KLJ Organic Ltd., New Delhi V. DCIT, New Delhi

ITA 6723/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7363 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 23-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 23-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

ITA NO. 6723/DEL/2013 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI H S SIDHU JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.:- 6723/DEL /2013 ASSESSMENT YEAR: 2009-10 KLJ ORGANIC LTD. KLJ HOUSE 63, RAMA MARG, NAJAFGARH, NEW DELHI. PAN AAACK3722A VS. DCIT, CENTRAL CIRCLE-4,ROOM NO. 318, 3 RD FLOOR, ARA CENTRE, JHANDEWALAN EXTN. NEW DELHI (APPELLANT) (RESPONDENT) O R D E R PER O.P. KANT, A. M. THIS APPEAL BY THE ASSESSEE IS DIRECTED A GAINST ORDER DATED 30/09/2013 OF LD. COMMISSIONER OF INCOME-TAX (APPEA LS)-XXXIII, NEW DELHI FOR ASSESSMENT YEAR 2009-10 RAISING FOLLOWING GROUNDS: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS PASSED THE IMPUGNED ASSESSMENT ORDER WITHOUT TAKING INTO ASSESSEE BY : SHRI V.K. SABHARWAL, ADV. DEPARTMENT BY: SHRI T. VASANTHAN, SR. DR DATE OF HEARING 23/05/2016 DATE OF PRONOUNCEMENT 24/06/2016 ITA NO. 6723/DEL/2013 2 CONSIDERATION ALL THE FACTS BEFORE HIM WHICH MAKE I T UNREASONABLE, UNJUSTIFIED AND BAD IN LAW. 2. THAT THE ACTION ON THE PART OF THE ASSESSING OFFICE R IS HIGHLY ARBITRARY, IMPROPER AND WITHOUT APPLICATION OF MIND , UNREASONABLE, UNJUSTIFIED AND BAD IN LAW AND DESERVE S TO BE DELETED, SO THAT PROPER JUSTICE CAN BE GIVEN TO THE APPLICANT. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LE ARNED ASSESSING OFFICER HAS ERRED WHILE MAKING ADDITION O N ACCOUNT OF SECTION 14A OF RS. 11,09,325/- WHICH IS ILLEGAL, UNJUSTIFIED AND REQUIRED TO BE DELETED. 4. THAT THE APPELLANT CRAVES LEAVE TO AMEND, CHANGE OR ADD ANY GROUND OF APPEAL AT THE TIME OF HEARING. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FIL ED RETURN OF INCOME ON 26/09/2009 DECLARING TOTAL INCOME OF RS. 6,10,42,95 3/-. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE A CT) WAS COMPLETED ON 28/12/2011 MAKING DISALLOWANCE OF RS. 11,09,325/ -UNDER SECTION 14A OF THE ACT, THOUGH THERE WAS NO EXEMPT INCOME E ARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE L D. COMMISSIONER OF INCOME-TAX (APPEALS) ALSO UPHELD THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE IN APPEA L BEFORE THE TRIBUNAL. 3. IN THE GROUNDS RAISED BY THE ASSESSEE, THE EFFECTIVE GRIEVANCE IS IN RESPECT OF DISALLOWANCE OF RS. 11,09,325/- UNDER SECTION 14A OF THE ACT. ITA NO. 6723/DEL/2013 3 4. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY MADE INVESTMENT IN HUNDRED PERCENT SUBSIDIARY COMPANY NAMELY K L J ORGANIC TH AILAND LTD. BUT NO DIVIDEND INCOME WAS EARNED DURING THE YEAR UNDER CO NSIDERATION FROM THE INVESTMENT. HE FURTHER SUBMITTED THAT THE INVES TMENT WAS MADE OUT OF CAPITAL AND FREE RESERVES AS DURING THE YEAR THE RE WAS NET PROFIT OF RS. 6,15,05,425/- AND AFTER PAYING THE TAX, THE NET SURPLUS REMAINED WAS OF RS. 4,02,52,125/-. HE FURTHER SUBMITTED THAT THE INVESTMENT WAS MADE ACCORDING TO THE BUSINESS STRATEGY OF THE COMP ANY AND NO EXTRA EFFORTS WERE MADE FOR THIS INVESTMENT AND THEREFORE NO DISALLOWANCE SHOULD BE MADE UNDER SECTION 14A OF THE ACT. HE ALS O RELIED ON THE DECISION OF THE TRIBUNAL DELHI D BENCH IN ITA NO. 308/DEL/2014 IN THE CASE OF KLJ TOWN PLANNERS(P) LTD. PRONOUNCED ON 18/ 01/2016, WHERE THE TRIBUNAL HAS FOLLOWED THE JUDGEMENT DATED 02/09/ 2015 OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CHEMINVEST VERSUS CIT IN ITA NO. 749/2014 . 5. THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE , ON THE OTHER HAND RELIED ON THE FINDINGS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSION AND PE RUSED THE MATERIAL ON RECORD. THERE IS NO DISPUTE AS TO THE FACT THAT NO EXEMPT INCOME WAS ITA NO. 6723/DEL/2013 4 EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSID ERATION FROM THE INVESTMENTS MADE. WE FIND THAT THE CASE OF CHEMINVE ST VERSUS COMMISSIONER OF INCOME-TAX (2015) 378 ITR 33 (DEL), THE QUESTION BEFORE THE HONBLE JURISDICTIONAL HIGH COURT FOR CO NSIDERATION WAS AS UNDER: WHETHER DISALLOWANCE UNDER SECTION 14A OF THE ACT CAN BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAS BEEN EARNED OR RECEIVED BY THE ASSESSEE? 7. THE HONBLE HIGH COURT RELYING UPON THE CAS E OF CIT VERSUS HOLCIM INDIA PRIVATE LIMITED IN ITA NO. 486/2004 AN SWERED THE QUESTION AS UNDER: 23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINB EFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT THE EXP RESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A O F THE ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, W HICH 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 N OT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. ITA NO. 6723/DEL/2013 5 8. IN VIEW OF THE BINDING PRECEDENTS , RESPEC TFULLY FOLLOWING THE FINDING OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHEMINVEST VERSUS CIT (SUPRA) , WE HOLD THAT NO DISALLOWANCE U NDER SECTION 14A OF THE ACT IS CALLED FOR IN THE CASE OF THE ASSESSEE A S NO EXEMPT INCOME WAS RECEIVED OR RECEIVABLE DURING THE YEAR UNDER CO NSIDERATION. ACCORDINGLY THE EFFECTIVE GROUND OF THE APPEAL IS A LLOWED. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/06/2016. SD/- SD/- (H.S. SIDHU) (O.P. KANT) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED: 24 /06/2016 VEENA VEENA VEENA VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI