Deltronix India Ltd., Noida v. DCIT, New Delhi

ITA 5264/DEL/2013 | 2010-2011
Pronouncement Date: 11-11-2014 | Result: Allowed

Appeal Details

RSA Number 526420114 RSA 2013
Assessee PAN AAACD4681K
Bench Delhi
Appeal Number ITA 5264/DEL/2013
Duration Of Justice 1 year(s) 1 month(s) 22 day(s)
Appellant Deltronix India Ltd., Noida
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 11-11-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 11-11-2014
Date Of Final Hearing 28-10-2014
Next Hearing Date 28-10-2014
Assessment Year 2010-2011
Appeal Filed On 19-09-2013
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY AM AND SHRI C.M.GARG J.M. ITA NO: 5264 /DEL/20 13 AY : - 20 10 - 11 DELTRONIC INDIA LTD. VS. DCIT CIRCLE 10(1) E 3 SECTOR 59 NEW DELHI NOIDA 201 301 PAN: AAAC D 4681 K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.SAMPATH ADV. RESPONDENT BY : SMT.PARWINDER KAUR SR. D.R. O R D E R PER J.SUDHAKAR REDDY ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER DATED 29.7. 20 13 OF LD.CIT(APPEALS) - XIII NEW DELHI PERTAINING TO THE AY 20 10 - 11 ON THE FOLLOWING GROUND. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE AUTHORITIES BELOW ERRED IN INVOKING PROVISIONS OF SECTION 14A OF THE ACT AND MAKING AN ADDITION OF RS.6 90 285/ - . THE ACTION BEING ARBITRARY ERRO NEOUS AND UNTENABLE MUST BE QUASHED WITH DIRECTIONS FOR RELIEF. 2 . WE HAVE HEARD SHRI K.SAMPATH THE LD.COUNSEL FOR THE ASSESSEE AND SMT.PARWINDER KAUR THE LD.SR.D.R. ON BEHALF OF THE REVENUE. 3 . AFTER HEARING RIVAL CONTENTIONS WE FIND THAT THE UNDISPUTED FACT IS THAT THE ASSESSEE DURING THE YEAR DOES NOT HAVE ANY INCOME WHICH IS EXEMPT FROM TAX. AS PER THE PROPOSITION LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S HOLCIM INDIA P.L TD. I N ITA NO.486/2014 AND ITA NO.299/2014 VIDE JUDGEMENT DATED 05 TH SEPTEMBER 2014 SEC.14A CANNOT BE ITA NO. 5264/DEL/2013 AY 2010 - 11 M/S DELTRONIC INDIA LTD. NOIDA 2 INVOKED. THE HON BLE JURISDICTIONAL COURT AT PARA NOS. 14 15 AND 16 HELD AS FOLLOWS. 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 2.4.2014 MADE REFERENCE TO TWO EARLIER DECISIONS OF THE SAME COURT IN CIT VS. HERO CYCLES LTD. (2010) 232 ITR 518 AND CIT VS. WINSOME TEXTILE INDUSTRIES LTD.(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 CIT - 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 DECIS ION 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 ALL OWABLE 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 . '. 15. INCOME EXEMPT UNDER SECTION 10 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 WOULD NOT BE TAXABLE MAY DEPEND UPON THE NATURE OF TRANSACTION ENTERED INTO IN THE SUBSEQUE NT 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 AN UNDISPUTED POSIT ION THAT RESPONDENT ASSESSEE IS AN INVESTMENT COMPANY AND HAD INVESTED BY PURCHASING A SUBSTANTIAL NUMBER OF SHARES AND THEREBY ITA NO. 5264/DEL/2013 AY 2010 - 11 M/S DELTRONIC INDIA LTD. NOIDA 3 SECURING RIGHT TO MANAGEMENT. POSSIBILITY OF SALE OF SHARES BY PRIVATE PLACEMENT ETC. CANNOT BE RULED OUT AND IS NOT AN IMPROBAB ILITY. 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 OF DIVIDEND. WHEN DECLARED IT IS SUBJECTED TO DIVIDEND DISTRIBUTION TAX. 16. WHA T IS ALSO NOTICEABLE IS THAT THE ENTIRE OR WHOLE EXPENDITURE HAS BEEN DISALLOWED AS IF THERE WAS NO EXPENDITURE INCURRED BY THE RESPONDENT - ASSESSEE FOR CONDUCTING BUSINESS. THE CIT(A) HAS POSITIVELY HELD THAT THE BUSINESS WAS SET UP AND HAD COMMENCED. THE SAID FINDING IS ACCEPTED. THE RESPONDENT - ASSESSEE THEREFORE HAD TO INCUR EXPENDITURE FOR THE BUSINESS IN THE FORM OF INVESTMENT IN SHARES OF CEMENT COMPANIES AND TO FURTHER EXPAND AND CONSOLIDATE THEIR BUSINESS. EXPENDITURE HAD TO BE ALSO INCURRED TO PRO TECT THE INVESTMENT MADE. THE GENUINENESS OF THE SAID EXPENDITURE AND THE FACT THAT IT WAS INCURRED FOR BUSINESS ACTIVITIES WAS NOT DOUBTED BY THE AO AND HAS ALSO NOT BEEN DOUBTED BY THE CIT(A). 3.1. RESPECTFULLY FOLLOWING THE SAME WE ALLOW THIS APPEAL OF THE ASSESSEE. 4 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH NOVEMBER 2014. SD/ - SD/ - ( C.M. GARG ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 11 TH NOVEMBER 2014 *MANGA ITA NO. 5264/DEL/2013 AY 2010 - 11 M/S DELTRONIC INDIA LTD. NOIDA 4 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR