DCIT, Panchkula V. M/s Haryana Financial Corporation, Chandigarh

ITA 955/CHANDI/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6905 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 31-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: B K NOHRIA
• Keywords: Earning of tax free income
• Section: 14A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.955/CHD/2016 (ASSESSMENT YEAR : 2011-12) THE D.C.I.T., VS. HARYANA FINANCIAL CORPORATION, PANCHKULA CIRCLE, SECTOR 17A, PANCHKULA. CHANDIGARH. PAN: AAACH4685B AND ITA NO.962/CHD/2016 (ASSESSMENT YEAR : 2011-12) HARYANA FINANCIAL CORPORATION, VS. THE D.C.I.T., SECTOR 17A, PANCHKULA CIRCLE, CHANDIGARH. PANCHKULA. PAN: AAACH4685B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI B.K. NOHRIA DEPARTMENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 16.08.2017 DATE OF PRONOUNCEMENT : 31.08.2017 ORDER PER SANJAY GARG, JUDICIAL MEMBER : THE ABOVE CAPTIONED APPEALS HAVE BEEN FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER PASSED B Y THE LD.CIT(APPEALS), PANCHKULA DATED 29.06.2016 RELATIN G TO ASSESSMENT YEAR 2011-12. 2. THE COMMON ISSUE RAISED IN BOTH THE APPEALS IS WHETHER THE DISALLOWANCE OF EXPENDITURE RELATABLE T O EARNING OF TAX EXEMPT INCOME AS PROVIDED UNDER THE PROVISIONS 2 OF SECTION 14A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) CAN NOT EXCEED THE TOTAL TAX EXEMPT INCOME EA RNED BY THE ASSESSEE. 3. AT THE OUTSET, BOTH THE LD REPRESENTATIVES OF TH E PARTIES HAVE FAIRLY ADMITTED THAT THE ISSUE IS SQUARELY COV ERED BY HE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 VIDE ITA NO.763/CHD/201 5, ORDER DATED 10.8.2016 WHEREIN ON THE IDENTICAL ISSU E THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO REST RICT THE DISALLOWANCE U/S 14A OF THE ACT UPTO THE EXTENT OF EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR. 4. WE MAY NOTE HERE THAT THE HONBLE DELHI HIGH COU RT IN THE CASE OF CHEMINVEST LTD. VS. CIT (2015) 61 TAXMA N.COM 118 HAS HELD THAT SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVAN T PREVIOUS YEAR AND THAT THE EXPRESSION DOES NOT FOR M PART OF THE TOTAL INCOME, IN SECTION 14A OF THE ACT ENVISA GES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME WHICH I S NOT INCLUDED IN THE TOTAL INCOME DURING THE RELEVANT PR EVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. ALMOST ID ENTICAL ISSUE HAS BEEN TAKEN BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT KANPUR VS. M/S. SHIVAM MOTORS P VT. LTD. IN ITA NO.88 OF 2014 VIDE ORDER DATED 05.05.2 014; BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. 3 CORRTECTH ENERGY PVT. LTD. IN ITA NO.239 OF 2014 V IDE ORDER DATED 24.03.2014, BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. DELITE ENTERPRISES IN ITA NO .110 OF 2009 VIDE ORDER DATED 26.02.09 AND BY THE JURISDICT IONAL PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. LAKHANI MARKETING INC.(2014) 49 TAXMANN.COM 257 (P& H) FURTHER IT MAY BE NOTED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT PRIVATE LIMITED REP ORTED IN 372 ITR 694 HAS HELD THAT SECTION 14 OF THE ACT OR RULE 8D CANNOT BE INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMPT INCOME OF THE ASSESSEE IS TO BE DISALLOWED. THAT THE WINDOW FOR DISALLOWANCE IS INDICATED IN SECTION 14A , AND IS ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE INCUR RED BY THE ASSESSEE IN RELATION TO THE TAX EXEMPT INCOME. THIS PROPORTION OR PORTION OF THE TAX EXEMPT INCOME SURE LY CANNOT SWALLOW THE ENTIRE AMOUNT OF TAX EXEMPT INCO ME. 5. IN VIEW OF THE ABOVE DISCUSSION, THIS QUESTION I S DECIDED IN FAVOUR OF THE ASSESSEE BY OBSERVING THAT THE DISALLOWANCE OF EXPENDITURE RELATABLE TO EARNING TA X EXEMPT INCOME AS PROVIDED UNDER THE PROVISIONS OF SECTION 14A OF THE ACT, CAN NOT EXCEED THE TOTAL TAX EXEMPT INCOME EARNED BY THE ASSESSEE. THE ASSESSING OFFICER IS ACCORDING LY DIRECTED TO RESTRICT THE DISALLOWANCE U/S 14 TO THE EXTENT OF EXEMPT INCOME EARNED BY THE ASSESSEE. 4 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.8.2017. SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST AUGUST, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH