M/s. Ganga Kaveri Credit & Holding Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 919/DEL/2014

• Counselvise Citation: 91920114 RSA 2014
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 23-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 17-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER ITA NO. 919/DEL/2014 ASSTT. YRS: 2009-10 GANGA KAVERI CREDIT & VS. ACIT, CIRCLE-12(1), HOLDING PVT. LTD., 2459/10, NEW DELHI. 3 RD FLOOR, BEADONPURA, KAROL BAGH, NEW DELHI. PAN: AAACG 2168 C ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI MANU K. GIRI ADV. ESPONDENT BY : SHRI S.K. JAIN ADDL. COMMISSIONER (DR) DATE OF HEARING : 23/07/2015. DATE OF ORDER : 08/10/2015. O R D E R PER S.V. MEHROTRA, A.M.. : THIS APPEAL, PREFERRED BY THE ASSESSEE, IS DIRECT ED AGAINST THE ORDER DATED 18-12-2013, PASSED BY THE LD. CIT(A)-XV, NEW DELHI IN APPEAL NO. 221/11-12/CIT(A)-XV, RELATING TO A.Y. 2009-10. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, I N THE RELEVANT ASSESSMENT YEAR WAS ENGAGED IN FINANCE AND LEASING. IT HAD FIL ED ITS RETURN OF INCOME DECLARING LOSS OF RS. 1,82,92,936/-. THE AO NOTICED THAT ASSESSEE HAD EARNED 2 ITA NO. 919/DEL/2014 GANGA KAVERI CREDIT & HOLDING P LTD. VS. ACIT DIVIDEND INCOME OF RS. 28,55,485/-. AFTER CONSIDERI NG THE ASSESSEES SUBMISSIONS IN REGARD TO DISALLOWANCE TO BE MADE U/ S 14A, THE AO COMPUTED THE DISALLOWANCE AT RS. 1,73,65,881/- AND, ACCORDIN GLY REDUCED THE TOTAL LOSS AT RS. 9,27,055/-. 3. LD. CIT(A) DISMISSED THE ASSESSEES APPEAL. BEIN G AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN FOLLO WING GROUNDS OF APPEAL: 1. THAT THE ORDER PASSED BY THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) IS BAD IN LAW. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EAL), ERRED IN REJECTING APPELLANT'S CONTENTION THAT THE DISALLOWANCE UNDER SECTION 14A CANNOT EXCEED RS. 4,02,133/- BEIN G 0.5% OF THE AVERAGE VALUE OF THE OPENING AND CLOSING BALANC E OF INVESTMENT IN SHARES OF APOLLO TYRES LTD ON WHICH S UCH DIVIDEND INCOME HAS BEEN RECEIVED BY THE ASSESSEE C OMPANY, THEREBY CONFIRMING THE ADDITION OF RS. 1,73,65,881/ - MADE BY THE ASSESSING OFFICER U/S 14A OF THE INCOME TAX ACT , RESULTING IN REDUCTION OF RETURNED LOSS TO THAT EXTENT. 3. WITHOUT PREJUDICE TO APPELLANT'S ABOVE CONTENTIO N, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REJECTING APPELLANT'S CONTENTION THAT THE AMOUNT OF DISALLOWANCE U/S 14A CANNOT EXCEED THE AMOUNT OF DI VIDEND INCOME EARNED DURING THE YEAR UNDER ASSESSMENT. 4. AT THE TIME OF HEARING, LD. COUNSEL DID NOT PRES S GROUND NOS. 1 & 2. ACCORDINGLY, THE SAME ARE DISMISSED AS NOT PRESSED. 3 ITA NO. 919/DEL/2014 GANGA KAVERI CREDIT & HOLDING P LTD. VS. ACIT 5. APROPOS GROUND NO. 3, LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT. LTD. VS. CIT (ITA 117/2015 DATED 2 5-2-2015), THE AMOUNT OF DISALLOWANCE U/S 14A CANNOT EXCEED THE AMOUNT OF DIVIDEND INCOME. 6. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND FIND THAT HONBLE DELHI HIGH COURT IN PARA 9 IN THE CASE OF J OINT INVESTMENTS PVT. LTD. (SUPRA), HAS OBSERVED AS UNDER: IN THE PRESENT CASE , THE AO HAS NOT FIRSTLY DISCL OSED WHY THE APPELLANT/ ASSESSEES CLAIM FOR ATTRIBUTING RS. 2,9 7,440/- AS A DISALLOWANCE UNDER SECTION 14A HAD TO BE REJECTED. TAIKISHA SAYS THAT THE JURISDICTION TO PROCEED FURTHER AND D ETERMINE AMOUNTS IS DERIVED AFTER EXAMINATION OF THE ACCOUNT S AND REJECTION IF ANY OF THE ASSESSEES CLAIM OR EXPLANA TION. THE SECOND ASPECT IS THERE APPEARS TO HAVE BEEN NO SCRU TINY OF THE ACCOUNTS BY THE AO, AN ASPECT WHICH IS COMPLETELY U NNOTICED BY THE CIT(A) AND THE ITAT. THE THIRD, AND IN THE OPIN ION OF THIS COURT, IMPORTANT ANOMALY WHICH WE CANNOT BE UNMINDF UL IS THAT WHEREAS THE ENTIRE TAX EXEMPT INCOME IS RS. 48,90,0 00/-, THE DISALLOWANCE ULTIMATELY DIRECTED WORKS OUT TO NEARL Y 110% OF THAT SUM I.E. RS. 52,56,197/-. BY NO STRETCH OF IMA GINATION CAN SECTION 14A OR RULE 8D BE INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMPT INCOME IS TO BE DISALLOWED. THE W INDOW FOR DISALLOWANCE IS INDICATED IN SECTION 14A, AND IS ON LY TO THE EXTENT OF DISALLOWING EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EXEMPT INCOME. THIS PROPORTION OR PORTION OF THE TAX EXEMPT INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT AS HAS HAPPENED IN THIS CASE. 4 ITA NO. 919/DEL/2014 GANGA KAVERI CREDIT & HOLDING P LTD. VS. ACIT 6.1. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE HIGH COURT, I DIRECT FOR RESTRICTING THE DISALLOWANCE U/S 14A TO RS. 28, 55,485/-. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 08/10/2015. SD/- (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 08/10/2015. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. 5 ITA NO. 919/DEL/2014 GANGA KAVERI CREDIT & HOLDING P LTD. VS. ACIT -+ DATE INITIAL 1. DRAFT DICTATED ON -10.2015 PS 2. DRAFT PLACED BEFORE AUTHOR .10.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.