M/s. Cheeko Tel Pvt. Ltd., Noida V. ITO, New Delhi

ITA 940/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7103 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 30-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 24-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-II, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 940/DEL/2016 ASSESSMENT YEAR: 2011-12 M/S CHEEKO TEL PVT. LIMITED, VS. INCOME TAX OF FICER, (NOW KNOWN AS M/S CHEEKOTEL WARD 6(1), VENTURE FUND PVT. LTD.) CR BLDG., I.P. ESTATE, 8, NOIDA SPECIAL ECONOMIC ZONE, NEW DELHI 110 002 NOIDA-201305 (UP) (PAN: AACCC1927B) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. K. SAMPATH, ADV. & SH. V. RAJA KUMAR, ADV. DEPARTMENT BY : SH. S.K. JAIN, SR. DR ORDER THE ASSESSEE HAS FILED THE APPEAL AGAINST THE IMPUGN ED ORDER DATED 29.1.2016 OF LD. CIT(A)-2, NEW DELHI PE RTAINING TO ASSESSMENT YEAR 2011-12. THE GROUND RAISED IN THE ASS ESSEES APPEAL READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO INVOKING THE PROVISION OF SECTION 14A OF THE ACT AND DISALLOWING RS. 20,84,144/- EVEN THOUGH THERE WAS NOT EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. THE ORDER BEING ARBITRARY, ERRONEOUS, UNWARRANTED 2 AND UNJUST MUST BE QUASHED WITH DIRECTIONS FOR RELIEF. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY FILED ITS RETURN SHOWING INCOME OF RS. 2,58,130/- ON 17.2.2013 AND THE CASE WAS SELECTED FOR SCRUTINY. TH E ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF TECH NOLOGY DEVELOPMENT, TECHNOLOGY SALE AND TECHNOLOGY RELATED ACTI VITIES. DURING THE YEAR UNDER CONSIDERATION, THE AO OBSERVED FROM THE PERUSAL OF THE BALANCE SHEET THAT VALUE OF INVESTMENTS HAD GONE UP FROM RS. 31,59,17,489/- AS ON 31.3.2010 TO RS. 51,77,40,270/- AS ON 31.3.2011 (INCOME FROM WHICH W OULD BE EXEMPT IN THE FORM OF DIVIDEND) BUT THE ASSESSEE HAD NOT MADE ANY DISALLOWANCE U/S. 14A OF THE I.T. ACT, 1961. IN THE ASSESSMENT ORDER, THE AO MADE DISALLOWANCE UNDER SECT ION 14A READ WITH RULE 8D(2)(III) TO THE TUNE OF RS. 20,8 8,144/-, AT THE RATE OF HALF PERCENT OF THE AVERAGE VALUE OF INVE STMENTS AND ASSESSED THE INCOME OF THE ASSESSEE AT RS. 23,42 ,270/- VIDE HIS ORDER DATED 18.3.2014 PASSED U/S. 143(3) OF THE I.T. ACT, 1961. 3. AGGRIEVED WITH THE AFORESAID ORDER, ASSESSEE PREF ERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUG NED ORDER DATED 29.1.2016 HAS DISMISSED THE APPEAL OF THE ASSESS EE. 3 4. NOW THE ASSESSEE IS AGGRIEVED AGAINST THE IMPUGNE D ORDER AND FILED THE PRESENT APPEAL BEFORE THE TRIBUNA L. 5. LD. DR RELIED UPON THE ORDER OF THE AUTHORITIES BELO W. 6. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE HAS STA TED THAT NO DISALLOWANCE U/S. 14A OF THE I.T. ACT, 1961 WAS WARRANTED IN THE INSTANT CASE AS NO DIVIDEND INCOME HA D BEEN EARNED BY THE ASSESSEE DURING THE YEAR. HE ALSO STATED THAT NO TAX FREE INCOME HAD BEEN EARNED AND ALSO AS SUCH NO DISALLOWANCE U/S. 14A SHOULD BE MADE. TO SUPPORT HIS CONTENTION, HE RELIED UPON THE DECISION OF THE HONB LE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT, R EPORTED IN 378 ITR 33. 7. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECO RDS, ESPECIALLY THE IMPUGNED ORDER PASSED BY THE LD. CIT (A). I FIND CONSIDERABLE COGENCY IN THE ASSESSEES COUNSEL OF TH E ASSESSEE THAT IT IS NOT IN DISPUTE THAT ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME OR ANY KIND OF EXEMPT INCOME FROM T HE INVESTMENT MADE OR NO TAX FREE INCOME HAS BEEN EARNED. I FIND THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISI ON OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST L TD. VS. CIT 378 ITR 33 WHEREIN THE HONBLE COURT HAS HELD TH AT NO EXEMPTED INCOME WAS EARNED BY THE ASSESSEE IN THE R ELEVANT ASSESSMENT YEAR AND SINCE THE GENUINENESS OF THE EXPE NDITURE 4 INCURRED BY THE ASSESSEE WAS NOT IN DOUBT, NO DISALLO WANCE COULD BE MADE UNDER SECTION 14A. THUS, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT I N THE CASE OF CHEMINVEST LTD. (SUPRA), I HOLD THAT, NO DISALLOW ANCE U/S. 14A IS CALLED FOR, ONCE THERE IS NO EXEMPT INCOME R ECEIVED OR RECEIVABLE BY THE ASSESSEE DURING THE RELEVANT PREV IOUS YEAR. ACCORDINGLY, THE ADDITION IN DISPUTE IS DELETED AND ACC ORDINGLY, THE GROUND RAISED BY THE ASSESSEE STANDS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/1/20 17. SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED: 03/1/2017 *SR BHATNAGAR* COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR 5