ITO, New Delhi V. M/s Dayal Finsec Ltd, New Delhi

ITA 6678/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4788 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 16-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAILASH TIWARI
• Keywords: Earning of tax free income; Proportionate interest
• Section: 143(3); 14A

Judgement Text

ITA NO. 6678/DEL/2015 ASSESSMENT Y EAR: 2010 - 11 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G BENCH NEW DELHI) BEFORE SHRI G.D. AGRAWAL, PRESIDENT & SHRI AMIT SHUKLA , JUDICIAL MEMB E R I N ITA NO. 6678 /DEL/201 5 ASSESSMENT YEAR: 20 1 0 - 1 1 ITO WARD - 7(2), ROOM NO. 406, 4 TH FLOOR, C.R. BUILDING, NEW DELHI VS. DAYAL FINSE C LTD. 607 - 608, GDITL TOWERS, NETAJI SUBHASH PLACE, NEW DELHI (APPLICANT) (RESPONDENT) (PAN: A A B C S0832L ) REVENUE BY: SH RI KAILASH TIWARI , SR. DR ASSESSEE BY: SHRI SACHIN JAIN, CA DATE OF HEARING 22 / 0 8 /201 7 DATE OF PRONOUNCEMENT 2 2 / 0 8 /201 7 ORDER PER AMIT SHUKLA, JUDICIAL MEMBER : THE AFORESAID A PPEAL HA S BEEN FILED BY THE R EVENUE AGAINST IMPUGNED ORDER DATED 13 . 10 .201 5 , PASSED BY THE LD. CIT (APPEALS) - 1 4 , NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) F OR THE A.Y. 20 1 0 - 1 1 . THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEALS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO ERRED IN APPLYING SECTION 14A OF THE I. T. ACT, 1961 READ WITH RULE 8D TO THE CASE OF THE APPELLANT COMPANY. PAGE 2 OF 4 2. THAT WITHOUT APPRECIATING THE FACTS OF THE CASE AND COMPLETELY IGNORING THE FINDINGS OF HIS PREDECESSOR FOR A.Y. 2010 - 11, THE LD. ASSESSING OFFICER WAS WRONG IN: (I) BLINDLY FOLLOW ING THE ORDER OF THE LD. C1T(A) FOR A.Y. 2010 - 11 WITH REGARD TO THE ISSUE OF DISALLOWANCE OF 'PROPORTIONATE INTEREST EXPENDITURE' U/R 8D (2)(II), WHICH WAS NOT EVEN IN EXISTENCE AFTER BEING SET ASIDE BY THE HON'BLE ITAT, NEW DELHI. (II) DISALLOWING AN AMOU NT OF RS. 39,91,941/ - U/R 8D (2)(II), BY CONSIDERING TOTAL INTEREST EXPENDITURE OF RS. 58,70,188/ - INCURRED ON LOANS OF RS. 450 LACS, AS ELIGIBLE FOR THE PURPOSE OF PROPORTIONATE DISALLOWANCE UNDER THAT RULE DESPITE THE FACT THAT THE MAJOR PORTION (RS. 447 .90 LACS) OF THE SAID LOANS OF RS. 450 LACS HAS BEEN DEMONSTRATED TO HAVE BEEN UTILIZED AND ATTRIBUTABLE TO THE TAXABLE INCOME GENERATING ACTIVITIES. 3. THAT THE APPELLANT CRAVE LEAVE TO ADD, AMEND, ALTER OR WITHDRAW ANY GROUND AT THE TIME OF HEARING. 2. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT , SINCE THERE WAS NO EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR, THEREFORE, THERE COULD NOT BE ANY DISALLOWANCE U/S 14A ; AND THIS ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CHEM INVEST LTD. VS. CIT REPORTED IN ( 2013 ) 378 ITR 33 3. 3. THE LD. DR, THOUGH ADMITTED THAT THERE I S NO EXEMPT INCOME DURING THE YEAR , H OWEVER, THE FACT REMAINS THAT THE INVESTMENT MADE BY THE ASSESSEE WERE CAPABLE OF EARNING EXEMPT INCOME, THEREFORE, DISALLOWANCE U/S 14A CAN BE MADE. 4. AFTER GOING THROUGH THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDER, WE FIND THAT THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE U/S 14A READ WITH RULE 8D AT RS. 39,91,941/ - , WHICH IS BASICALLY UNDER RULE 8D (2) (II) AND ONLY SUM OF RS. 10,814/ - HAS BEEN MADE ON PAGE 3 OF 4 ACCOUNT OF INDIRECT EXPENDITURE UNDER RULE 8D(2)(III) . ONE OF THE MAIN CONTENTIONS OF THE ASSESSEE HAD BEEN THAT THERE WAS NO DIVIDEND INCOME OR ANY KIND OF EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR WHICH CAN BE SAID TO BE FORMING PART OF THE TOTAL INCOME. WHENCE, THERE IS NO ACTUAL RECEIPT OF ANY EXEMPT INCOME WHICH CAN BE SAID TO BE INCLUDED IN THE TOTAL INCOME DU RING THE RELEVANT PREVIOUS YEAR , THEN DISALLOWANCE U/S 14A CANNOT BE TRIGGERED. THIS PROPOSITION HAS BEEN UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHEM INVEST LTD. VS. CIT (SUPRA) . THE HON'BLE DELHI HIGH COURT AFTER CONSIDERING THE VA RIOUS DECISIONS CAME TO THE FOLLOWING CONCLUSION: - 23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINBEFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT THE EXPRESSION 'DOES NOT FORM PART OF THE TOTAL INCOME' IN SECTION 14A OF THE ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING T HE RELEVANT PREVIOUS YEAR. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 5 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER P RONOUNCED IN THE OPEN COURT ON 2 2 . 0 8 .201 7. S D / - S D / - ( G.D. AGRAWAL ) (AMIT SHUKLA) (PRESIDENT) (JUDICIAL MEMBER) DATED: 2 2 . 0 8 .2017 PAGE 4 OF 4 NARENDER COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT (APPEALS) 5) DR: ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED ON 22 .0 8 .2017 DRAFT PLACED BEFORE AUTHOR 2 2 . 0 8 .2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 2 2 . 8 .2017 KEPT FOR PRONOUNCEMENT ON 2 2 . 8 .2017 FILE SENT TO THE BENCH CLERK 2 2 . 8 .2017 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.