M/s. Rathi Steel and Power Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 6483/DEL/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3375 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 13-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 05-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Earning of tax free income
• Section: 14A; 115JB

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.:- 6483/DEL /2013 ASSESSMENT YEAR: 2009-10 RATHI STEEL AND POWER LTD., 24-1A, MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI 110 044 PAN AAACR1435K VS. ADDL. CIT RANGE-15, NEW DELHI. (APPELLANT) (RESPONDENT) O R D E R PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE AS SESSEE AGAINST ORDER DATED 17.9.2013 PASSED BY THE LD. CIT(A) XVIII, NEW DELHI FOR ASSESSMENT YEAR 2009-10 AND ISSUES IN DISPUTE RELAT E TO DISALLOWANCE U/S ASSESSEE BY: SHRI SATYEN SETHI, ADVOCATE DEPARTMENT BY : SHRI AMIT JAIN , SR. DR DATE OF HEARING 23 /11 /2017 DATE OF PRONOUNCEMENT 19.2.2018 ITA NO. 6483/DEL-2013 RATHI STEEL AND POWER LTD. VS. ACIT 2 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLE D THE ACT) AND ADJUSTMENT U/S 115JA/JB OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE R ETURN OF INCOME WAS FILED AT A LOSS OF 20,20,87,700/- AND INCOME U/S 115JB WA S OFFERED AT RS. 7,43,16,125/-. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE AO OBSERVED THAT ASSESSEE HAD INVESTMENTS TO THE TUNE OF RS. 94,70,947/- WHICH YIELDED EXEMPT INCOME IN THE FORM OF DIVIDEND . AS THE ASSESSEE DID NOT MAKE A SUO MOTO DISALLOWANCE ON ACCOUNT OF COST OF MAINTAINING SUCH INVESTMENTS NOR HAD ALLOCATED ANY INTEREST COS T, THE AO PROCEEDED TO APPLY RULE 8D OF INCOME TAX RULES, 1962 AND DISA LLOWED A SUM OF RS. 6,44,977/- U/S 14A OF THE ACT. A SIMILAR DISALLOWAN CE WAS ALSO MADE FOR COMPUTING INCOME U/S 115JB OF THE ACT. THE LD. CIT (A) ALSO DISMISSED THE ASSESSEES APPEAL. NOW THE ASSESSEE HAS APPROAC HED THE ITAT AND HAS CHALLENGED THE UPHOLDING THE DISALLOWANCE BY TH E LD. CIT (A). 3. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED T HAT THE DISALLOWANCE HAD BEEN MADE ON MIS-APPRECIATION OF THE FACTS BY T HE AO. IT WAS SUBMITTED THAT THE AO AS WELL AS THE LD. CIT (A) DI D NOT TAKE COGNIZANCE OF THE FACT THAT THESE INVESTMENTS WERE MADE IN THE YEAR 1991 AND, THEREFORE, NO COST WAS INCURRED EITHER IN TERMS OF INTEREST OR IN TERMS OF MAINTAINING THE INVESTMENTS WHICH WOULD JUSTIFY THE DISALLOWANCE. IT WAS ITA NO. 6483/DEL-2013 RATHI STEEL AND POWER LTD. VS. ACIT 3 ALSO SUBMITTED THAT THE INVESTMENTS WERE NOT MADE O UT OF BORROWED FUNDS. 4. THE LD. SR. DR, IN RESPONSE, PLACED RELIAN CE ON THE CONCURRENT FINDINGS OF BOTH THE LOWER AUTHORITIES AND SUBMITTE D THAT BOTH THE LOWER AUTHORITIES HAD MADE THE DISALLOWANCE AFTER DUE CON SIDERATION OF THE FACTS OF THE CASE. IT WAS SUBMITTED THAT THE ASSESS EES APPEAL DESERVES TO BE DISMISSED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON A SPECIFIC QUERY FROM THE BENCH, BOTH THE PARTIES AGREED THAT THE DISALLOWANCE MAY BE RESTRICTED TO THE EXTE NT OF THE EXEMPT INCOME OR THE DISALLOWANCE AS CALCULATED BY THE AO, WHICHEVER IS LESS. SINCE BOTH THE PARTIES HAVE AGREED THAT THE DISALLO WANCE MAY BE RESTRICTED TO THE EXTENT OF EXEMPT INCOME OR THE DI SALLOWANCE MADE BY THE AO, WHICHEVER IS LESS, THE ISSUE IS RESTORED TO THE FILE OF THE AO FOR DETERMINING AND VERIFYING THE EXEMPT INCOME AND THE REAFTER RESTRICTING THE DISALLOWANCE UNDER SECTION 14A TO THE EXTENT OF EXEMPT INCOME EARNED DURING THE YEAR OR THE DISALLOWANCE MADE BY THE AO, WHICHEVER IS LESS. THE AO IS ALSO DIRECTED TO PROVIDE ADEQUAT E OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE BEFORE PROCEEDING TO W ORK OUT THE ITA NO. 6483/DEL-2013 RATHI STEEL AND POWER LTD. VS. ACIT 4 DISALLOWANCE. ACCORDINGLY, THIS GROUND STANDS ALLOW ED FOR STATISTICAL PURPOSES 6. IN THE RESULT APPEAL STANDS ALLOWED FOR STATIS TICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 19.2.2018. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVAST AVA) HON'BLE PRESIDENT JUDICIAL MEMBER DATED: 19.2.2018 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI