Income Tax Appellate Tribunal - Delhi
Nilgiri Infrastructure Development ... vs Assessee on 10 July, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'E' : NEW DELHI)
BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER
and
SHRI A.T. VARKEY, JUDICIAL MEMBER
ITA No.4108/Del./2013
(ASSESSMENT YEAR : 2009-10)
M/s. Nilgiri Infrastructure Development Ltd., vs. ACIT, Circle 13 (1),
F - 60, Malhotra Building, 2nd Floor, New Delhi.
Connaught Place,
New Delhi - 110 001.
(PAN : AACCN3012E)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri G.C. Srivastava, Advocate and
Shri Saurabh Srivastava, FCA
REVENUE BY : Shri P. Dam Kanunjna, Senior DR
Date of Hearing : 08.07.2015
Date of Pronouncement : 10.07.2015
ORDER
PER A.T. VARKEY, JUDICIAL MEMBER :
This appeal, at the instance of the assessee, is directed against the order of the Commissioner of Income-tax (Appeals)-XVI, Delhi dated 03.04.2013. The relevant assessment year is 2009-10.
2. The sole ground of appeal is against the confirmation of the addition made by the AO amounting to Rs.1,36,94,050/- made under section 14A of the Income-tax Act, 1961 (hereinafter 'the Act') read with Rule 8D of the Income-tax Rules, 1962 (hereinafter 'the Rules'). 2 ITA Nos.4108/Del./2013
3. The brief facts of the case are that the assessee is a private limited company who declared current year loss of Rs.1,27,54,359/-. The case was selected for scrutiny assessment and statutory notices were issued and the assessee cooperated with the assessment proceedings before the AO. The AO took note that the assessee company had made investment in the shares of M/s. High Land Meadows Pvt. Ltd. and M/s. Park Land Developers Pvt. Ltd. of Rs.50 crores each. The total investment thus made and shown in the balance sheet of the said two companies was to the tune of Rs.100 crores. Vide order sheet entry dated 09.11.2011, the AR of the assessee was asked to show-cause why the provisions of section 14A of the Act read with Rule 8D of the Rules may not be invoked since the income from the investments in the shares would be of the nature of tax exempt dividend income. The assessee company vide reply dated 15.11.2011 submitted that section 14A does not apply on the assessee company as there was no exempt income. However, the AO did not accept the said contention of the assessee and after relying on the Special Bench decision in the case of M/s. Cheminvest Ltd. Vs. ITO dated 05.08.2009, he held that section 14A is applicable and after applying Rule 8D, made an addition of Rs.1,36,94,050/-.
4. Aggrieved by the said order of the AO, the assessee preferred an appeal before the ld. CIT (A) who was pleased to confirm the said addition made by the AO.
3 ITA Nos.4108/Del./2013
5. The ld. AR took our attention to page 3 para 3.3.2 of the AO's order and pointed out that assessee had not earned dividend income or tax free income in the instant assessment year which fact has not been controverted by the AO before proceeding to disallow by invoking the provisions of section 14A read with Rule 8D. He relied on the decision of Hon'ble Delhi High Court in the case of CIT vs. Holcim India P. Ltd. reported in 2014-TIOL-1586-HC-DEL-IT wherein the Hon'ble High Court has held that section 14A cannot be invoked when no exempt income was earned.
6. On the other hand, ld. DR relied on the order of the Special Bench cited by the AO, as stated above, to support the decision of CIT (A).
7. We have heard both the parties and perused the records. We find that there is no quarrel that the assessee company has not received any dividend income or tax free income. On the said factual matrix, the issue before us is no longer res integra. The Hon'ble jurisdictional High Court, after taking notice of the Punjab & Haryana High Court judgments in the cases of CIT, Faridabad vs. M/s. Lakhani Marketing Incl. (ITA No.970/2008 decided on 02.04.2014, CIT vs. Hero Cycles Limited (323 ITR 518) and CIT vs. Winsome Textile Industries Ltd. (219 ITR 204), held as under :-
"14. On the issue whether the respondent-assessee could have earned dividend income and even if no dividend income was earned, yet Section 14A can be invoked and disallowance of 4 ITA Nos.4108/Del./2013 expenditure can be made, there are three decisions of the different High Courts directly on the issue and against the appellant-Revenue. No contrary decision of a High Court has been shown to us. The Punjab and Haryana High Court in Commissioner of Income Tax, Faridabad Vs. M/s. Lakhani Marketing Incl., ITA No. 970/2008, decided on 02.04.2014, made reference to two earlier decisions of the same Court in CIT Vs. Hero Cycles Limited, [2010] 323 ITR 518 and CIT Vs. Winsome Textile Industries Limited, [2009] 319 ITR 204 to hold that Section 14A cannot be invoked when no exempt income was earned. The second decision is of the Gujarat High Court in Commissioner of Income Tax-I Vs. Corrtech Energy (P.) Ltd. [2014] 223 Taxmann 130 (Guj.). The third decision is of the Allahabad High Court in Income Tax Appeal No. 88 of 2014, Commissioner of Income Tax (Ii) Kanpur, Vs. M/s. Shivam Motors (P) Ltd. decided on 05.05.2014. In the said decision it has been held:
"As regards the second question, Section 14A of the Act provides that for the purposes of computing the total income under the Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. Hence, what Section 14A provides is that if there is any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction. For the year in question, the finding of fact is that the assessee had not earned any tax free income. Hence, in the absence of any tax free income, the 5 ITA Nos.4108/Del./2013 corresponding expenditure could not be worked out for disallowance. The view of the CIT(A), which has been affirmed by the Tribunal, hence does not give rise to any substantial question of law. Hence, the deletion of the disallowance of Rs.2,03,752/- made by the Assessing Officer was in order" .
Thus, the Hon'ble Delhi High Court, after taking note of the aforesaid order, upheld the Tribunal order allowing the claim of the assessee company and the appeal of the revenue was dismissed. We are bound by the decision of the Hon'ble jurisdictional High Court and the appeal of the assessee is accordingly allowed and the impugned addition is directed to be deleted.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in open court on this 10th day of July, 2015.
Sd/- sd/-
(R.S. SYAL) (A.T. VARKEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated the 10th day of July, 2015
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-XVI, New Delhi.
5.CIT(ITAT), New Delhi.
AR, ITAT
NEW DELHI.