DCIT, New Delhi v. M/s. PRL Projects & Infrasturcture Ltd., New Delhi

ITA 5010/DEL/2015 | 2011-2012
Pronouncement Date: 16-11-2017 | Result: Dismissed

Appeal Details

RSA Number 501020114 RSA 2015
Assessee PAN AAACP0411D
Bench Delhi
Appeal Number ITA 5010/DEL/2015
Duration Of Justice 2 year(s) 3 month(s) 11 day(s)
Appellant DCIT, New Delhi
Respondent M/s. PRL Projects & Infrasturcture Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 16-11-2017
Appeal Filed By Department
Tags No record found
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 16-11-2017
Assessment Year 2011-2012
Appeal Filed On 05-08-2015
Judgment Text
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI BEFORE SHRI B.P. JAIN ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA JUDICIAL MEMBER ITA NO.:- 5010/DEL /2015 ASSESSMENT YEAR: 2011-12 DCIT CIRCLE-19(2) ROOM NO. 221 2 ND FLOOR C.R. BUILDING I.P. ESTATE NEW DELHI. VS. PRL PROJECTS & INFRASTRUCTURE LT. 34/1 VIKAS APARTMENT EAST PUNJABI BAGH NEW DELHI 110 026 AAACP0411D (APPELLANT) (RESPONDENT) O R D E R PER SUDHANSHU SRIVASTAVA J.M. THIS APPEAL HAS BEEN PREFERRED BY THE DEPARTMENT AGAINST THE ORDER PASSED BY THE LD. CIT (A) 7 DELHI WHEREIN VI DE ORDER DATED 28.5.2015 THE LD. CIT(APPEALS) HAD DELETED THE DISA LLOWANCE OF RS. 40 19 608/- MADE UNDER SECTIONS 40(A)(IA) AND OF RS . 1 32 540/- MADE DEPARTMENT BY: SHRI SURENDERPAL SR. DR ASSESSEE BY : SHRI TARUN KUMAR BATRA CA DATE OF HEARING 02/11 /2017 DATE OF PRONOUNCEMENT / 2017 ITA NO. 5010/DEL/2015 DCIT VS. PRL PROJECTS & INFRASTRUCTURE LTD. 2 U/S 14A OF THE INCOME TAX ACT 1961 (HEREINAFTER CAL LED THE ACT). THE RELEVANT ASSESSMENT YEAR IS 2011-12. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME SHOWING A TOTAL INCOME OF RS. 26 1 8 310/- UNDER THE NORMAL PROVISIONS AND RS. 1 46 26 148/- UNDER PROVI SIONS OF SECTION 115JB OF THE ACT. THE CASE WAS SELECTED FOR SCRUTIN Y AND ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AFTER MAKING DISALL OWANCES OF RS. 1 32 540/- U/S 14A AND RS. 40 19 608/- U/S 40(A)(IA ) OF THE ACT. 2.1 ON APPEAL BY THE ASSESSEE THE LD. CIT (A) D ELETED BOTH THE ADDITIONS MADE BY THE A.O. 2.2 NOW AGGRIEVED THE DEPARTMENT HAS APPROACH ED THE ITAT AND HAS CHALLENGED THE DELETIONS BY THE LD. CIT (A). 3. THE LD. SR. DR SUBMITTED THAT AS FAR AS TH E DISALLOWANCE OF RS. 40 19 608/- WAS CONCERNED THE SAME WAS MADE FOR TH E AMOUNT PAID AS BANK GUARANTEE COMMISSION PAID TO BANK OF INDIA AND ICICI BANK LTD. AND IN VIEW OF THE NOTIFICATION NO. 56/2012 ISSUED BY THE CBDT DATED 31.12.2012 IT WAS CLEAR THAT THIS NOTIFICATION EXE MPTING PERSONS FROM DEDUCTING TAX AT SOURCE FROM BANK GUARANTEE COMMISS ION HAD COME INTO FORCE WITH EFFECT FROM 1 ST JANUARY 2013 AND PAYMENT MADE PRIOR TO THAT ITA NO. 5010/DEL/2015 DCIT VS. PRL PROJECTS & INFRASTRUCTURE LTD. 3 PERIOD WAS NOT COVERED BY THE SAID NOTIFICATION. IT WAS FURTHER SUBMITTED THAT ACCORDINGLY THE ASSESSEE WAS REQUIRED TO DED UCT TAX AT SOURCE ON THE BANK GUARANTEE COMMISSION AND THEREFORE THE A DDITION HAD BEEN RIGHTLY MADE BY THE A.O. 3.1 REGARDING THE SECOND GROUND PERTAINING TO DISALLOWANCE U/S 14A THE SR. DR SUBMITTED THAT THE DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES IS MANDATORY AND HAS TO BE CAL CULATED AT % OF THE AVERAGE INVESTMENT WHICH THE A.O. HAD DONE. IT WAS FURTHER SUBMITTED THAT THE LD. CIT (A) WAS PATENTLY WRONG I N DELETING THE SAID ADDITION. 