Appeal details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 6862 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 10 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
17-10-2016
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
15-09-2016
Assessment Year
2009-2010
Appeal Filed On
28-11-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A .NO. 6301/DEL/2013 (ASSESSMENT YEA R-2009-10) DRUZBA OVERSEAS PVT. LTD. M-11, MIDDLE CIRCLE, CONNAUGHT CIRCUS NEW DELHI-110001 AABCD5112E (APPELLANT) VS ACIT CENTRAL CIRCLE 23 NEW DELHI 110 001 (RESPONDENT) APPELLANT BY SH. V. S. RASTOGI, AR RESPONDENT BY SH. ANIL KUMAR SHARMA, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED AGAINST THE ORDER DATED 19/08/ 2013 PASSED BY CIT (A) XXXIII, NEW DELHI. 2. THE GROUNDS OF APPEAL IS AS FOLLOWS: 1. THAT THE ORDERS PASSED BY THE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS)-XXXIII, NEW DE LHI ARE BAD IN LAW AND VOID AB-INITIO. DATE OF HEARING 15.09.2016 DATE OF PRONOUNCEMENT 17.10.2016 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE OF RS.1 ,14,610/- MADE BY THE ASSESSING OFFICER U/S 14A OF THE IT ACT . 3. THE APPELLANT CRAVES PERMISSION TO ADD, AMEND, ALTE R OR VARY ALL OR ANY GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING OF THE APPEAL. 3. THE ASSESSEE IS A GROUP COMPANY OF M/S. BPTP LTD ., WHICH IS THE FLAGSHIP COMPANY. IT HAD EARNED DIVIDEND INCOME OF RS. 47,43,750/- FROM THE SHARES OF BPTP LTD. ACQUIRED I N EARLIER YEARS. AS PER ANNUAL ACCOUNTS THE INVESTMENT IN THESE SHAR ES WAS SHOWN AT RS. 8,25,00,000/-. THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY DURING THE FY 2008-09. THE ASSESS EE CLAIMED EXEMPTION UNDER SECTION 10 OF THE INCOME TAX ACT, 1 961. THEREFORE, THE QUESTIONNAIRE DATED 15/07/2011, THE ASSESSEE WA S ASKED TO FURNISH AND JUSTIFY THE CLAIM OF VARIOUS EXPENSES D EBITED BY IT IN ITS P&L ACCOUNT, AS PER THE PROVISIONS OF SECTION 14A O F THE ACT R/W RULE 8D OF THE INCOME TAX RULES, 1962. THE ASSESSEE SUBMITTED REPLY DATED 16/11/2011 AS UNDER: 8. REGARDING THE EXPLANATION SOUGHT BY YOUR GOOD S ELF AS TO WHY DISALLOWANCE OF EXPENSES CLAIMED BY THE COMPANY IN THE PROFIT & LOSS ACCOUNT BE MADE AS PER THE PROVISION OF SECTION 14A OF THE INCOME TAX ACT R/W RULE 8D OF THE INCOME TAX RULES, 1962, WE WISH TO SUBMIT THAT THE COMPANY HAS RECEIVED DIVIDEND INCOME OF RS. 47,43,7 50/- IN JULY, 2008 FROM M/S. BPTP LIMITED ON INVESTMENT MADE IN 94,87, 500/- EQUITY SHARES OF SAID COMPANY. THE ASSESSEE HAS NOT INCURRED ANY EXPENSES WHOLLY AND EXCLUSIVELY EITHER BY WAY OF PAYMENT OF INTEREST OR OTHER EXPENSES FOR THE EARNING OF SAID EXEMPT DIVIDEND INCOME. THEREFORE, NO DISALLOWANCE OUT OF EXPENSES INCURRED OF CALLED FOR. DETAILS OF EXPENSE S CLAIMED HAVE ALREADY BEEN FILED. 4. THE ASSESSING OFFICER OBSERVED IN PARA 2.7 OF TH E ASSESSMENT ORDER THAT: 2.7 IN THE PRESENT CASE, THE ASSESSEE HAS EARNED D IVIDEND INCOME OF RS.47,43,750/- AND HAS CLAIMED IT EXEMPT U/S 10 OF THE ACT. AN INCOME DOES NOT COME FROM NOWHERE. CERTAIN EXPENSES ARE AL WAYS INCURRED FOR EARNING AN INCOME. THEREFORE, THIS CONTENTION OF TH E ASSESSEE THAT IT HAS NOT INCURRED ANY EXPENDITURE ON EARNING THE EXEMPT INCOME IS NOT ACCEPTED. THE ASSESSEE HAS SHOWN TAXABLE INCOME OF RS.7,77,673/- IN THE FY 2008-09 AND HAS DEBITED TOTAL EXPENSES OF RS. 1, 37,083/- IN ITS P& L ACCOUNT. 2.7.1 AS PER RULE 8D(III), THE TOTAL DISALLOWANCE C OMES TO RS. 4,12,500/- (BEING 0.5% OF AVERAGE VALUE OF INVESTMENTS I.E. 0. 5% OF RS. 8,25,00,000/- ). ON PRO-RATA BASIS THE EXPENSES ATTRIBUTABLE TO T AXABLE INCOME COMES TO RS. 22,473/- (777673/4743750 X 137083) AND EXPENSES ATTRIBUTABLE TO EXEMPT INCOME COMES TO RS. 1,14,610/- (137083 224 73), HENCE THE DISALLOWANCE IS RESTRICTED TO AMOUNT OF RS. 1,14,61 0/-. THUS ASSESSING OFFICER MADE ADDITION OF RS.1,14,610 /-. 5. BEING AGGRIEVED BY THIS ORDER THE ASSESSEE PREFE RRED APPEAL BEFORE THE CIT(A). THE CIT(A) HELD AS UNDER: I HAVE PERUSED THE PROFIT & LOSS ACCOUNT FILED IN THE P/B BY LD. AR. OUT OF TOTAL RECEIPT CREDITED IN P & L A/C FOR RS. 55,22,4 23/- EXEMPT INCOME IN FORM OF DIVIDEND CONSTITUTES 86%. SIMILARLY INVESTM ENT IN SHARES OF M/S. BPTP LTD. IS FOR RS. 8,25,00,000/- WHICH CONSTITUTE S ALMOST 74% OF TOTAL ASSET. THEREFORE, EFFECTIVELY THE APPELLANT COMPANY IS AN INVESTMENT COMPANY, WHICH HAS MADE INVESTMENT IN SHARES, THE D IVIDEND INCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOME. I HAVE EX AMINED THE NATURE OF EXPENSES DEBITED UNDER PROFIT & LOSS ACCOUNT, THE E XPENDITURE ARE MAINLY ADMINISTRATIVE IN NATURE. AS THE MAJOR ACTIVITY OF THE APPEAL IS INVESTMENT IN SHARES, THESE ADMINISTRATIVE EXPENDITURE INCLUDE S THE EXPENSE IN MAINTAINING INVESTMENT. THE ARGUMENTS OF LD. AR THA T THE DIVIDEND IS RECEIVED IN THE MONTH OF JULY DOES NOT CHANGE THE F ACTS OF THE CASE, AS THE APPELLANT IS MAINTAINING SUCH SHARES EVEN AFTER JUL Y, DURING THE REMAINING PERIOD OF FINANCIAL YEAR. CONSIDERING THESE FACTS, IN MY VIEW DISALLOWANCE U/S 14A READ WITH RULE 8D CAN BE MADE. THE ASSESSIN G OFFICER HAS COMPUTED DISALLOWANCE UNDER RULE 8D (III) WHICH IS HIGHER THAN TOTAL EXPENDITURE CLAIMED IN P&L ACCOUNT. THEREFORE, THE ASSESSING OFFICER HAS MADE DISALLOWANCE ON PRO-RATA BASIS OF EXEMPT INCOM E TO TOTAL INCOME BY EXCLUDING THE EXPENSE PERTAINING TO TAXABLE INCOME. THE ACTION OF THE ASSESSING OFFICER APPEARS TO BE FAIR & PROPER. ACCO RDINGLY, I CONFIRM THE ADDITION MADE THIS GROUND OF APPEAL IS DISMISSED. 6. AGGRIEVED BY THE SAID ORDER THE ASSESSEE IS BEFO RE US. THE LD. AR SUBMITTED THAT BEFORE PROCEEDING TO INVOKE RULE 8D OF THE INCOME TAX RULES, THE ASSESSING OFFICER HAS TO RECO RD A FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLA IM OF THE ASSESSEE. SUCH FINDING HAS TO BE GIVEN AFTER THE EXAMINATION/ SCRUTINY OF THE ACCOUNTS. THE SAID FINDING HAS TO BE ARRIVED AT ON OBJECTIVE SATISFACTION, IN GOOD FAITH, ON RELEVANT CONSIDERAT ION. THE FINDING IS TO GIVE AFTER GIVING ASSESSEE REASONABLE OPPORTUNIT Y TO SHOW CAUSE ON THE CONNECTION OF THE CLAIMED BY HIM. THE REASON S FOR GIVING THE FINDING HAVE TO BE GIVEN. NO DISALLOWANCE CAN BE MA DE IF NO EXPENDITURE IS INCURRED IN RELATION TO THE EXEMPT I NCOME. BUT IN ASSESSEES CASE THE ASSESSING OFFICER HAS NOT FOLLO WED THE SAME. THE LD. AR RELIED ON THE FOLLOWING CASE LAWS: I) MAXOPP INVESTMENT VS. CIT (2011) 15 TAXMANN.COM 390 (DELHI) II) CIT VS. TAIKISHA ENGINEERING INDIA PVT. LTD. IN ITA NO. 115 & 119/2014 DATED 25.11.2014 (DELHI) III) GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT 328 ITR 81 (BOM) IV) M/S JOINT INVESTMENT PVT. LTD. VS. CIT IN ITA N O. 117/2015 DATED 25.02.2015 (DELHI) V) UP ELECTRONICS CORPORATION LTD. VS. DCIT, LUCKNO W ITAT A BENCH IN ITA NO. 538/LKW/2012 DATED 23.01.2015. 7. THE LD. DR RELIED UPON THE ORDERS OF THE ASSESSI NG OFFICER AND CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE DOCUMENTS. OUT OF TOTAL RECEIPT CREDITED IN P & L A /C FOR RS. 55,22,423/- EXEMPT INCOME IN FORM OF DIVIDEND CONST ITUTES 86%. THE ASSESSEE HAS MADE INVESTMENT FOR RS. 8,25,00,00 0/- WHICH CONSTITUTES ALMOST 74% OF THE TOTAL ASSET. THUS ASS ESSEE IS MAINLY AN INVESTMENT COMPANY WHICH HAS MADE INVESTMENT IN SHARES, THE DIVIDEND INCOME FROM WHICH DOES NOT FORM PART OF TO TAL INCOME. THE EXPENSES INCURRED WERE ALSO THAT OF ADMINISTRATIVE EXPENSES WHICH IS PART OF THE INVESTMENT MADE BY THE ASSESSEE. THE ASSESSING OFFICER HAS GIVEN PROPER SATISFACTION AND REASONS W HILE APPLYING SECTION 14A READ WITH RULE 8D (III). THE CIT(A) WAS RIGHT IN HOLDING THAT AS THE MAJOR ACTIVITY OF THE ASSESSEE IS INVES TMENT IN SHARES, THESE ADMINISTRATIVE EXPENDITURE INCLUDES THE EXPEN SE IN MAINTAINING INVESTMENT. THE ARGUMENTS OF LD. AR THA T THE DIVIDEND IS RECEIVED IN THE MONTH OF JULY DOES NOT CHANGE TH E FACTS OF THE CASE, AS THE ASSESSEE IS MAINTAINING SUCH SHARES EV EN AFTER JULY, DURING THE REMAINING PERIOD OF FINANCIAL YEAR. THE ASSESSING OFFICER HAS COMPUTED DISALLOWANCE UNDER RULE 8D (III) OF TH E INCOME TAX RULES WHICH IS HIGHER THAN TOTAL EXPENDITURE CLAIME D IN P&L ACCOUNT. THEREFORE, THE ASSESSING OFFICER HAS MADE DISALLOWANCE ON PRO-RATA BASIS OF EXEMPT INCOME TO TOTAL INCOME BY EXCLUDING THE EXPENSE PERTAINING TO TAXABLE INCOME. THE ACTION OF THE ASSESSING OFFICER APPEARS TO BE FAIR & PROPER. THE JUDGMENTS/ ORDERS RELIED UPON BY THE LD. AR WILL NOT APPLY IN THE PRESENT CA SE. IN FACT, IN MAXOPP INVESTMENT VS. CIT, THE HONBLE DELHI HIGH C OURT HAS HELD THAT WHILE REJECTING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE AND NO EXPENDITURE, AS THE CASE MAY BE IN RELATION TO EXEMPT INCOME THE ASSESSING OFFICER HAVE TO INDICAT E COGENT REASONS FOR THE SAME. IN THE PRESENT CASE THE ASSES SING OFFICER HAS CLEARLY POINTED OUT THAT THE ASSESSEE HAS EARNED DI VIDEND INCOME OF RS. 47,43,750/- AND CLAIMED IT EXEMPT U/S. 10 OF T HE INCOME TAX ACT. INCOME DOES NOT COME FROM NOWHERE. CERTAIN EXP ENSES ARE ALWAYS INCURRED FOR EARNING AN INCOME. THEREFORE, T HE ASSESSING OFFICER REJECTING THE CONTENTION OF THE ASSESSEE TH AT IT HAS NOT INCURRED ANY EXPENDITURE ON EARNING THE EXEMPT INCO ME. THE CIT(A) ALSO NOTED THAT THE NATURE OF EXPENSES DEBITED UNDE R PROFIT AND LOSS ACCOUNT, THE EXPENDITURE ARE MAINLY ADMINISTRA TIVE IN NATURE. THUS THE APPLICABILITY OF RULE 8D (2)(III) IS JUST AND PROPER. IN LIGHT OF THIS, THERE IS NO NECESSITY TO INTERFERE WITH TH E FINDINGS OF THE ASSESSING OFFICER AS WELL AS THAT OF CIT(A). 9. IN RESULT, THE APPEAL OF THE ASSESSEE IS DISMISS ED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 17TH OF OCTOBER, 2016. SD/- SD/- (S.V. MEHROTRA) ( SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17/10/2016 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON .09 2016 PS 2. DRAFT PLACED BEFORE AUTHOR . 09.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 10.2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 17 .10.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 17 .10.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.
Mehul