ACIT, New Delhi V. M/s Sindhu Trade Links Ltd, New Delhi

ITA 6873/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4310 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 31-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K TULSIYAN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NOS.6873 & 6874/DEL/2015 ASSESSMENT YEARS : 2012-13 & TO 2013-14 ACIT, CENTRAL CIRCLE-8 (NOW CC-17), ARA CENTRE, JHANDEWALEN, NEW DELHI. VS. SINDHU TRADE LINKS LTD., 13, 129, TRANSPORT CENTRE, PUNJABI BAGH, NEW DELHI. PAN: AACCB4137E CO NOS.119 & 120/DEL/2016 ITA NOS.6873 & 6874/DEL/2015 ASSESSMENT YEARS : 2012-13 & TO 2013-14 SINDHU TRADE LINKS LTD., 13, 129, TRANSPORT CENTRE, PUNJABI BAGH, NEW DELHI. PAN: AACCB4137E VS. ACIT, CENTRAL CIRCLE-8 (NOW CC-17), ARA CENTRE, JHANDEWALEN, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.K. TULSIYAN, ADVOCATE DEPARTMENT BY : MS RACHNA SINGH, CIT, DR ITA NOS.6873 & 6874/DEL/2015 CO NO.119 & 120/DEL/2016 2 DATE OF HEARING : 14.09.2017 DATE OF PRONOUNCEMENT : 15.09.2017 ORDER PER BENCH: THESE TWO APPEALS BY THE REVENUE AND EQUAL NUMBER OF CROSS OBJECTIONS BY THE ASSESSEE RELATE TO THE ASSESSMENT YEARS 2012-13 AND 2013-14. SINCE COMMON ISSUE IS RAISED IN BOTH THE APPEALS, WE ARE, THEREFORE, PROCEEDING TO DISPOSE THEM OF BY THIS CO NSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FACTS RELATING TO ASSESSMENT YEAR 2012-13 AR E THAT THE ASSESSEE EARNED CERTAIN EXEMPT INCOME DURING THE YEAR FROM T HE INVESTMENTS MADE IN EQUITY SHARES. NO DISALLOWANCE WAS OFFERED U/S 14A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT). THE ASSESSING OFFICER COMPUTED SUCH DISALLOWANCE U/S 14A READ WIT H RULE 8D(2)(III) AT % OF THE AVERAGE INVESTMENTS. THIS LED TO AN A DDITION OF RS.47,06,180/-. SIMILAR ADDITION WAS MADE FOR THE ASSESSMENT YEAR 2013-14 AT RS.86,22,153/-. THE ASSESSEE ARGUED BEF ORE THE CIT(A) THAT ONLY SUCH INVESTMENTS SHOULD BE CONSIDERED FOR THE PURPOSES OF ITA NOS.6873 & 6874/DEL/2015 CO NO.119 & 120/DEL/2016 3 APPLICATION OF RULE 8D(2)(III) FROM WHICH EXEMPT IN COME HAS BEEN EARNED AND FURTHER SUCH INCOME IS NOT FROM STRATEGI C INVESTMENTS. THE LD. CIT(A) GOT CONVINCED WITH THE ASSESSEES CONTEN TION AND RESTRICTED THE ADDITION TO RS.3,06,139/- FOR THE ASSESSMENT YE AR 2012-13 AND RS.2,71,612/- FOR THE ASSESSMENT YEAR 2013-14. THE REVENUE IS AGGRIEVED AGAINST THE REDUCTION IN THE DISALLOWANCE MADE BY THE LD. CIT(A). 3. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELE VANT MATERIAL ON RECORD, WE OBSERVE THAT THE LD. CIT(A) HAS RESTRICT ED THE DISALLOWANCE UNDER RULE 8D(2)(III) BY CONSIDERING ONLY SUCH INVE STMENT WHICH YIELDED EXEMPT INCOME, OTHER THAN THE INCOME FROM S TRATEGIC INVESTMENTS. THE HON'BLE JURISDICTIONAL HIGH COURT IN ACB INDIA LTD. VS. ACIT (2015) 374 ITR 108 (DEL) , HAS HELD THAT VALUE OF TAX EXEMPT INVESTMENTS SHOULD BE CONSIDERED INSTEAD OF TOTAL I NVESTMENTS FOR ADOPTING AVERAGE VALUE OF INVESTMENTS OF INCOME WHI CH IS NOT PART OF THE TOTAL INCOME. THE EFFECT OF THIS DECISION IS THAT WHILE MAKING DISALLOWANCE UNDER RULE 8D(2)(III), IT IS ONLY THE AVERAGE OF THOSE ITA NOS.6873 & 6874/DEL/2015 CO NO.119 & 120/DEL/2016 4 INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME ARE TO BE TAKEN INTO CONSIDERATION AND NOT THE AVERAGE OF ALL INVESTMENT S AS HAS BEEN DONE BY THE AO IN THIS CASE. ADVERTING TO THE FACTS OF THE INSTANT CASE, IT IS SEEN THAT THE LD. CIT(A) REDUCED THE DISALLOWANCE BY IGN ORING THE INVESTMENTS MADE IN FOREIGN COMPANIES NOT RESULTING INTO ANY IN COME CHARGEABLE TO TAX AND INVESTMENTS MADE IN GROUP CONCERNS WHICH WE RE STRATEGIC IN NATURE. THIS FACT HAS ALSO BEEN ADMITTED BY THE LD . DR IN HER NOTE GIVEN AFTER THE CONCLUSION OF HEARING. 4. THE HON'BLE JURISDICTIONAL HIGH COURT IN CHEMINVEST VS. CIT (2015) 388 ITR 33 (DEL), HAS HELD THAT NO DISALLOWANCE U/S 14A CAN BE MADE IN THE CASE OF STRATEGIC INVESTMENTS MADE IN G ROUP CONCERNS. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE MADRAS H IGH COURT IN CIT VS. CHETTINAD LOGISTICS PVT. LTD. (2017) 98 CCH 015 1 CHENHC . THUS, IT BECOMES CLEAR THAT THE LD. CIT(A) REDUCED SUCH INVE STMENTS FROM THE TOTAL AMOUNT OF INVESTMENTS FOR THE PURPOSE OF CALC ULATING % OF DISALLOWANCE UNDER RULE 8D(2)(III). IN VIEW OF THE ABOVE DISCUSSION, WE ITA NOS.6873 & 6874/DEL/2015 CO NO.119 & 120/DEL/2016 5 ARE SATISFIED THAT THE LD. CIT(A) WAS JUSTIFIED IN REDUCING THE DISALLOWANCE PRO TANTO FOR BOTH THE YEARS UNDER CONSIDERATION. 5. THE LD. AR DID NOT PRESS THE CROSS OBJECTIONS BY STATING THAT THESE ARE ONLY IN SUPPORT OF THE LD. CIT(A)S ORDER. 6. IN THE RESULT, THE APPEALS OF THE REVENUE AND TH E CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 15.09.201 7. SD/- SD/- [SUCHITRA KAMBLE] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, SEPTEMBER, 2017. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.