4. IN RESPONSE THE LD. AUTHORISED REPRESE NTATIVE SUBMITTED THAT AS FAR AS THE ISSUE OF DISALLOWANCE OF RS. 40 19 60 8/- U/S 40(A)(IA) WAS CONCERNED THIS BANK GUARANTEE COMMISSION WAS CHAR GED BY THE RESPECTIVE BANKS BY DEBITING THE SAME TO THE BANK A CCOUNT OF THE ASSESSEE AND THAT THE ASSESSEE COMPANY HAD NOT PAID THESE AMOUNTS BY ISSUANCE OF ANY CHEQUE OR PAY ORDER. THUS IN SUCH CIRCUMSTANCES IT WAS NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE. IT WAS F URTHER SUBMITTED THAT THE ITAT MUMBAI BENCH IN THE CASE OF KOTAK SECURITI ES LTD. VS. DCIT (TDS) IN ITA NO. 6657/MUM/2011 VIDE ORDER DATED 3 RD FEBRUARY 2012 HAD HELD THAT A PLAIN READING OF EXPLANATION TO SEC TION 194H INDICATED ITA NO. 5010/DEL/2015 DCIT VS. PRL PROJECTS & INFRASTRUCTURE LTD. 4 THAT ELEMENT OF AGENCY WAS ESSENTIAL IN CASE OF ALL SERVICES OR TRANSACTIONS CONTEMPLATED BY EXPLANATION TO SECTIO N 194H AND FURTHER THAT THOSE TRANSACTIONS OR SERVICES WHICH WERE ON P RINCIPAL TO PRINCIPAL BASIS WOULD NOT BE GOVERNED BY THE PROVISION REQU IRING DEDUCTION OF TAX AT SOURCE. RELIANCE WAS ALSO PLACED ON ORDER OF ITAT DELHI BENCH IN THE CASE OF BAIDYNATH AYURVED BHAWAN LTD. VS JCIT REPORTED IN 83TTJ 409 AND ACIT VS. THE SAMAJ REPORTED 71 TTJ 783. REL IANCE WAS ALSO PLACED ON JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCIATION VS. UNION OF IN DIA 257 ITR 202. 4.2 ON THE ISSUE OF DISALLOWANCES U/S 14A THE L D. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE COMPANY HAD AN OPENING BALANCE OF INVESTMENT OF RS. 2 65 08 000/- IN SHARE S OF PRIVATE LIMITED COMPANIES AND DURING THE YEAR UNDER CONSIDERATION T HE ASSESSEE DID NOT EARN ANY INCOME ON THE SAME AND ALSO DID NOT ATTRIB UTE ANY EXPENDITURE RELATING TO SUCH INVESTMENT. IT WAS FURTHER SUBMITT ED THAT DURING THE YEAR UNDER CONSIDERATION NO FRESH INVESTMENT IN SHA RES AND SECURITIES WAS MADE. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDIA PRIVATE L IMITED IN ITA NO. 486/2014 AND ITA NO.291/2014 WHEREIN THE HONBLE DE LHI HIGH COURT HAD HELD THAT THERE COULD BE NO DISALLOWANCE OF EXP ENDITURE FOR EARNING ITA NO. 5010/DEL/2015 DCIT VS. PRL PROJECTS & INFRASTRUCTURE LTD. 5 OF EXEMPT INCOME IN CASE WHERE NO EXEMPT INCOME WAS EARNED DURING THE YEAR. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND H AVE PERUSED THE MATERIAL ON RECORD. REGARDING THE DISALLOWANCE OF R S. 40 19 608/- U/S 40(A)(IA) OF THE ACT IT HAS SEEN THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF ITAT MUMBAI BENCH IN THE C ASE OF KOTAK SECURITIES LIMITED VS. DCIT (TDS) (SUPRA) WHEREIN THE MUMBAI BENCH OF THE ITAT HAS HELD THAT THERE IS NO PRINCIPAL AG ENT RELATIONSHIP BETWEEN THE BANK ISSUING THE BANK GUARANTEE OF THE ASSESSEE. THE MUMBAI BENCH HAS NOTED THAT WHEN THE BANK ISSUES A BANK GUARANTEE ON BEHALF OF THE ASSESSEE ALL IT DOES IS TO ACCEPT THE COMMITMENT OF MAKING PAYMENT OF A SPECIFIED AMOUNT TO THE BENEFIC IARY ON DEMAND AND IT IS IN CONSIDERATION OF THIS COMMITMENT THAT THE BANK CHARGES OF FEE WHICH IS TERMED AS BANK GUARANTEE COMMISSION. THE ITAT MUMBAI BENCH HAS FURTHER NOTED THAT WHILE IT IS TERMED AS GUARANTEE COMMISSION THE