PROMINENT BUILDWELL PRIVATE LIMITED,DELHI V. ACIT, CIRCLE 20(1) DELHI, NEW DELHI

ITA 4892/DEL/2024

AI Insights

The case involves Prominent Buildwell Pvt Ltd, which appealed against the order of the CIT(A) sustaining an addition of Rs. 11,32,500 under section 14A of the Income Tax Act, 1961, related to expenses incurred in earning exempt income. The assessee argued that the expenses claimed were minimal and unrelated to the exempt income, citing various legal precedents. The Department supported the CIT(A)'s decision. The Tribunal, referencing a co-ordinate bench decision, found the disallowance excessive and adjusted it to match the actual expenses claimed by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312257 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2017-2018
• Other Referred Cases: Maxopp Investment Limited vs. PCIT, Gillette Group India Pvt Ltd vs. ACIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: MOHIT CHOUDHARY
• Keywords: Opportunity of being heard; Business expenditure; Earning of tax free income; Rule 8D; Tangible material
• Section: 143(3); 14A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘F’ BENCH, NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 4892/DEL/2024 [A.Y 2017-18] Prominent Buildwell Pvt Ltd Vs. The A.C.I.T. D-1/105A, Nehru Nagar, D-Block Circle - 20(1) Karawal Nagar, C/o Dr. Ravi Gupta Delhi B-41, LGF, Kailash Colony, New Delhi PAN: AADCP 5176 G (Appellant) (Respondent) Assessee By : Shri Mohit Choudhary, CA Shri Harish Kumar Choudhary, CA Ms. Mitika, ADV Department By : Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing : 28.04.2025 Date of Pronouncement : 28.04.2025 ORDER PER NAVEEN CHANDRA, AM :- This appeal by the assessee is directed against the order of the ld. CIT(A) New Delhi dated 30.09.2024, for A.Y 2017-18. 2 ITA No. 4892/DEL/2024 Prominent Buildwell [A.Y 2017-18] 2. Grounds raised by the assessee read as under: “1. That On the facts and circumstances of the case and provisions of law, the order passed by the Ld. CIT(A) under section 250 of the Act is bad both in the eyes of law and on facts. 2. That on the facts and circumstances of the case and the provisions of the law, the Ld. CIT(A) has failed to appreciate that the assessment order passed u/s 143(3) is illegal, bad in law and without jurisdiction. 3. On the facts and circumstances of the case, Ld. CIT(A) has erred, both on facts and in law, in sustaining the action of the Ld AO and disallowing Rs. 11,32,500 by invoking the provisions of Section 14A, which are not applicable to the facts of the case 4. That on facts and in circumstances of the case and in law, Ld CIT(A) erred in passing the appeal order u/s. 250 of the Act, without affording a proper opportunity of being heard. 5. That on facts and in circumstances of the case and in law, Ld CIT (A) has erred in confirming the order passed u/s 143(3) by the Ld AO despite the fact that the Ld AO has travelled beyond the scope of notice u/s 143(2). 6. That on facts and in circumstances of the case and in law, Ld CIT (A) has erred in confirming the order passed u/s 143(3) by the 3 ITA No. 4892/DEL/2024 Prominent Buildwell [A.Y 2017-18] Ld AO only on the basis of assumptions and surmises and not upon any tangible material and sustaining the said addition arbitrarily rejecting the explanation and evidences brought on record by the appellant. 7. That the impugned appeal order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence. 8. That the appellant craves leave to add, amend, alter, vary and/or withdraw any or all the above grounds of appeal before or at the time of hearing of the appeal.” 3. Facts, in brief, are that the assessee is a company mainly engaged in the business of constructions of building and parts thereof. During the year the company had made investment of Rs. 15,45,00,000/- as per following details: Fixed deposit 10,45,00,000 HDFC investments 5,00,00,000 Total 15,45,00,000 This investment is reflected in Note 6 to the balance sheet. The assessee company filed return of income on 17.10.2017 declaring total income at Rs.1,04,79,202/-. An assessment u/s143(3) of the Income-tax Act, 1961 [the Act, for short] has been completed after making addition of Rs. 4 ITA No. 4892/DEL/2024 Prominent Buildwell [A.Y 2017-18] 11,32,500/-u/s 14A of the Act. The Assessing Officer has completed the assessment on 22.11.2019 after assessing the income at Rs. 1,16,11,702/-. 