIUM PAID OVER AND ABOVE PAID - UP VALUE OF SHARES IS AN INVESTMENT ON WHICH DIVIDEND WILL ACCRUE/ARISE WHICH IS IN CONTRADICTION TO THE PROVISIONS OF THE COMPANIES ACT, 1956 . 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FINANCE AND TRADING IN SHARES/INVESTMENT. ASSESSEE FILED RETURN OF INCOME DECLARING LOSS OF RS.33,82,64,959/ - ON 30.09.2019 . THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) . THE CASE WAS SELECTED FOR SCRUTINY AND THE AS SESSMENT U/S 143(3) OF THE ACT WAS COM PLETED AT A LOSS OF RS. 33,67,05,413/ - BY THE ASSESSING OFFICER THEREBY RE DUCING THE LOSS BY RS.15,59,546/ - . 3 ITA NO. 625/DEL/2014 AY: 2009 - 10 AGGRIE VED, THE ASSESSEE FILED APPEAL BEFORE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), WHO RESTRICTED THE DISALLOWANCE U/S 14A OF THE ACT TO RS.13,50,032/ - . HENCE, THE PRESENT APPEAL. 3. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT IN THE YEAR UNDER CONSIDERATION THE ASSES SEE EARNED EXEMPT INCOME OF RS.6,98, 508/ - AND THUS RELYING ON THE DECISION OF THE HON BLE J URISDICTI ONAL HIGH COURT IN THE CASE OF JOINT I NVESTMENT (P) LTD VS. COMMISSIONER OF INCOME T AX (2015) 59 TAXMANN.COM 295 (DELHI) T HE DISALLOWANCE UNDER SECTION 14A OF THE ACT MIGHT BE RESTRICTED TO THE EXTENT OF EXEMPTED INCOME EARNED. 4. ON THE OTHER HAND, LEARNER SENIOR DEPARTMENTAL R EPRESENTATIVE RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISS ION S AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE EFFECTIVE GROUND IS IN RESPECT OF DISALLOWANCE OF RS.13,50, 032 / - UNDER SECTION 14A OF THE ACT , UPHELD BY THE LEARNED COMMISSIONER OF I NCOME TAX (A PPEALS ) . WE FIND THAT THE HON BLE J URISDICTI ONAL HIGH CO URT IN THE CASE OF JOINT INVESTMENT PRIVATE L IMITED (SUPRA) HAS LIMITED THE DISA LLOWANCE IN TERMS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF INCOME TAX R ULES , 1962 TO THE EXTENT OF EXEMPT INCOME. IN THE CASE ASSESSEE HAS DECLARED EXEMPT INCOME OF RS.6, 98,508/ - WHEREAS DISALLOWANCE OF EXPENSES OF RS.13,50,032/ - HAS BEEN UPHELD BY THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) IN TERMS OF SECTION 14 A O F THE ACT READ WITH RULE 8D OF R ULES. THUS , RESPECTFULLY FOLLOWING THE FINDING OF THE HON BLE HIGH COUR T IN THE CASE OF JOINT INVESTMENT PRIVATE L IMITED (SUPRA) , WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT TO RS. 6, 98,508/ - . ACCORDINGLY , THE GROUNDS ARE ALLOWED PARTLY. 4 ITA NO. 625/DEL/2014 AY: 2009 - 10 6. IN THE RESULT , THE APPEAL IS ALLOWED PAR TLY. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 2 N D D E C . , 2016 . S D / - S D / - ( H.S. SIDHU ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 N D D E C E M B E R , 2016 . LAPTOP / - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI