DCIT, CIRCLE- 11(1), New Delhi V. Innus Infrastructure Pvt. Ltd., New Delhi

ITA 7331/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6396 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 07-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAJMI
• Assessee Lawyers: RAJHESH AGGARWAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 201; 64; 13

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI KUL BHARAT , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 7331/DEL/2017 (ASSESSMENT YEAR: 201 4 - 15 ) ACIT(E), CIRCLE - 1(1), NEW DELHI VS. INNUS INFRASTRUCTURE PVT. LTD, M - 62 & 63, FIRST FLOOR, CONNAUGHT PLACE, NEW DELHI PAN: AACCI1776N (APPELLANT) (RESPONDENT) REVENUE BY : SHRI NAJMI, CIT DR ASSESSEE BY: SHRI RAJHESH AGGARWAL, CA DATE OF HEARING 03/08 / 2021 DATE OF PRONOUNCEMENT 0 3 / 08 / 2021 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS APPEAL IS FILED BY LD AO / DCIT, CIRCLE - 11(1), NEW DELHI AGAINST THE ORDER OF THE LD CIT(A) - 4, NEW DELHI DATED 27 .10.2017 FOR ASSESSMENT YEAR 2014 - 15 WHEREIN THE DISALLOWANCES MADE BY THE LD AO OF RS. 4 , 35 , 19 , 612 / - U /S 14 A READ WITH RULE 8D WAS DELETED. THIS IS THE SOLITARY GROUND OF APPEAL RAISED BY THE LD AO. 2. BRIEFLY STATED THE FACT SHOWS THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DEVELOPMENT OF INFRASTRUCTURE AND TO PURCHASE AND SALE OF RESIDENTIAL OR COMMERCIAL PROJECTS INCLUDING ITS DEVELOPMENT. THE ASSESSEE FILED ITS RETURN OF INCOME ON 24 .0 9 . 2014 DECLARING INCOME OF RS. 640 / - . THE LD AO QUESTI ON ED THE ASSESSEE AS TO WHY DISALLOWANCE U /S 14 A READ WITH RULE 8 D SHOULD NOT BE MADE . THE ASSESSEE SUBMITTED A REPLY WHICH WAS CONSIDERED AND REJECTED. THE ASSESSEE SUBMITTED THAT IT HAS NOT EARNED ANY INCOME WHICH IS EXEMPT ON ITS INVESTMENT AND THEREFO RE THE PROVISION S OF SECTION 14 A ARE NOT APPLICABLE. THE AO REJECTED THE SAME RELYING ON THE CIRCULAR NO. 5 OF 2014. THEREFORE , HE COMPUTE D THE DISALLOWANCE U /S 14 A OF THE ACT AS PER PARA NO. 4 WHEREIN INDIRECT EXPENDITURE OF INTEREST OF RS. 4 , 21 , 13 , 314 / - WAS COMPUTED UNDER RULE 8 D(2)(I) AND SUM OF RS. 2 , 41 , 973 / - UNDER RULE 8D(2)(III) . TOTAL DISALLOWANCES WAS COMPUTED AT RS. 4 , 49 , 55 , 321 / - . HE REDUCED THE SUO MOTTO DISALLOWANCES ALREADY MADE IN THE COMPUTATION OF TOTAL INCOME OF RS. 14 , 35 , 709 / - . THUS, NET PAGE | 2 DISALLOWANCES OF RS. 4 , 35 , 19 , 612 / - WAS MADE . CONSEQUENTLY, ASSESSMENT ORDER U /S 143 (3) OF THE ACT WAS PASSED ON 30.03.2016 DETERMINING THE TOTAL INCOME OF THE ASSESSEE OF RS. 4 , 35 , 20 , 252 / - AGAINST THE RETURN INCOME OF RS. 640 / - ONLY. 3. THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE LD CIT(A) WHO NOTED THAT THE ASSESSEE HAS SUO MOTTO DISALLOWED RS. 14 , 35 , 709 / - AGAINST