DCIT, Circle-12(1), New Delhi V. Indian Mortgage Guarantee Corporation Pvt. Ltd., New Delhi

ITA 7504/DEL/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9634 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 13-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Corroborative evidences
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’, NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.7504/Del/2017 Assessment Year: 2013-14 DCIT Circle -12 (1) New Delhi Vs India Mortgage Guarantee Corporation Pvt. Ltd. A-47, Lower Ground Floor, Hauz Khas, New Delhi- 110049 PAN No.AACCG6775B (APPELLAN (RESPONDENT) Appellant Sh. Anuj Garg, Sr. DR Respondent Sh. Hiten Chande, Advocate Sh. Akshit Gupta, CA Date of hearing: 07/07/2022 Date of Pronouncement: 07/07/2022 ORDER PER N.K. BILLAIYA, AM: This appeal by the revenue is preferred against the order of the CIT(A)-4, New Delhi dated 20.10.2017 pertaining to A.Y.2013- 14 2. The grievance of the revenue read as under :- 1. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition made on account of profit from sourcing business of 2 Rs.2,18,93,027/- by applying 10% mark up on entire expenses which is as per the facts of the case. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance u/s. 14A r.w Rule 8D of the Act, amounting to Rs.2,94,656/-. 3. Representatives of both the sides were heard at length. Case records carefully perused. 4. Briefly stated the facts of the case are that with a view to establish its presence in India and extend the global mortgage guarantee business to India, Genworth Financial Inc. had established Genworth Financial Mortgage India Private Limited in 2006 to provide residential mortgage credit default protection to lenders. On 11 June 2012, the company changed its name from Genworth Financial Mortgage India Pvt. Ltd to "India Mortgage Guarantee Corporation Private Limited". In 2012, Genworth has established a joint venture with National Housing Bank, Asian Development Bank and International Finance Corporation. The percentage of shareholding of each JV partner is as under: National Housing Bank : 38% Genworth Financial Mauritius Holdings Ltd : 36% Asian Development Bank : 13% International Financial Corporation : 13% 3 The assessee did not commence mortgage guarantee business in the subject assessment year and has therefore, disallowed all the personnel and operating expenses. However, the company had entered into an agreement with its related company (Genworth North America Corporation), for identifying appropriate vendors, liaison between vendors and project leaders at Genworth etc. The company bills the expenses incurred for sourcing to the related company at a mark up of 10%. The income has been offered to tax in the subject assessment year. 5. During the course of the scrutiny assessment proceedings and taking a leaf out of the assessment orders for A.Y.2009-10 and 2011-12 the AO formed a belief that since the mortgage guarantee business was yet to start the assessee has incurred huge expense of Rs.21.56 crores as compared to Rs.8.44 crores in the previous year. The AO was of the opinion that GFAC is deriving benefits from the services of employees of assessee company and the assessee company is not raising any invoices on GFAC. With these observations the income from sourcing business was computed as under :- 4 6. Accordingly addition of Rs.21893027/- was made. 7. Proceeding further the AO further noticed that the assessee has earned dividend income of Rs.2683789/- on which no disallowance has been made u/s. 14A r.w.r. 8D. The AO accordingly computed the disallowance of Rs.294656/-. 8. The additions were challenged before the CIT(A). It was strongly contended that the addition on account of profit from sourcing business by applying 10% mortgage mark-up on entire expenses as arbitrary and not based on any supporting evidences. 9. After considering the facts and the submissions and after perusing the findings given by the CIT(A) in A.Y.2009-10 the CIT(A) was convinced that in the absence of any cogent evidence to support his findings that entire expenditure was incurred for providing services to GFAC. The AO was not right in applying 10% mark up on the total expenditure and accordingly deleted 5 the addition of Rs.2,18,93,027/-. 10. On disallowance of Rs.294656/- u/s. 14A r.w.r 8D the CIT(A) found that the expenses other than those sourcing business have suo moto being disallowed by the assessee and the remaining expenses were reimbursed by 10% mark up. Hence, no expenses can be attributed for earning the exempt income of Rs.294656/-. 11. Before us the DR strongly placed reliance on the findings of the AO and read the operative part of the assessment order. 12. Per contra the Counsel for the assessee reiterated what has been stated before the CIT(A). 13. We have given a thoughtful consideration to the orders of the authorities below. There is no dispute that the assessee did not commence mortgage business in the subject assessment year. It is not in dispute that the assessee has disallowed all the personnel and operating expenses. The undisputed fact is that as per the agreement with GNAC the assessee had incurred certain expenses for identifying appropriate vendors, licensor between vendors and project leaders at Genworth etc for which the company bills expenses incurred for sourcing to the related company at a mark up of 10%. We are of the considered view that action of the AO is based upon surmise and conjectures 6 without any supporting evidences. It is merely a presumption of the AO that GNAC is deriving benefits from services of employees of assessee company. In our considered opinion additions cannot be made on assumptions and surmises we, therefore, do not find any reason to interfere with the findings of the CIT(A). The ground No.1 is accordingly dismissed. 14. In so far as deletion of disallowance u/s. 14A is concerned we find that the assessee itself has disallowed entire expenses other than those reimbursed with 10% mark up. The conspectus view of the financial statement of the assessee show that in fact no relatable expenses have been incurred by the assessee for earning the exempt income. Since all the expenses have been suo moto disallowed by the assessee no further disallowance is called for. Hence, we decline to interfere with the findings of the CIT(A). The ground No.2 is accordingly dismissed. 15. In the result, the appeal filed by the revenue is dismissed. 16. Decision announced in the open court on 07.07.2022. Sd/- Sd/- (ASTHA CHANDRA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA, Sr. Private Secretary* Date:- .07.2022 7 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Date of dictation 07.07.2022 Date on which the typed draft is placed before the dictating Member 08.07.2022 Date on which the typed draft is placed before the Other member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for Pronouncement Date on which the fair order comes back to the Sr. PS/ PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which file goes to the Head Clerk. The date on which file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order