Mayar India Ltd., New Delhi v. JCIT (OSD), New Delhi

ITA 3280/DEL/2013 | 2008-2009
Pronouncement Date: 21-11-2014 | Result: Allowed

Appeal Details

RSA Number 328020114 RSA 2013
Assessee PAN AAACM8246P
Bench Delhi
Appeal Number ITA 3280/DEL/2013
Duration Of Justice 1 year(s) 5 month(s) 28 day(s)
Appellant Mayar India Ltd., New Delhi
Respondent JCIT (OSD), New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 21-11-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 21-11-2014
Date Of Final Hearing 11-11-2014
Next Hearing Date 11-11-2014
Assessment Year 2008-2009
Appeal Filed On 23-05-2013
Judgment Text
DELHI BENCH E : NEW DELHI BEFORE SHRI S.V. MEHROTRA ACCOUNTANT MEMBER AND SHRI A. T. VARKEY JUDICIAL MEMBER ITA NO. 3280 /DEL/ 2013 (ASSESSMENT YEAR: 2008 - 09 ) MAYAR INDIA LTD. PLOT NO.A BASANT LOK COMMUNITY CENTER VASANT VIHAR NEW DELHI PAN:AAACM8246P VS. JCIT(OSD) CIRCLE - 6(1) C.R.BUILDING NEW DELHI (APPELLANT) (RESPONDENT) O R D E R PER A. T. VARKEY JUDICIAL MEMBER THIS IS AN APPEAL ARISING FROM THE ORDER OF THE LD CIT(A) IX NEW DELHI FOR ASSESSMENT YEAR 2008 - 09. 2. THE SOLITARY ISSUE PERTAINS TO DISALLOWANCE OF RS. 9 62 228/ - U/S 14A OF THE INCOME TAX ACT 1961 (HEREIN AFTER THE ACT) . 3. BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF HERBAL PRODUCTS AND TRADING IN VARIOUS COMMODITIES AND PROVIDING SERVICES TO MAYAR (HK) L TD. HONKONG. THE RETURN OF INCOME FOR THE ASSESSME NT YEAR 2008 - 09 WAS FILED BY DECLARING AN INCOME OF RS.71 04 370/ - . THE SAME WAS LATER SELECTED FOR SCRUTINY PROCESSED U/S 143(3) OF THE ACT AND MADE AN ADDITION OF RS.81 90 600/ - . 4. THE AO INVOKED SECTION 14A OF THE ACT READ WITH RULE 8D AND COMPUTED DIS ALLOWANCE AT 5% OF AVERAGE INVESTMENTS I.E. 5% OF RS.19.25 CRORES AND COMPUTED DISALLOWANCE AT RS.9 62 228/ - WHICH HAS BEEN CONFIRMED BY THE LD CIT(A). HAVING CONSIDERED THE SUBMISSION AND EVIDENCES PLACED ON RECORD WE FIND THAT THE UNDISPUTED FACTS AS E MERGING FROM THE MATERIAL ON RECORD IS THAT THE ASSESSEE DID NOT EARN ANY EXEMPT INCOME IN APPELLANT BY : MAHESH KUMAR BANSAL CA RESPONDENT BY : J.P. CHANDRAKER SR. DR PAGE 2 OF 3 THE INSTANT YEAR. IN SUCH CIRCUMSTANCES THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD IN THE CASE OF LD CIT VS. HOKIM INDIA PVT LTD. IN ITA NO.486/2014 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 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 0 2.04.2014 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] 3 19 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 IN COME 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 FEE INCOME. HENCE IN THE ABSENCE OF ANY LAX FEE INCOME THE CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT FOR DISALLOWANCE. THE VIEW OF THE C1T(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'. 15. INCOME EXEMPT UNDER SECTION 1 0 IN A PARTICULAR ASSESSMENT YEAR MAY NOT HAVE BEEN EXEMPT EARLIER AND CAN BECOME TAXABLE IN FUTURE YEARS. FURTHER WHETHER INCOME EARNED IN A SUBSEQUENT YEAR WOULD OR WOU LD NOT BE TAXABLE MAY DEPEND UPON THE NATURE OF TRANSACTION ENTERED INTO IN THE SUBSEQUENT ASSESSMENT YEAR. FOR EXAMPLE LONG TERM CAPITAL GAIN ON SALE OF SHARES IS PRESENTLY NOT TAXABLE WHERE SECURITY TRANSACTION TAX HAS BEEN PAID BUT A PRIVATE SALE OF SHARES IN AN OFF MARKET TRANSACTION ATTRACTS CAPITAL GAINS TAX. IT IS PAGE 3 OF 3 AN UNDISPUTED POSITION THAT RESPONDENT ASSESSEE IS AN INVESTMENT COMPANY AND HAD INVESTED BY PURCHASING A SUBSTANTIAL NUMBER OF SHARES AND THEREBY SECURING RIGHT TO MANAGEMENT. POSSIBILI TY OF SALE OF SHARES BY PRIVATE PLACEMENT ETC. CANNOT BE RULED OUT AND IS NOT AN IMPROBABILITY. DIVIDEND MAYOR MAY NOT BE DECLARED. DIVIDEND IS DECLARED BY THE COMPANY AND STRICTLY IN LEGAL SENSE A SHAREHOLDER HAS NO CONTROL AND CANNOT INSIST ON PAYMENT O F DIVIDEND. WHEN DECLARED IT IS SUBJECTED TO DIVIDEND DISTRIBUTION TAX. 5. HAVING REGARD TO THE AFORESAID FACTUAL AND JUDICIAL POSITION WE HOLD THAT DISALLOWANCE MADE U/S 14A IS UNWARRANTED AND THEREFORE WE DELETE THE ADDITION OF RS.9 62 228/ - . 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 1 . 11. 2014. - S D / - - S D / - ( S.V. MEHROTRA ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 1 / 11 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT NEW DELHI