THE EXEMPT INCOME EARNED OF RS. 14 , 64 , 100 / - AND THEREFORE, HE DIRECTED TO DELETE THE BALANCE DISALLOWANCE U /S 14 A OF THE ACT . HE NOTED THAT THE ASSESSEE HAS AN EXEMPT DIVIDEND INCOME OF RS. 14 , 64 , 100 / - THEREFORE THE CLAIM OF THE ASSESSEE IS THAT IT HAS NOT RECEIVED ANY EXEMPT INCOME IS INCORRECT. HE FOUND THAT THAT THE ASSESSEE HAS SUO MOTTO DISALLOWED RS. 14 , 35 , 709 / - . HE NOTED THAT THE HAS NOT RECORDED HIS SATISFACTION THAT THE SUO MOTTO DISALLOWANCES OF THE ASSESSEE OF RS. 1 435 , 309 / - IS NOT CORRECT . HE FURTHER NOTED THAT SUO MOTTO DISALLOWANCE IS ALMOST EQUAL TO THE EXEMPT INCOME. 4. THE LD AO IS AGGRIEVED WITH THE ORDER OF THE L D CIT(A) AND HAS PREFERRED THIS APPEAL ON THE SOLITARY GROUND. THE LD SR. DR SUPPORTED THE ORDER OF THE AO . 5. ON BEHALF OF THE ASSESSEE NONE APPEARED DESPITE NOTICE AND THEREFORE THE ISSUE IS DECIDED ON THE MERITS OF THE CASE. 6. WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE LD SR. DR AS WELL AS ORDERS OF THE LOWER AUTHORITIES. IN THE PRESENT CASE THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS. 14,64,100/ - SUO MOTTO DISALLOWANCE MADE BY ASSESSEE IS RS. 14 , 35 , 709 / - . ON THE ISSUE OF DISALLOWANCES , THERE IS NO SATISFACTION RECORDED BY THE LD AO THAT HOW THE DISALLOWANCE OFFERED BY THE ASSESSEE IS NOT CORRECT. HOWEVER, THE DISALLOWANCE MADE BY THE LD AO IS ALMOST EQUAL TO THE AMOUNT OF EXEMPT INCOME EARNED BY THE ASSESSEE. WHEN THE LEARNED AO DOES NO T RECORD ANY SATISFACTION WITH RESPECT TO THE CORRECTNESS OF THE DISALLOWANCES OFFERED BY THE ASSESSEE U /S 14A , AND PROCEEDED TO MAKE DISALLOWANCES ON THE BASIS OF PROVISION OF RULE 8D, IT CANNOT BE SUSTAINED. THE RECORDING OF THE SATISFACTION IS THE BASI C CONDITION FOR INVOKING THE PROVISION OF RULE 8D . HON BLE SUPREME COURT IN 402 ITR 640 HAS CATEGORICALLY HELD SO. THEREFORE , ON THIS GROUND THE DISALLOWANCE MADE BY THE LD AO IS NOT SUSTAINABLE. EVEN OTHERWISE THE AMOUNT OF EXEMPT INCOME EARNED BY THE ASS ESSEE I.E. 14,35,309/ - WHICH IS ALMOST EQUAL TO THE DISALLOWANCE OFFERED BY THE ASSESSEE ON ITS OWN. T HEREFORE, AS THE LD AO HAS NOT RECORDED A SATISFACTION ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE OF INCURRING EXPENDITURE OF RS. 14 , 35 , 309 / - FOR EARNING EXEMPT INCOME HAVING REGARD TO THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THEREBY STRAIGHT PAGE | 3 AWAY APPLICATION OF THE PROVISION OF RULE 8 D CANNOT BE SUSTAINED . ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD CIT(A) AND DISMISSED THE APPEAL OF THE LEARNT AO . O RDER PRONOUNCED IN THE OPEN COURT ON 0 3 . 0 8 . 2 0 2 1 . - SD/ - - SD/ - ( KUL BHARAT ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 3 / 08 / 2021 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI