M/s. Indus Valley Investment & Finance Pvt. Ltd., New Delhi v. DCIT, New Delhi

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C : NEW DELHI BEFORE SHRI R.S. SYAL AM AND SHRI C.M. GARG JM ITA NO.3763/DEL/2013 ASSESSMENT YEAR : 2009-10 INDUS VALLEY INVESTMENT & FINANCE PVT. LTD. 414/1 4 TH FLOOR DDA COMM. COMPLEX JANAKPURI NEW DELHI. PAN: AAACI1539D VS. DCIT CIRCLE 11(1) NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MANU K. GIRI ADVOCATE DEPARTMENT BY : SHRI T. VASANTHAN SR. DR DATE OF HEARING : 28.04.2015 DATE OF PRONOUNCEMENT : 29.04.2015 ORDER PER R.S. SYAL AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY THE CIT(A) ON 10.4.2013 IN RELATION TO THE ASSESSME NT YEAR 2009-10. ITA NO.3763/DEL/2013 2 2. THE ONLY ISSUE RAISED BEFORE US IS AGAINST THE C ONFIRMATION OF DISALLOWANCE U/S 14A TO THE TUNE OF RS.1 05 07 322/ -. 3. SUCCINCTLY THE ASSESSEE EARNED EXEMPT INCOME AM OUNTING TO RS.25 38 020/- FROM INVESTMENTS IN UNITS OF MUTUAL FUNDS. THE ASSESSEE SUO MOTU OFFERED DISALLOWANCE U/S 14A FOR A SUM OF RS.7 36 052/- BEING % OF AVERAGE OF OPENING AND CLOSING BALANCES OF IN VESTMENT IN SHARES ON WHICH EXEMPT DIVIDEND INCOME WAS EARNED. THE AO INVOKED THE PROVISIONS OF SECTION 14A READ WITH RULE 8D AND COM PUTED DISALLOWANCE AT RS.1.12 CRORE. AS THE ASSESSEE HAD OFFERED DISALLOWANCE VOLUNTARILY AT RS.7.36 LAC HE MADE FURTHER DISALLO WANCE AMOUNTING TO RS.1 05 07 322/-. THE LD. CIT(A) UPHELD THE ADDITI ON. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE TOTAL EXEMPT INCOME EARNED BY THE ASSESSEE IS TO THE TUNE OF RS.25.38 LAC AGA INST WHICH AN ADDITION OF RS.1.05 CRORE HAS BEEN MADE. THE HONBLE DELHI HIGH COURT IN JOINT INVESTMENT PVT. LTD. VS. CIT VIDE ITS JUDGMENT DATED 25.2.2015 HAS HELD THAT THE DISALLOWANCE U/S 14A CANNOT EXCEED TH E AMOUNT OF EXEMPT ITA NO.3763/DEL/2013 3 INCOME. THE HONBLE DELHI HIGH COURT IN THE CASE O F CIT VS. HOLCIM INDIA PVT LTD. (2014) 90 CCH 081-DEL-HC HAS HELD THAT THERE CAN BE NO DISALLOWANCE U/S 14A IN THE ABSENCE OF ANY EXEMP T INCOME. THE RATIONALE BEHIND THESE JUDGMENTS IS THAT THE AMOUNT OF DISALLOWANCE U/S 14A SHOULD NOT EXCEED THE EXEMPT INCOME. SINCE THE TOTAL EXEMPT INCOME IN THE INSTANT CASE IS RS.25 38 020/- WE DI RECT THAT THE DISALLOWANCE U/S 14A BE RESTRICTED TO RS.18 01 968/ - (RS.25 38 020- RS.7 36 052/-). THE REMAINING AMOUNT OF DISALLOWAN CE IS DIRECTED TO BE DELETED. 5. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29.04.201 5. SD/- SD/- [C.M. GARG] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 29 TH APRIL 2015. DK ITA NO.3763/DEL/2013 4 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT AR ITAT NEW DELHI.