M/s. Global Capital Ltd., New Delhi V. ACIT, New Delhi

ITA 6586/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97960 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 11-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

I.T.A.NO. 6586/DEL/2013 ASSESSMENT YEAR: 2009-10 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `D NEW DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI O. P. KANT, ACCOUNTANT MEMBER I.T.A.NO.6586/DEL/2013 ASSESSMENT YEAR : 2009-10 M/S GLOBAL CAPITAL LTD., VS ACIT, 414/1, 4 TH FLOOR, CIRCLE-12(1), DDA COMM. COMPLEX, NEW DELHI. DISTT. CENTER, JANAKPURI, NEW DELHI-110058 (PAN: AAACG3130E) (APPELLANT) (RESPONDENT) APPELLANT B Y: SHRI MANU K. GIRI, ADV. RESPONDENT BY : SHRI GAUR AV DUDEJA, SR. DR DATE OF HEARING: 10.11.2015 DATE OF PRONOUNCEMENT: 27.11.2015 O R D E R PER CHANDRAMOHAN GARG, J.M. THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-XV, NEW DELHI DATED 30.9.2013 IN APPEAL NO. 220/11-12/CIT(A)-XV FOR AY 2009-10. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER :- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEAL), ERRED IN REJECTING ASSESSEE'S CONTENTION THAT THE D ISALLOWANCE UNDER SECTION 14A CANNOT EXCEED RS. 13,35,040/- BEI NG THE AMOUNT OF DIVIDEND INCOME RECEIVED BY THE ASSESSEE COMPANY, THEREBY CONFIRMING THE ADDITION OF RS. 21,87,713/- MADE BY THE I.T.A.NO. 6586/DEL/2013 ASSESSMENT YEAR: 2009-10 2 ASSESSING OFFICER U/S 14A OF THE INCOME TAX ACT, RE SULTING IN ADDITION TO RETURNED INCOME TO THAT EXTENT. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) ERRED IN HOLDING THAT DISALLOWANCE UNDER RULE 8D HA S BEEN CORRECTLY WORKED OUT IN ACCORDANCE WITH THE PROVISI ONS OF RULE 8D. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. AT THE VERY OUTSET, LEA RNED COUNSEL OF THE ASSESSEE SUBMITTED A COPY OF THE ORDER OF THE ITAT DELHI C BENCH IN I.T.A. NO. 3763/DEL/2013 FOR ASSESSMENT YEAR 2009-10 DATED 29. 4.15 IN THE CASE OF INDUS VALLEY INVESTMENT & FINANCE (P) LTD. VS DCIT AND SU BMITTED THAT IN THE SIMILAR SET OF FACTS AND CIRCUMSTANCES, THE TRIBUNAL IN THE CASE OF ASSESSEES GROUP COMPANY HAS DIRECTED THAT THE DISALLOWANCE U/S 14A SHOULD NOT EXCEED THE EXEMPT INCOME AND THEREFORE, THE DISALLOWANCE WAS R ESTRICTED TO THE EXEMPT INCOME. LEARNED COUNSEL OF THE ASSESSEE HAS DRAWN O UR ATTENTION TOWARDS PARA 4 OF THE TRIBUNAL ORDER (SUPRA). 4. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW, HOWEVER, HE FAIRLY ACCEPTED THAT IN THE SIMILAR SET OF FACTS AND CIRCUMSTANCES, THE AMOUNT OF DISALLOWANCE HAS BEEN RESTRICTED TO THE EXEMPT INCOME. I.T.A.NO. 6586/DEL/2013 ASSESSMENT YEAR: 2009-10 3 5. FIRSTLY, IT WOULD BE APPROPRIATE TO REPRODUCE TH E RELEVANT PART OF THE ORDER OF THE TRIBUNAL (SUPRA) WHICH HAS BEEN RELIED BY TH E LEARNED COUNSEL OF THE ASSESSEE WHICH READS AS FOLLOWS:- 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT TH E TOTAL EXEMPT INCOME EARNED BY THE ASSESSEE IS TO THE TUNE OF RS. 25.38 LAC, AGAINST WHICH AN ADDITION OF RS.1.05 CRORE HAS BEEN MADE. THE HONBLE DELHI HIGH COURT IN JOINT INVESTMENT PVT. L TD. VS. CIT, VIDE ITS JUDGMENT DATED 25.2.2015, HAS HELD THAT TH E DISALLOWANCE U/S 14A CANNOT EXCEED THE AMOUNT OF EXEMPT INCOME. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HOL CIM INDIA PVT LTD. (2014) 90 CCH 081-DEL-HON'BLE HIGH COURT , HAS HELD THAT THERE CAN BE NO DISALLOWANCE U/S 14A IN THE AB SENCE OF ANY EXEMPT INCOME. THE RATIONALE BEHIND THESE JUDGMENTS IS THAT THE AMOUNT OF DISALLOWANCE U/S 14A SHOULD NOT EXCEED TH E EXEMPT INCOME. SINCE THE TOTAL EXEMPT INCOME IN THE INSTAN T CASE IS RS.25,38,020/-, WE DIRECT THAT THE DISALLOWANCE U/S 14A BE RESTRICTED TO RS.18,01,968/- (RS.25,38,020-RS.7,36, 052/-). THE REMAINING AMOUNT OF DISALLOWANCE IS DIRECTED TO BE DELETED. 6. IN VIEW OF ABOVE, IT IS OBSERVED THAT IN THE SIM ILAR SET OF FACTS AND CIRCUMSTANCES, THE TOTAL EXEMPT INCOME EARNED BY TH E PRESENT ASSESSEE IS RS.13,35,040 AGAINST WHICH AN ADDITION OF RS.21,87, 713 HAS BEEN MADE BY THE ASSESSING OFFICER U/S 14A OF THE ACT. AS NOTED BY THE COORDINATE BENCH OF THIS TRIBUNAL THAT IN THE CASE OF JOINT INVESTMENT (P) L TD. VS CIT (SUPRA), THE HONBLE DELHI HIGH COURT HAS HELD THAT THE DISALLOW ANCE U/S 14A OF THE ACT SHOULD NOT EXCEED THE EXEMPT INCOME. THE TRIBUNAL ALSO NOTED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS HOLCIM INDIA PVT. LTD. (SUPRA) HELD THAT THERE CAN BE NO DISALLOWANCE U/S 14A IN THE ABSENCE OF ANY EXEMPT INCOME. I.T.A.NO. 6586/DEL/2013 ASSESSMENT YEAR: 2009-10 4 FINALLY, THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT NOTED THAT THE DISALLOWANCE SHOULD NOT EXCEED THE EXEMPT INCOME DU RING THE RELEVANT FINANCIAL PERIOD. IN THE PRESENT CASE, SINCE THE TOTAL EXEMP T INCOME OF THE ASSESSEE IS RS.13,35,040 AND THE ASSESSEE HAD SUO MOTO OFFERED DISALLOWANCE OF RS.1,81,388 UNDER RULE 8D(2)(III) OF THE INCOME TAX RULES, 1962 BEING 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT IN THE SHARES O F APOLLO TYRES LTD. ON WHICH SUCH DIVIDEND INCOME WAS EARNED. HENCE, WE DIRECT THE ASSESSING OFFICER THAT THE DISALLOWANCE U/S 14A BE RESTRICTED TO RS.11,53, 752 (RS. 13,35,040 RS.1,81,388) AND THE REMAINING AMOUNT OF DISALLOWAN CE IS DIRECTED TO BE DELETED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.11.2015. SD/- SD/- (O.P.KANT) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27TH NOVEMBER, 2015 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR