M/s Apollo Indternational Ltd., New Delhi V. DCIT, New Delhi

ITA 6834/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3343 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 29-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI KANT GUPTA SENIOR
• Assessee Lawyers: MANU K GIRI
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6834/DEL./2015 (ASSESSMENT YEAR : 2011-12) M/S. APOLLO INTERNATIONAL LIMITED, VS. DCIT, CIRCL E 3 (1), 303, DLF COURT YARD, NEW DELHI. SAKET, NEW DELHI-110 017. (PAN : AAACA6447N) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MANU K. GIRI, ADVOCATE REVENUE BY : SHRI RAVI KANT GUPTA, SENIOR DR DATE OF HEARING : 01.03.2018 DATE OF ORDER : 09.03.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, M/S. APOLLO INTERNATIONAL LIMITED (H EREINAFTER REFERRED TO AS THE ASSESSEE COMPANY) BY FILING TH E PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 01.12. 2015 PASSED BY LD. CIT(APPEALS)-I, NEW DELHI QUA THE ASSESSMENT YE AR 2011-12 ON THE GROUNDS INTER ALIA THAT :- ITA NO.6834/DEL./2015 2 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN DISALLOWING AN AMOUNT OF RS.20,67,000/- UNDER SECTI ON 14A OF THE ACT READ WITH RULE 80 OF THE INCOME TAX RULES AND IN DOING SO HAS GROSSLY ERRED IN :- A) HOLDING THAT THE APPELLANT IS UNDER AN OBLIGATIO N TO COMPUTE DISALLOWANCE AS PER PROVISIONS OF RULE 8 0. B) MAKING ADDITION U/S 14A OF THE ACT WITHOUT REWARDING HIS DISQUALIFICATION HAVING REGARD TO THE TAX AUDIT REPORT AND ACCOUNTS OF THE APPELLANT THAT EXPENDITURE OF RS.8,17,000 HAS BEEN INCURRED FOR EARNING EXEMPT INCOME. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : THE ASSESSEE COMPANY IS I NTO MANUFACTURING AND TRADING OF TYRES, TUBES, FLAPS, L EATHER GARMENTS AND LEATHER ACCESSORIES. ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (F OR SHORT THE ACT) BY DETERMINING THE TOTAL LOSS AT RS.18,88,67, 890/- AS AGAINST DECLARED LOSS OF RS.19,09,34,890/- BY MAKING DISALL OWANCE OF RS.20,67,000/- U/S 14A OF THE ACT. 3. ASSESSEE COMPANY CARRIED THE MATTER BY WAY OF FI LING APPEAL BEFORE THE LD. CIT (A) WHO HAS CONFIRMED THE DISALL OWANCE MADE BY THE AO BY PARTLY ALLOWING THE APPEAL. FEELING A GGRIEVED, THE ITA NO.6834/DEL./2015 3 ASSESSEE COMPANY HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE ASSESSEE COMPANY, DURING THE ASSESSMENT PROC EEDINGS, HAS GIVEN COMPLETE DETAILS OF ITS INVESTMENT DURING THE YEAR UNDER ASSESSMENT, FOR THE PURPOSE OF CALCULATION OF EXPEN DITURE QUA INCOME CHARGEABLE TO TAX U/S 14A OF THE ACT READ WI TH RULE 8D OF THE INCOME-TAX RULES, 1962 (FOR SHORT THE RULES) WHICH IS EXTRACTED AS UNDER FOR READY PERUSAL :- S.NO. PARTICULARS AMOUNT (RS.) LACS 1 EXPENDITURE DIRECTLY RELATED ON DIVIDEND INCOME N IL 2 EXPENDITURE BY WAY OF INTEREST NOT ATTRIBUTABLE T O ANY PARTICULAR INCOME OR RECEIPT (PLEASE REFER NOTE BEL OW) NIL 3 0.5% OF THE AVERAGE VALUE OF INVESTMENT AVERAGE VALUE OF INVESTMENT APOLLO TYRES LTD. 1634.09 COSMIC INVESTMENT 48.00 ENCORP E SERVICE LTD. 260.00 APOLLO LOGISOLUTIONS LTD. 1505.00 GLASSDOOR INVESTMENT PVT. LTD. 5.00 UFO MOVIEZ INDIA LTD. 2316.54 OPENING INVESTMENT 5768.63 CLOSING INVESTMENT 5768.63 TOTAL 11537.6 AVERAGE INVESTMENT 5768.63/2 5768.63 28.84 TOTAL 28.84 ITA NO.6834/DEL./2015 4 6. UNDISPUTEDLY, THE ASSESSEE COMPANY HAS RECEIVED DIVIDEND OF RS.131.45 LAKHS WHICH HAS BEEN CLAIMED AS EXEMPT INCOME. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE COMPANY HA S SUO MOTU MADE DISALLOWANCE OF RS.8,17,000/- U/S 14A BEING 0.5% OF THE VALUE OF THE INVESTMENT IN THE SHARE OF APOLLO TYRES LIMITED ON WHICH ASSESSEE COMPANY HAS EARNED DIVIDEND. 7. IN THE BACKDROP OF THE AFORESAID INVESTMENT MADE BY THE ASSESSEE COMPANY DURING THE YEAR UNDER ASSESSMENT A ND THE UNDISPUTED FACTS, GROUNDS RAISED BY THE ASSESSEE CO MPANY AND ARGUMENTS ADDRESSED BY THE LD. AUTHORIZED REPRESENT ATIVES OF THE PARTIES TO THE APPEAL, THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER THE ASSESSEE COMPANY HAS MADE WRONG CALCULATION TO MAKE SUO MOTU DISALLOWANCE ON THE AVERAGE INVESTMENT EARNING DIVIDEND INCOME DURING T HE YEAR UNDER ASSESSMENT? 8. WHEN THE QUESTION FRAMED IS EXAMINED IN THE LIGH T OF THE FACT THAT THE ASSESSEE COMPANY HAS RECEIVED DIVIDEND OF RS.131.45 LAKHS ON THE AVERAGE INVESTMENT VALUE OF RS.1634.09 LAKHS IN APOLLO TYRES LIMITED ONLY AND HAS NOT RECEIVED ANY DIVIDEND IN REMAINING FOUR INVESTMENTS SHOWN IN THE TABLE IN TH E PRECEDING ITA NO.6834/DEL./2015 5 PARA, THE AO WAS REQUIRED TO INVOKE PROVISIONS CONT AINED U/S 14A READ WITH RULE 8D ONLY IF THE SUO MOTU DISALLOWANCE OF RS.8,17,000/- MADE BY THE ASSESSEE COMPANY ON THE A VERAGE INVESTMENT HAS NOT BEEN CALCULATED CORRECTLY. 9. HOWEVER, THE AO HEREIN BY INVOKING THE PROVISION S CONTAINED U/S 14A READ WITH RULE 8D(III) MADE DISAL LOWANCE @ 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT I.E. RS .5768.63 LAKHS BY LOSING SIGHT OF THE FACT THAT ONLY INVESTMENT AT TRACTING DIVIDEND WAS TO BE TAKEN FOR THE PURPOSE OF DISALLOWANCE UND ER RULE 8D(III). AO HAS NOT RECORDED HIS DISSATISFACTION THAT SUO MO TU DISALLOWANCE MADE BY THE ASSESSEE COMPANY ON THE INVESTMENT OF R S.1634.09 LAKHS ON WHICH THE ASSESSEE COMPANY HAS EARNED DIVI DEND OF RS.8,17,000/- IS NOT CORRECT, RATHER CALCULATED THE DISALLOWANCE ON THE ENTIRE INVESTMENT WHICH HAS NOT ATTRACTED ANY D IVIDEND INCOME DURING THE YEAR UNDER ASSESSMENT. 10. SO, WHEN THE ASSESSEE COMPANY HAS NOT RECEIVED ANY DIVIDEND INCOME FROM THE INVESTMENT MADE IN OTHER C OMPANIES, NO DISALLOWANCE UNDER RULE 8D(2)(III) CAN BE MADE. HON BLE HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDIA (P.) LTD. 272 CTR 282 HELD THAT WHERE NO EXEMPT INCOME IS RECEIVED BY THE ASSESSEE COMPANY IN THE PREVIOUS YEAR, DISALLOWANCE U/S 14A OF THE ACT IS NOT WARRANTED. SO, KEEPING IN VIEW THE FACT THAT I N THE REMAINING ITA NO.6834/DEL./2015 6 INVESTMENT EXCEPT INVESTMENT OF RS.1634.09 LAKHS IN APOLLO TYRES LIMITED, NO DIVIDEND INCOME HAS BEEN RECEIVED BY TH E ASSESSEE COMPANY AND AS SUCH, AO HAS WRONGLY INVOKED THE PRO VISIONS CONTAINED UNDER RULE 8D(2)(III) OF THE RULES WHICH IS NOT SUSTAINABLE IN THE EYES OF LAW. 11. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, IMPUG NED ORDER PASSED BY LD. CIT (A) IS NOT SUSTAINABLE AND DISALL OWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) OVER AND AB OVE DISALLOWANCE OF RS.8,17,000/- SUO MOTU MADE BY THE ASSESSEE COMPANY IS NOT SUSTAINABLE, HENCE DELETED. CONSEQU ENTLY, THE APPEAL FILED BY THE ASSESSEE COMPANY IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 9 TH DAY OF MARCH, 2018. SD/- SD/- (B.P. JAIN) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 9 TH DAY OF MARCH, 2018/ TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)- I, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.