ITO, New Delhi V. M/s. Caraf Builders & Constructions Pvt. Ltd., New Delhi

ITA 939/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3169 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 16-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• 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 NO.939/DEL/2015 ASSESSMENT YEAR : 2009-10 ITO, WARD-5(3), NEW DELHI. VS. CARAF BUILDERS & CONSTRUCTIONS PVT. LTD., I-E, NAAZ CINEMA COMPLEX, JHANDEWALAN EXTENSION, NEW DELHI. PAN; AACCC8696F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. SINGHVI, CA DEPARTMENT BY : MS RACHNA SINGH, CIT, DR DATE OF HEARING : 26.02.2018 DATE OF PRONOUNCEMENT : 27.02.2018 ORDER PER R.S. SYAL, VP: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE CIT(A) ON 14.12.2012 IN RELATION TO THE ASSE SSMENT YEAR 2009-10. ITA NO.939/DEL/2015 2 2. THIS APPEAL IS TIME BARRED BY 38 DAYS. THE LD. AR DID NOT RAISE ANY OBJECTION TO THE LATE FILING OF THE APPEAL. AS SUC H, THE DELAY IS CONDONED AND THE APPEAL IS ADMITTED FOR HEARING. 3. TWO ISSUES HAVE BEEN RAISED IN THIS APPEAL VIZ., ONE, TOWARDS CONFIRMATION OF DISALLOWANCE U/S 14A TO THE TUNE OF RS.75,89,66,443/- INSTEAD OF RS.145.22 CRORE AND THE SECOND, AGAINST THE ALLOWING OF SET OFF OF INTEREST EXPENDITURE AGAINST INTEREST INCOME U/S 57(III) OF THE ACT. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE EARNED DIVIDEND INCOME OF RS.19,25,655/- WHICH WAS CLAIMED AS EXEMPT U/S 10(34) OF THE ACT. THE ASSESSEE ALSO VOLUNTARILY M ADE DISALLOWANCE U/S 14A TO THE TUNE OF RS.70,20,602/-. THE ASSESSING O FFICER APPLIED THE PROVISIONS OF RULE 8D AND WORKED OUT DISALLOWANCE U /S 14A AT RS.144.52 CRORE. THEREAFTER, IT WAS OBSERVED THAT THE ASSESS EE EARNED INTEREST INCOME OF RS.41.81 CRORE AND HAD PAID INTEREST OF RS.153.0 8 CRORE. AFTER SETTING OFF INTEREST EXPENDITURE AGAINST THE INTEREST INCOME, N O INTEREST INCOME WAS OFFERED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER, ON PERUSAL OF THE ASSESSEES BALANCE SHEET, OBSERVE D THAT IT HAD RAISED A TERM ITA NO.939/DEL/2015 3 LOAN OF RS.1000/- CRORE FROM HDFC BANK IN THE YEAR RELEVANT TO ASSESSMENT YEAR 2008-09 WHICH WAS REPAID DURING THE YEAR UNDER CONSIDERATION. IT WAS NOTICED THAT INTEREST INCOME WAS EARNED FROM LOANS AND ADVANCES GIVEN BY THE ASSESSEE TO ITS SISTER CONCERN, NAMELY, DLF INF O CITY DEVELOPERS (KOLKATA) LTD. AND M/S DLF INFO CITY (CHANDIGARH) L TD. INTEREST OF RS.138.51 CRORE WAS FOUND TO HAVE BEEN PAID IN RELA TION TO THE TERM LOAN OF RS.1000/- CRORE TAKEN FROM HDFC BANK. THE AO ALLOW ED INTEREST OF RS.8.55 CRORE AS EXPENDITURE AGAINST THE INTEREST I NCOME OF RS.41.81 CRORE AND COMPUTED INCOME FROM OTHER SOURCES AT RS.33.2 5 CRORE (RS.41.81 CRORE MINUS RS.8.55 CRORE). THE LD. CIT(A) SET OFF INTEREST EXPENDITURE OF RS.44.81 CRORE AGAINST THE INTEREST INCOME AND HEN CE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER UNDER THE HEAD INCOM E FROM OTHER SOURCES. AS REGARDS THE COMPUTATION OF DISALLOWANCE U/S 14A, THE LD. CIT(A) REDUCED SUCH DISALLOWANCE TO RS.75,89,66,443/- BY C ONSIDERING INTEREST EXPENDITURE OF RS.75.84 CRORE AND OTHER EXPENSES AT RS.5.15 LAC. THAT IS HOW, THE REVENUE IS AGGRIEVED AGAINST THE IMPUGNED ORDER. ITA NO.939/DEL/2015 4 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD. IT IS NOTICED FROM THE ASSESSEES BALANCE S HEET, A COPY OF WHICH HAS BEEN PLACED ON RECORD, THAT APART FROM SHARE CAPITA L OF RS.1.02 LAC, THE ONLY OTHER LOAN LIABILITY IS THAT OF RS.10,46,08,34,442/ -, BEING THE AMOUNT OF UNSECURED LOANS. THUS, IT IS SEEN THAT APART FROM CERTAIN CURRENT LIABILITIES, THE ASSESSEE HAD UNSECURED LOANS AVAILABLE WITH IT TO THE TUNE OF RS.1,046.08 CRORE. IT IS ONLY SUCH AMOUNT OF UNSEC URED LOANS WHICH WAS AT ITS DISPOSAL, OUT OF WHICH ADVANCES WERE MADE TO SI STER CONCERNS ON WHICH THE ASSESSEE EARNED INTEREST INCOME. AS SUCH, IT I S CLEAR THAT THERE IS A CLOSE NEXUS BETWEEN THE INTEREST EXPENDITURE AND INTEREST INCOME AND, HENCE, THE LD. CIT(A) WAS RIGHT IN MAKING APPROPRIATE SET OFF. 6. AS REGARDS THE CONFIRMATION OF DISALLOWANCE U/S 14A, IN OUR CONSIDERED OPINION, THE LD. CIT(A) HAS RIGHTLY TREA TED THE INTEREST OF RS.75.89 CRORE, AS RELATING TO THE EXEMPT INCOME A ND ACCORDINGLY MADE SUCH DISALLOWANCE U/S 14A. THE LD. AR ALSO CANDIDL Y ACCEPTED THAT SUCH DISALLOWANCE SUSTAINED IN THE FIRST APPEAL AT RS.75 .89 CRORE, DESPITE THERE BEING EXEMPT INCOME ONLY OF RS.19.25 LAC AND THE SUO MOTU DISALLOWANCE AT RS.70.20 LAC, IS IN ORDER. WE, THEREFORE, UPHOLD T HE IMPUGNED ORDER. ITA NO.939/DEL/2015 5 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 27.02.201 8. SD/- SD/- [SUCHITRA KAMBLE] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 27 TH FEBRUARY, 2018. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.