4. During the year under consideration, assessee company has earned exempt income to the tune of Rs. 3,94,513.95 as dividend income as reflected in Note 7 to the balance sheet and incurred expenses as follows: Expenses Amount in Rs. Accountancy charges 18,000 Audit Fees 17,250 ROC Expenses 1200 Interest on Income Tax 49,890 Total 86,340 3. At the very outset, the ld. counsel for the assessee submitted that the P&L account of the assessee company reflects that assessee has made major expenses against payment of interest on income tax. Rest of the expenses were made for maintaining the company affairs. No other expenses have been incurred during the year, much less on earning any exempt income made in any affairs. Out of the above expenses, Rs.49,890 being interest on income tax has been disallowed u/s 40 of 5 ITA No. 4892/DEL/2024 Prominent Buildwell [A.Y 2017-18] the Act. Hence, only Rs. 36,450/- was claimed by the assessee. These expenses are only on account of audit fee, ROC fee etc. 4. The ld. counsel for the assessee further submitted that the assessee has not incurred any expenses in the nature of interest on money borrowed. There are no administrative expenses which have been debited to the P & L A/c. These details were available with the Assessing Officer while framing the assessment, but was clearly unable to rebut it in any way and further, the same were available before the Learned CIT(A), but again there is no rebuttable of it in the order u/s 250 also. 5. The ld. counsel for the assessee continued by saying that the Assessing Officer has made the addition of Rs.11,32,500/- despite knowing the fact that the expenses made during the year was Rs. 86,340/-, and furthermore, only Rs. 36,450 has been debited as expenses in the profit and loss as per the Act. 6. The ld. counsel for the assessee submitted that it is a settled law that if an expenditure incurred has no causal connection with the exempted income, then such an expenditure would obviously be treated as not related to the income that is exempted from tax, and such 6 ITA No. 4892/DEL/2024 Prominent Buildwell [A.Y 2017-18] expenditure would be allowed as business expenditure. To put it differently, such expenditure would then be considered as incurred in respect of other income which is to be treated as part of the total income. Therefore, the only expenses debited to the Profit and Loss is Rs. 36,450/- on account of Audit fees, ROC fees etc. and these have no connection with the exempted income in any way and so, the addition made amounting to Rs. 11,32,500/- is bad in law and liable to be deleted. 7. The ld. counsel for the assessee placed reliance is place on a catena of decisions including the case of Maxopp Investment Limited 91 Taxmann.com 154 [Supreme Court], PCIT Vs. Caraf Builders & Constructions Pvt Ltd. 414 ITR 122; Gillette Group India Pvt Ltd Vs. ACIT [Delhi-Trib]. 8. Per contra, the ld. DR relied upon the orders of the authorities below. 9. We have heard the rival submissions and have perused the relevant material on record. We find that the ld. counsel for the assessee has relied upon the decision of the co-ordinate Bench in the case of Gillete 7 ITA No. 4892/DEL/2024 Prominent Buildwell [A.Y 2017-18] Group India [supra] wherein it has been held that u/s 14A read with rule 8D, disallowance can be made for the expenditure incurred for earning of exempt income. From the assessee's P&L A/c, it is evident that the total expenditure incurred was ₹49 lakhs only which was claimed as a deduction. The disallowance under section 14A & rule 8D cannot exceed the expenditure actually claimed by the assessee. Accordingly, the action of the AO & CIT (A) in making disallowance in excess of total expenditure debited to P&L A/c is unjustified. 10. In that view of the matter, considering the facts and circumstances of the case and following the decision of the co-ordinate bench [supra], the disallowance u/s 14A is restricted to Rs. 36,450/-, the expenditure actually claimed by the assessee. The Assessing Officer is directed to delete the balance addition u/s 14A of the Act. 11. In the result, appeal of assessee in ITA No. 4892/DEL/2024 is partly allowed. Order pronounced in open court on 28.04.2025. Sd/- Sd/- [SATBEER SINGH GODARA] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 28th APRIL, 2025. 8 ITA No. 4892/DEL/2024 Prominent Buildwell [A.Y 2017-18] VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order . 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order "