SAME IS NOT IN THE NATURE OF COMMI SSION AS IT IS UNDERSTOOD IN COMMON BUSINESS PARLANCE AND IN CONTE XT OF SECTION 194H. THE ITAT MUMBAI BENCH WENT TO HOLD THAT NO TDS WAS DEDUCTIBLE ON SUCH BANK GUARANTEE COMMISSION. IT IS SEEN THAT THE LD. CIT (A) ALSO HAS RELIED ON THIS ORDER OF ITAT MUMBAI BENCH WHILE ALL OWING RELIEF TO THE ITA NO. 5010/DEL/2015 DCIT VS. PRL PROJECTS & INFRASTRUCTURE LTD. 6 ASSESSEE AND FURTHER DURING THE COURSE OF PROCEED INGS BEFORE US THE DEPARTMENT COULD NOT POINT OUT ANY CONTRARY JUDGEMEN T WHICH COULD GIVE RELIEF TO THE DEPARTMENT ON THIS ISSUE. ACCORDINGLY WE REFUSE TO INTERFERE ON THIS ISSUE AND UPHOLD THE ADJUDICATION OF THE LD. CIT (A). 5.2 REGARDING THE DISALLOWANCE OF RS. 1 32 540 /- U/S 14A IT IS UNDISPUTED THAT THE ASSESSEE HAD NOT EARNED ANY EXE MPT INCOME DURING THE YEAR AND AS SUCH NO EXPENDITURE COULD BE SAID T O HAVE BEEN INCURRED TO EARN THE EXEMPT INCOME. IT IS SETTLED LAW THAT IF THERE IS NO EXEMPT INCOME NO DISALLOWANCE U/S 14A CAN BE MADE. THIS I SSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF HONBLE HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDIA PVT. LTD. (SUPRA). THE HONBLE DELHI HIGH COURT HAS HELD IN PARAGRAPH 14 OF THE SAID JUDGMENT:- 14. ON THE ISSUE WHETHER THE RESPONDENT-ASSESSEE C OULD HAVE EARNED DIVIDEND INCOME AND EVEN IF NO DIVIDEND INC OME WAS EARNED YET SECTION 14A CAN BE INVOKED AND DISALLO WANCE OF EXPENDITURE CAN BE MADE THERE ARE THREE DECISIONS OF THE DIFFERENT HIGH COURTS DIRECTLY ON THE ISSUE AND AGA INST THE APPELLANT-REVENUE. NO CONTRARY DECISION OF A HIGH C OURT HAS BEEN SHOWN TO US. THE PUNJAB AND HARYANA HIGH COURT IN COMMISSIONER OF INCOME TAX FARIDABAD VS. M/S. LAKH ANI MARKETING INCL. ITA NO. 970/2008 DECIDED ON 02.0 4.2014 MADE REFERENCE TO TWO EARLIER DECISIONS OF THE SAME COUR T IN CIT VS. ITA NO. 5010/DEL/2015 DCIT VS. PRL PROJECTS & INFRASTRUCTURE LTD. 7 HERO CYCLES LIMITED [2010] 323 ITR 518 AND CIT VS. WINSOME TEXTILE INDUSTRIES LIMITED [2009] 319 ITR 204 TO H OLD THAT SECTION 14A CANNOT BE INVOKED WHEN NO EXEMPT INCOME WAS EAR NED. THE SECOND DECISION IS OF THE GUJARAT HIGH COURT IN COMM ISSIONER OF INCOME TAX-I VS. CORRTECH ENERGY (P.) LTD. [2014] 2 23 TAXMANN 130 (GUJ.). THE THIRD DECISION IS OF THE ALLAHABAD H IGH COURT IN INCOME TAX APPEAL NO. 88 OF 2014 COMMISSIONER OF I NCOME TAX. (II) KANPUR VS. M/S. SHIVAM MOTORS (P) LTD. DECIDE D 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 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'. ITA NO. 5010/DEL/2015 DCIT VS. PRL PROJECTS & INFRASTRUCTURE LTD. 8 5.3 IN VIEW OF THE ABOVE WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A) ON THIS ISSUE ALSO. THE LD. CIT (A) HAS ALSO RELIED UPON THE JUDGMENT OF THE HONBLE DELHI HIGH C OURT IN CIT VS. HOLCIM INDIA PVT. LTD. (SUPRA) WHILE ALLOWING RELIE F TO THE ASSESSEE AND BEFORE US ALSO THE DEPARTMENT COULD NOT POINT OUT ANY LEGAL OR FACTUAL INFIRMITY IN THE SAME. THEREFORE WE UPHOLD THE ADJU DICATION BY THE LD. CIT (A) ON THIS ISSUE ALSO. 6. IN THE FINAL RESULT APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/11/2017. . SD/- SD/- (B.P. JAIN) (S UDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16.11.2017 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT NEW DELHI