Rakhi Agencies Ltd., New Delhi v. ITO, New Delhi

ITA 3597/DEL/2011 | 2008-2009
Pronouncement Date: 23-09-2011 | Result: Allowed

Appeal Details

RSA Number 359720114 RSA 2011
Bench Delhi
Appeal Number ITA 3597/DEL/2011
Duration Of Justice 2 month(s) 2 day(s)
Appellant Rakhi Agencies Ltd., New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 23-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 23-09-2011
Date Of Final Hearing 21-09-2011
Next Hearing Date 21-09-2011
Assessment Year 2008-2009
Appeal Filed On 21-07-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI U.B.S. BEDI JUDICIAL MEMBER AND SHRI B.K. HALDAR ACCOUNTANT MEMBER I.T.A. NO.3597/DEL/2011 ASSESSMENT YEAR : 2008-09 RAKHI AGENCIES LTD. ITO 3328-KUCHA KASHGIRI BAZAR WARD-15 (1) SITA BRAM DELHI. V. NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACR AAACR AAACR AAACR- -- -0880 0880 0880 0880- -- -Q QQ Q APPELLANT BY : SHRI CHAMAN LAL SHARMA ADVOCATE. RESPONDENT BY : SMT. PRATIMA KAUSHIK SR. DR. ORDER PER B.K. HALDAR AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD CIT(A)-XVIII NEW DELHI DATED 18.5.2011 FOR ASSESSMENT YEAR 2008-09. THE ASSESSEE HAS TAKEN FOLLOWING GROUND OF APPEAL:- THAT THE ITO WARD-15(1) NEW DELHI HAS ERRED IN F ACTS AND LAW IN MAKING THE ADDITION OF `.97 116/- IN THE INCOME OF THE ASSESSEE BY WRONGLY AND ILLEGALLY INVOKING THE PROVISIO N OF SECTION 14A OF THE INCOME TAX ACT 1961. THE ASSESSEE NE ITHER HAD ANY EXEMPT INCOME NOR CLAIMED ANY EXPENDITURE T OWARDS ANY EXEMPT INCOME. THE ADDITION OF `.97 116/- WRON GLY AND ILLEGALLY MADE BY ASSESSING OFFICER AND ERRONEOUSLY CON FIRMED BY CIT(A) XVIII NEW DELHI MAY KINDLY BE DELETED. ITA NO3597/DEL/11 2 2. THE ASSESSEE DURING THE FINANCIAL YEAR 2006-07 INVES TED AN AMOUNT OF `.25 LAKHS IN THE EQUITY SHARES OF HOTEL BAN ZARA LTD. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE DID NO T EARN ANY INCOME FROM THE SAME. HOWEVER THE ASSESSEE CLAIMED INTEREST ON LOANS AND INTEREST PAID TO BANK AMOUNTING TO `.5 31 6 08/- AND `.34 41 494/- RESPECTIVELY UNDER THE HEAD ADMINISTRA TIVE & SELLING EXPENSES. THE ASSESSING OFFICER ASKED THE ASSESSEE TO SHOW CAU SE AS TO WHY DISALLOWANCE U/S 14A OF THE ACT ON THIS ACCOUNT SHOULD NOT BE WORKED OUT AS PER RULE 8D OF THE IT RULES. IT WAS CON TENDED BY THE ASSESSEE THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. IT WAS ALSO CLAIMED THAT THE IMPUGNED SHARES WERE PURCHASED OUT OF THE COMPANYS OWN FUNDS AND THEREFORE NO EXPENDITURE WAS INCURRED BY THE ASSESSEE WHICH COUL D BE RELATABLE TO EARNING OF EXEMPT INCOME. THE ABOVE CONTENTION O F THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER. IT WAS HELD TH AT AFTER INSERTION OF RULE 8D READ WITH SECTION 14A OF THE AC T DISALLOWANCE OF EXPENSES FOR EARNING DIVIDEND INCOME WAS MANDATORY. H E THEREFORE WORKED OUT SUCH DISALLOWANCE AS UNDER:- I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCO ME WHICH DOES NOT FORM PART OF TOTAL INCOME - `.37 73 102/- II) IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OF RECEIPT AN AMOUNT COMPUTED IN ACCORDANCE WITH THE FOLLOWING FORMULA: A X B A = INTEREST `.39 73 102/- B = AVERAGE OF VALUE OF INVESTMENT `.25 00 0 00/- C = AVERAGE OF THE TOTAL ASSETS. `.11 7 3 86 262/- `.39 73 102/- X `.25 00 000/- /`.11 73 86 262/ - = `.84 616/- ITA NO3597/DEL/11 3 III) AN AMOUNT OF EQUAL TO ONE HALF PER CENT OF THE AVERAGE OF THE VALUE OF INVESTMENT INCOME FROM WHICH DOES NOT OR SH ALL NOT FROM PART OF THE TOTAL INCOME. (II) + (III) = 84616/- + 12 500/- = `.97 116/- 3. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE LD C IT(A). 4. THE GROUND TAKEN BY THE ASSESSEE BEFORE THE LD CIT(A ) WAS AS UNDER:- THAT THE ITO HAS ERRED IN FACTS AND LAW IN MAKING T HE ADDITION OF `.97 M116/- IN THE INCOME OF THE ASSESSEE. THE PROVISIO N OF SECTION 14A HAVE BEEN WRONGLY AND ILLEGALLY INVOKED. ON THE FACTS AND IN THE CIRCUMSTANCES IT IS THEREFORE REQUEST ED THAT TO KINDLY DELETE THE ADDITION OF `.97 116/-. 5. THE LD CIT(A) DID NOT CONSIDER THE FACTUAL ASPECT OF THE CASE AND RELYING ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE & MFG. CO. LTD. V. DCIT UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. AGGRIEVED THE ASSESSEE HAS FILED APPEAL BEFORE THE TRIBUNAL 6. BEFORE US IT WAS CONTENDED BY THE LD AR FOR THE ASSESSEE THAT AS THE ASSESSEE DID NOT PURCHASE THE SHARES BY UTILIZING BO RROWED FUNDS AND AS NO OTHER EXPENDITURE WAS INCURRED IN RELA TION TO THE SAID INVESTMENT SECTION 14A WAS NOT ATTRACTED IN ASSESSEES CASE . IT WAS CONTENDED BY HIM THAT THIS FACTUAL CONTENTION OF THE ASSESSEE HAS NEITHER BEEN CONSIDERED BY THE ASSESSING OFFICER OR THE LD CIT(A). FOR THE PROPOSITION THAT IN SUCH CIRCUMSTANCES SECTION 14A OF THE ACT IS ITA NO3597/DEL/11 4 NOT ATTRACTED. THE LD AR FOR THE ASSESSEE HAS RELIED ON THE FOLLOWING CASE LAWS:- 1. DECISION OF HON'BLE HIGH COURT OF PUNJAB & HARYANA I N THE CASE OF CIT V. HERO CYCLES LTD. IN I.T.A. NO.331 OF 2009 DATED 4.11.2009. 2. YATISH TRADING CO. PVT. LTD. V. ACIT 1(3) MUMBAI 12 9 ITD 237 (MUM). 7. THE LD DR ON THE OTHER HAND CONTENDED THAT THE FACTUAL METRIC OF THE CASE HAS NOT BEEN NOTICED BY THE LD CIT(A). T HE CONTENTION RAISED BY THE ASSESSEE ON THIS ISSUE HAS NOT BEEN ADJUDICATE D BY THE LD CIT(A). THUS IT WAS PRAYED THAT THE CASE MAY BE R EMITTED BACK TO THE FILE OF THE LD CIT(A) FOR FRESH CONSIDERATION. 8. IT WAS FURTHER CONTENDED BY HER THAT EVEN IF THER E IS NO EXEMPT INCOME EARNED FROM INVESTMENT DURING THE PARTICULAR PREVIOUS YEAR SECTION 14A WAS ATTRACTED. IN SUPPORT OF THE ABOVE CON TENTION SHE RELIED ON THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF CHEMINVEST LTD. V. ITO (2009) 317 ITR (AT) 86 (DEL.) . 9. IN THE REJOINDER IT WAS CONTENDED BY THE LD AR F OR THE ASSESSEE THAT FROM ASSESSEES PAPER BOOK PAGE 21 IT IS ABSOLUTELY CLEAR THAT AS ON 31.3.2007 THE ASSESSEE HAD RESERVE AND SURPLUS OF `.3 CRORES. CONSIDERING THE ABOVE FACTS AND THE DECISION OF HON'BL E PUNJAB &* HARYANA HIGH COURT IN THE CASE OF HERO CYCLES LTD. (S UPRA) THERE IS NO NEED TO SEND BACK THE CASE TO THE LD CIT(A) FOR RE-CO NSIDERATION. 10. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE HAVE ALSO GONE THROUGH THE CASE LAWS CITED BY BOTH THE SIDES. THE JURISDICTION IN ITA NO3597/DEL/11 5 THE CASE OF THE ASSESSEE LIES WITH THE HON'BLE HIGH COUR T OF DELHI AND NOT WITH THE HON'BLE PUNJAB & HARYANA HIGH COURT. T HUS THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IS NOT BINDING. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF CHEMINV EST LTD. HAS HELD THAT WHETHER ANY DIVIDEND IS EARNED FROM AN INVESTMEN T IN A PARTICULAR PREVIOUS YEAR IS NOT MATERIAL FOR MAKING DISALLOWANCE U/S 14A OF THE ACT. THUS THE ABOVE DECISION OF THE HON'BLE SPECIAL BENCH OF THE TRIBUNAL WILL BE BINDING ON US IN ABSENCE OF ANY DEC ISION TO THE CONTRARY BY THE JURISDICTIONAL HIGH COURT. IN THIS VI EW OF THE MATTER WE FOLLOW THE DECISION OF THE HON'BLE SPECIAL BENCH OF THE TRIBUNAL. 11. WE FIND THAT THE FACTUAL ASPECT OF THE CASE HAS NO T BEEN EXAMINED BY THE LD CIT(A). RULE 8D(1) READS AS UNDER :- RULE 8D(1): RULE 8D(1): RULE 8D(1): RULE 8D(1): WHERE THE ASSESSING OFFICER HAVING REGARD TO THE ACCOUN TS OF THE ASSESSEE OF A PREVIOUS YEAR IS NOT SATISFIED WITH (A) THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY T HE ASSESSEE OR (B) THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS B EEN INCURRED. IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TH E TOTAL INCOME UNDER THE ACT FOR SUCH PREVIOUS YEAR HE SHALL DETERMI NE THE AMOUNT OF EXPENDITURE IN RELATION TO SUCH INCOME IN ACCORDA NCE WITH THE PROVISIONS OF SUB RULE (2). 12. THUS THE ASSESSING OFFICER MUST HAVE SATISFACTION THAT ONE OF THE CONDITIONS MENTIONED IN RULE 8D(1) (A) OR (B) IS ATTRACTED. IN THE PRESENT CASE IT APPEARS THAT THE ASSESSEES CONTENTION IS THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REACHING THE ABOV E SATISFACTION IN ITA NO3597/DEL/11 6 THE FACTS OF THE PRESENT CASE. THIS ASPECT HAS NOT BEEN DEALT WITH BY THE LD CIT(A). IN THE ABOVE CIRCUMSTANCES WE DEEM I T FIT TO SET ASIDE THE ORDER OF THE LD CIT(A) ON THIS ISSUE AND REMIT THE MATTER BACK TO HIS FILE WITH THE DIRECTION THAT THE FACTUAL METRIX OF THE CASE WITH REFERENCE TO JUSTIFICATION OF ASSESSING OFFICERS SATISFACT ION AS PER RULE 8D(1) SHOULD BE EXAMINED AND A FRESH ORDER BE PASSED AS PER LAW AFTER GIVING THE PARTY ADEQUATE OPPORTUNITY OF BEING HEAR D. 13. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. 14. ORDER PRONOUNCED IN THE OPEN COURT ON THE 23RD DAY OF SEPTEMBER 2011. SD/- SD/- (U.B.S. BEDI) (B.K. HAL DAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 23. .9.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)- NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. TRUE COPY. BY ORDER (ITAT NEW DELHI). ITA NO3597/DEL/11 7 DATE OF HEARING DATE OF DICTATION DATE OF ORDER SIGNED BY THE HON'BLE MEMBER. DATE OF ORDER SENT TO THE CONCERNED BENCH