M/S. MOSER BAER SOLAR LTD.,NEW DELHI V. DCIT, NEW DELHI

ITA 3535/DEL/2017

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M/s. Moser Baer Solar Ltd. appealed against the order of the CIT (Appeals)-38, which confirmed the disallowance made under section 14A of the Income Tax Act, 1961, read with Rule 8D of the Income Tax Rules, 1962. The disallowance was related to expenses incurred for earning exempt dividend income, which was restricted to Rs.2,33,95,428. The Tribunal noted the absence of representation from the assessee and proceeded with the assistance of the Departmental Representative. The Tribunal found that the factual position regarding the assessee's claims was not effectively countered by the Departmental Representative and decided to remand the case for further action by the Assessing Officer.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 31017 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Other Referred Cases: Ghanshyam Manz Retails Pvt. Ltd. Mishra and Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd.
• Laws Referred To: Income-tax Act, 1961, Income Tax Rules, 1962, IBC Code
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BALJEET KAUR
• Keywords: Onus to prove; Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘E’ : NEW DELHI) BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI SUDHIR KUMAR, JUDICIAL MEMBER ITA No.3535/Del./2017 (ASSESSMENT YEAR : 2009-10) M/s. Moser Baer Solar Ltd. Vs. DCIT, Circle- 5 (1) 43-B, Okhla Industrial Area, New Delhi Phase-III, New Delhi-110020 PAN No.AAAECP1955A (APPELLANT) (RESPONDENT) ASSESSEE BY : None REVENUE BY : Ms. Baljeet Kaur, CIT DR Date of Hearing : 16.01.2025 Date of Order : 29.01.2025 O R D E R PER SUDHIR KUMAR, JM : Aforesaid appeal has been filed by the assessee against the impugned order dated 20.02.2017, passed by the ld. CIT (Appeals)-38, Delhi of assessment passed under section 143(3)of the Income-tax Act, 1961 (for short ‘the Act’) for the assessment year 2009-10. 2. The assessee has raised following grounds of appeal :- 1. That the Commissioner of Income Tax (Appeals) ['CIT(A)'] erred on facts and in law in confirming action of the assessing officer in making disallowance under section 14A of the Income Tax Act, 1961 ('the Act') read with Rule 8D of the Income Tax Rules, 1962 ('the Rules'), albeit restricting the disallowance to Rs.2,33,95,428 alleging the same to be incurred for earning exempt dividend income. 2 1.1 That the CIT(A) erred on facts and in law in holding that investment in unquoted shares were made during the year substantially out of the borrowed funds, without appreciating that the appellant had earned dividend income of Rs. 2,33,95,428 from mutual funds which were made from internal accruals and equity available with the appellant. 1.2 That the CIT(A) has erred on facts and in law in holding that the appellant has failed to correlate the financial burden for making such investment, without appreciating that no expenditure was incurred in earning of exempt dividend income. 1.3 That the CIT(A) erred on facts and in law in not appreciating that under section 14A of the Act only expenses having direct/ proximate nexus with earning of the dividend income could be disallowed. 1.4 That the CIT(A) erred on facts and in law in not appreciating that the dividend income earned from investments in mutual funds was received after deducting fund management charges. 1.5 That the CIT(A) erred on facts and in law in not appreciating that interest expenditure on loans amounting to Rs 7,86.55,443 were incurred by the appellant for business and operations of the appellant and does not relate to the investments made during the year. 1.6 That the CIT(A) erred on facts and in law in not appreciating that the dividend income earned from investment in mutual funds was only incidental to the main activity of earning profits on sale of mutual funds. 1.7 That the CIT(A) erred on facts and in law in not appreciating that the onus to prove that the expenditure was incurred in the taxable business operations and not the exempt income is upon the revenue and not of the appellant. 1.8 Without prejudice, that the CIT(A) erred on facts and in law in not appreciating that sub-section (2) of section 14A cannot be applied without recording satisfaction about the correctness of the claim of the appellant in respect of the expenditure incurred for earning the said income. 1.9 Without prejudice, that the CIT(A) erred on facts and in law in, inadvertently, considering the amount of interest expenses at Rs. 7,86,55,443/- as against Rs.2,08,15,484/-. 1.10 Without prejudice, that the CIT(A) erred on facts and in law in incorrectly computing the average value of total assets at Rs. 9,03,94,78,284 instead of the correct amount of Rs. 8,26,06,52,951. 3 1.11 Without prejudice, that the CIT(A) erred on facts and in law in incorrectly computing the amount of expenditure allegedly attributed to earning of exempt income at Rs.4,43,46,901, albeit restricting it to Rs.2,33,95,428, by applying rule 8D of the Rules against the correct amount of Rs. 97,74,261. The appellant craves leave to add to, alter, amend or vary from the above grounds of appeal before or at the time of hearing. 3. Aggrieved with the order of ld. Assessing officer, the assessee company filed the appeal before the Ld. CIT(A), who vide his order dated 20.02.2017 partly allowed the appeal against which the assessee company is in further appeal before the Tribunal. 4. None appeared on behalf of the assessee. The bench decided to proceed the matter with the assistance of the learned Departmental Representative. 5. Learned Departmental Representative for the Revenue could not convert the factual position brought on record by the assessee. He, thus submitted that the appeal cannot be decided on this juncture on merits and the Assessing Officer has to take necessary steps to include itself as secured creditor before the Hon’ble NCLT against the tax liability arising in the present case. We have also perused the submissions advanced by both sides in the light of relevant provision under the Act as well as IBC Code. Section 14 of IBC Code is very clear on the aspect that once moratorium is drawn and the insolvency commencement date is declared any institution of suits or definition of pending suits or proceedings against the creditor, debtor (in the present facts of the case of assessee before us) including the execution of any judgment, decree, or order in any Court of law, Tribunal, 4 Arbitration Resolution Plan/Process has been accepted by the NCLT. At this juncture, we refer to the decision of Hon’ble Supreme Court in the case of Ghanshyam Manz Retails Pvt. Ltd. Mishra and Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd. reported in (2021) 126 Taxmann.com 132 wherein the Hon’ble Supreme Court has considered a situation wherein, the resolution plan was approved by the adjudicating authority under Section 31(1) of the IBC Code. Hon’ble Supreme Court observed that, once the resolution plan was drawn, the claim as provided in the resolution plan stood frozen, and will be binding on the corporate debtor, its employee, its members, creditors, Central Government and any State Government or legal authority, guarantor and other stakeholders. We also note that in the present facts of the case, the resolution plan is yet to be finalized. When, we read the newly inserted provisions of Section 156A of the Act, it is necessary to remand the appeal to the Ld. AO to take necessary steps/action as per Rules. 6. Hence, in the above circumstances, we deem it fit and proper to remand this appeal back to the file of Ld. Assessing Officer to take necessary steps as per Section 156A of the Act. Accordingly, we allowed the appeal filed by the assessee. 8. In the result, the appeal of the assessee is allowed for statistical purpose. 5 Order pronounced in the open court on 29.01.2025. Sd/- Sd/- (PRADIP KUMAR KEDIA) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:29.01. 2025 Neha, Sr. PS "