Paliwal GDR Homestyles (P) Ltd., New Delhi V. DCIT, CIRCLE- 10(1), New Delhi

ITA 6712/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7206 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 07-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRINALINI SAPRA
• Keywords: Rule of consistency; Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI F BENCH: NEW DELHI (THROUGH VIDEO CONFERENCING ) BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & DR.B.R.R.KUMAR, ACCOUNTANT MEMBER ITA NO.6712/DEL/2017 ASSESSMENT YEAR : 2014-15 PALIWAL GDR HOMESTYLES (P.) LTD., 38, FUNCTIONAL INDL. ESTATE, PAHARGANJ, NEW DELHI-110092 PAN-AACCP3904F VS DCIT, CIRCLE-10(1), NEW DELHI. APPELLANT RESPONDENT APPELLANT BY MS. MONIK A A G GARWAL, CA RESPONDENT BY MS. MRINALINI SAPRA, SR.DR DATE OF HEARING 26.08.2021 DATE OF PRONOUNCEMENT 03.09 .2021 ORDER PER KUL BHARAT, JM : THIS APPEAL FILED BY THE ASSESSEE PERTAINING TO ASS ESSMENT YEAR 2014-15 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-35, NEW DELHI DATED 25.08.2017. THE ASSESSEE HAS RAISED FOLLOWING SOLITARY GROUNDS OF APPEAL:- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)-35, NEW DELHI HAS ERRED BOTH IN LAW AND ON FACTS IN SUSTAIN ING THE DISALLOWANCE OF RS. 3,07,3071/- REPRESENTING EXPEND ITURE DISALLOWABLE BY INVOKING SECTION 14A READ WITH RULE 8D OF THE ACT. 2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) COMPLETELY IGNORED THE FACT THAT, ONLY A PORTION OF INVESTMENT IS GENERATING DIVIDEND WHICH IS TAX FREE AND ALSO FAILED TO APPRE CIATE THAT ALL THE INVESTMENT WERE MADE FROM OWN INTEREST FREE FUNDS A VAILABLE TO ASSESSEE ,EVEN ON THE PRINCIPLE OF CONSISTENCY THE DISALLOWANCE MADE IS UNTENABLE. 3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) COMPLETELY IGNORED THE DECISION IN THE CASE OF CLT V. HDFC BAN K LIMITED (ITA NO. 330 OF 2012), BOMBAY HIGH COURT WHERE IT WAS HE LD THAT NO DISALLOWANCE U/S 14A CAN BE MADE IN RESPECT OF INTE REST PAID ON BORROWING IF ASSESSEE'S OWN FUNDS AND NON-INTEREST BEARING FUNDS EXCEEDS INVESTMENT IN TAX-FREE SECURITIES. ITA NO.6712/DEL/2017 ASSESSMENT YEAR : 2014-15 2 | P A GE IT IS THEREFORE, PRAYED THAT DISALLOWANCE MADE AND SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) MAY KINDLY BE DELETED AND APPEAL OF THE APPELLANT COMPANY BE ALLO WED. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE MADE U/S 14A OF THE INCOME TAX ACT, 1 961 (THE ACT) R.W.RULE 8D OF THE INCOME TAX RULES, 1962 (THE RULES) AMOU NTING TO RS.3,07,307/-. 3. FACTS IN BRIEF OF THE PRESENT CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME AT RS.1,40,18,020/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) OF THE ACT WAS FRAME D VIDE ORDER DATED 24.11.2016. BY FRAMING THE ASSESSMENT, THE ASSESSI NG OFFICER MADE ADDITION U/S 14A OF THE ACT IN TERMS OF THE PROVISION OF RUL E 8D OF THE RULES AMOUNTING TO RS.3,07,307/-. APART FROM IT, THE ASSESSING OFF ICER ALSO MADE CERTAIN ADHOC DISALLOWANCE OF RS.1,37,303/- IN RESPECT OF TELEPHO NE EXPENSES AND VEHICLE RUNNING EXPENSES. 4. AGGRIEVED AGAINST THIS, THE ASSESSEE PREFERRED T HE APPEAL BEFORE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS, P ARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THEREBY, THE ADDITION OF RS.1,37,303 /- WAS DELETED AND THE ADDITION OF RS.307,307/- WAS CONFIRMED AS MADE BY I NVOKING THE PROVISION OF SECTION 14A OF THE ACT. 5. AGGRIEVED AGAINST THIS, THE ASSESSEE IS IN APPE AL BEFORE THIS TRIBUNAL. 6. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT IN THIS CASE, THE ASSESSEE HAD EARNED A DIVIDEND INCOME OF RS.49, 489/- ONLY. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO DISALLOWANCE COU LD BE MADE IN EXCESS OF THE EXEMPT INCOME. IN SUPPORT OF THIS CONTENTION, LD. COUNSEL FOR THE ASSESSEE ITA NO.6712/DEL/2017 ASSESSMENT YEAR : 2014-15 3 | P A GE RELIED ON THE JUDGEMENT OF HONBLE JURISDICTIONAL H IGH COURT RENDERED IN THE CASE OF JOINT INVESTMENT P.LTD. VS CIT 372 ITR 694 (DEL.). 7. PER CONTRA, LD. SR. DR SUPPORTED THE ORDERS OF T HE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE REVENUE HAS NOT CONTROVERTED THE FA CT THAT DURING THE YEAR UNDER APPEAL, THE ASSESSEE HAD EARNED A DIVIDEND IN COME OF RS.49,489/- ONLY. THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT P.LTD. VS CIT (SUPRA) HELD THAT B Y NO STRETCH OF IMAGINATION CAN SECTION 14A OR RULE 8D BE INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMP T INCOME IS TO BE DISALLOWED. THE WINDOW FOR DISALLOWANCE IS INDICATED IN SECTION 14A, AND IS ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE; INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EXEMPT INCOME. THIS PROPORTION OR PORTION OF THE TA X EXEMPT INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT AS HAS HAPPENED IN THIS C ASE. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO T HE EXTENT OF EXEMPT INCOME OF RS.49,489/- U/S 14A R.W.RULE 8D OF RULES. THUS, GR OUNDS RAISED BY THE ASSESSEE IN THIS APPEAL ARE PARTLY ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ABOVE DECISION WAS PRONOUNCED ON CONCLUSION OF VIRT UAL HEARING IN THE PRESENCE OF BOTH THE PARTIES ON 03.09.2021. SD/- SD/- (DR. B.R.R.KUMAR) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIA L MEMBER *AMIT KUMAR* ITA NO.6712/DEL/2017 ASSESSMENT YEAR : 2014-15 4 | P A GE COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI