Minda Projects Ltd, New Delhi v. DCIT, Circle-16(2), New Delhi

ITA 6503/DEL/2017 | 2014-2015
Pronouncement Date: 11-03-2021 | Result: Dismissed

Appeal Details

RSA Number 650320114 RSA 2017
Assessee PAN AAACM8440R
Bench Delhi
Appeal Number ITA 6503/DEL/2017
Duration Of Justice 3 year(s) 4 month(s) 13 day(s)
Appellant Minda Projects Ltd, New Delhi
Respondent DCIT, Circle-16(2), New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2021
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 11-03-2021
Assessment Year 2014-2015
Appeal Filed On 27-10-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI AMIT SHUKLA JUDICIAL MEMBER AND SHRI O.P. KANT ACCOUNTANT MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.6503/DEL./2017 ASSESSMENT YEAR: 2014-15 M/S. MINDA PROJECTS LTD. B-64/1 WAZIRPUR INDUSTRIAL AREA DELHI VS. DCIT CIRCLE-16(2) NEW DELHI PAN :AAACM8440R (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 23 RD AUGUST 2017 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-28 NEW DELHI [IN SHORT THE LEARNED CIT(A)] FOR ASSESSMENT YEAR 2014-15 RAISING FOLLOWING GROU NDS: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE L EARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER IN DISALLOWING RS.2105899/- UNDER SECTION 14A OF THE ACT AS AGAINST AMOUNT OF RS.17500/- ALREADY MADE IN APPELLANT BY NONE RESPONDENT BY MS. RINKU SINGH SR.DR DATE OF HEARING 01.03.2021 DATE OF PRONOUNCEMENT 11.03.2021 2 ITA NO.6503/DEL./2017 RETURNED INCOME AND THUS THERE IS FURTHER DISALLOWA NCE OF RS.2088399/- 2. WITHOUT PREJUDICE TO ABOVE LEARNED CIT(A) HAS N OT GIVEN ANY FINDING ON THE COMPUTATION OF DISALLOWANCE UNDER RU LE 8D OF THE INCOME TAX RULES PROVIDED AT RS.210590/- BEFORE CIT (A) DURING THE APPELLATE PROCEEDING AS AGAINST DISALLOWANCE OF RS.2105899/- COMPUTED BY THE ASSESSING OFFICER. 3. THE IMPUGNED DISALLOWANCE IS ARBITRARILY UNLAWF UL UNJUSTIFIED AND AGAINST FACTS AND RECORD OF THE CASE. 4. THAT THE APPELLANT CRAVES THE LEAVE TO ADD MODI FY AMEND OR DELETE THE GROUNDS OF APPEAL AT THE TIME OF HEARING . 2. THE FACTS IN BRIEF OF THE CASE ARE THAT THE ASSESS EE WAS ENGAGED IN THE BUSINESS OF CONTRACT FINANCE AND IN VESTMENT. FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE FILED RE TURN OF INCOME ON 07.11.2017 DECLARING TOTAL INCOME OF RS.1 92 62 687/-. THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUT INY AND STATUTORY NOTICES UNDER THE INCOME-TAX ACT 1961 (I N SHORT THE ACT) WERE ISSUED AND COMPLIED WITH. THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 28 TH DECEMBER 2016 AFTER MAKING CERTAIN DISALLOWANCES. 2.1 AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE LEA RNED CIT(A) HOWEVER ONLY PART RELIEF WAS ALLOWED TO TH E ASSESSEE. BEING AGGRIEVED WITH THE ORDER OF LEARNED CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL (IN SHORT THE TRIBUNAL) RAISING THE GROUNDS AS REPRODUCED ABOVE. 3. DESPITE NOTIFYING NEITHER ANY ONE APPEARED NOR AN Y ADJOURNMENT APPLICATION HAS BEEN FILED ON BEHALF OF THE ASSESSEE. ON EARLIER DATE I.E. 04.01.2021 ALSO NONE APPEAR ED ON BEHALF OF THE ASSESSEE AND THEREFORE THE ASSESSEE WAS ISSUE D NOTICE THROUGH REGISTERED POST. IT IS SEEN FROM THE RECORD THAT THIS NOTICE DATED 04.01.2021 ISSUED BY THE REGISTRY FOR HEARING ON 3 ITA NO.6503/DEL./2017 01.03.2021 DID NOT RETURN BACK. THUS IT IS ASSUMED THAT THIS NOTICE WAS DULY SERVED UPON THE ASSESSEE AND NO COM PLIANCE HAS BEEN MADE ON THE PART OF THE ASSESSEE. IN SUCH CIRC UMSTANCES WE FEEL IT APPROPRIATE TO DECIDE THE APPEAL EX-PARTE . ACCORDINGLY AFTER HEARING THE ARGUMENT OF THE LEARNED DR WE PROCEEDE D TO DECIDE THE APPEAL. 4. THE FACTS IN BRIEF IN ISSUE IS THAT THE ASSESEE EA RNED DIVIDEND INCOME OF RS.3 49 926/- AND AGAINST THE SA ID DIVIDEND INCOME THE ASSESSEE DISALLOWED A SUM OF RS.17 500/ - UNDER SECTION 14A OF THE ACT. THE SUO MOTU DISALLOWANCE BY THE ASSESSEE WAS ON ESTIMATE OF 5% OF THE DIVIDEND INCO ME EARNED. THE ASSESSING OFFICER BEING DISSATISFIED WITH THE C ORRECTNESS OF THE CLAIM OF DISALLOWANCE MADE BY THE ASSESSEE SHO W-CAUSED TO THE ASESSEE AS TO WHY THE RULE 8D OF THE INCOME TA X RULES 1962 (IN SHORT THE RULES) MIGHT NOT BE INVOKED. THE AS SESSEE CONTENDED THAT THE INVESTMENT IN SHARES WAS MADE FO R STRATEGIC PURPOSE IN THE SISTER CONCERNS WITH NO MOTIVE OF EA RNING DIVIDEND INCOME. THE LEARNED ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND MADE DISALLOWANCE INVOKING RULE 8D AS UNDER: I. RULE 8D(2)(I) NIL II. RULE 8D(2)(II) RS.2 10 590 III. RULE 8D(2)(III) RS.18 95 309 TOTAL RS.21 05 899/- LESS: ALREADY DISALLOWED IN COMPUTATION RS.17 500 /- BALANCE TO BE DISALLOWED: RS.20 88 399/- 4 ITA NO.6503/DEL./2017 4.1 BEFORE THE LEARNED CIT(A) THE ASSESSEE FILED DETAI LED SUBMISSIONS AND CONTESTED THAT NO OBJECTIVE SATISFA CTION WERE RECORDED BY THE ASSESSING OFFICER FOR INVOKING RULE 8D OF THE RULES. THE ASSESSEE ALSO CONTESTED THAT THE INVESTM ENT WAS MADE IN THE SISTER CONCERN FOR HOLDING/CONTROLLING STAKE AND NOT FOR EARNING ANY INCOME FROM OUT OF THE INVESTMENT. THE LEARNED CIT(A) HOWEVER REJECTED THE CONTENTION OF THE ASS ESSEE OBSERVING AS UNDER: 6. I HAVE CONSIDERED THE FACTS OF THE CASE BASIS OF DISALLOWANCE MADE BY THE AO AND SUBMISSIONS OF APPELLANT. AS IT IS CLEAR FROM ASSESSMENT ORDER THAT THE AO HAS ANALYZED THE FACTS AND FIGURES OF THE EXEMPT INCOME EARNED BY APPELLANT EXPENSES CLA IMED BY APPELLANT AGAINST IT AND INVESTMENTS MADE BY APPELL ANT ON SUCH EXEMPT INCOME. THE AO HAS ALSO DISCUSSED THE DECISI ON OF HON'BLE SUPREME COURT IN THE CASE RAJENDRA PRASAD MOODY AND CBDT CIRCULAR NO. 5/2014 DATED 11.02.2014 WHEREIN IT IS CLARIFIED THAT RULE 8D R.W. SECTION 14A OF THE ACT PROVIDES FOR DI SALLOWANCE OF EXPENDITURE EVEN TAXPAYER IN A PARTICULAR CASE HAS NOT EARNED ANY EXEMPT INCOME. TAKING INTO ACCOUNT ALL THESE FACTS AND LEGAL POSITION AO HAS COMPLETED THE DISALLOWANCE U/S 14A AND RULE 8D AT RS 21 05 899/-. THE OBJECTION RAISED BY APPELLA NT THAT AO HAS NOT RECORDED ANY OBJECTIVE SATISFACTION IN REGARD T O THE CORRECTNESS OF CLAIM OF THE ASSESSEE HAS NO FORCE AS RECENTLY IN T HE CASE INDIA BULLS FINANCIAL SERVICES LTD. VS. DCIT 395 ITR 242 HON'B LE JURISDICTIONAL COURT HAS HELD THAT IF THE AO HAS CARRIED ELABORATE ANALYSIS OUT OF FACTS AND THE ISSUE BUT DID NOT EXPRESSLY RECORD HI S DISSATISFACTION WOULD NOT PER SAY JUSTIFY THAT HE WAS NOT SATISFIED OR DID NOT RECORD COGENT REASONS FOR HIS DISSATISFACTION. IT HAS BEEN FURTHER HELD BY HON'BLE COURT TO INSIST THAT THE AO SHOULD PAY SUCH LIP SERVICE REGARDLESS OF SUBSTANTIAL COMPLIANCE WITH A PROVISI ON WOULD IN FACT DESTROY THE MANDATE SECTION 14A OF THE ACT. SO FAR AS THE COMPUTATION OF DISALLOWANCE UNDER 8D RULE OF THE AC T IS CONCERNED HON'BLE COURT HAS FURTHER HELD THAT 'UNDOUBTEDLY T HE LANGUAGE OF SECTION 14A PRESUPPOSES THAT THE AO HAS TO ADDUCE S OME REASONS IF HE IS NOT SATISFIED WITH THE AMOUNT OFFERED BY WAY OF DISALLOWANCE BY THE ASSESSEE. AT THE SAME TIME SECTION 14A (2) AS INDEED RULED 8D (2)(I) LEAVE THE AO EQUALLY WITH NO CHOICE IN TH E MATTER INASMUCH AS THE STATUTE IN BOTH THESE PROVISIONS MANDATES TH AT THE PARTICULAR METHODOLOGY ENACTED SHOULD BE FOLLOWED. IN OTHER WO RDS THE AO IS UNDER A MANDATE TO APPLY THE FORMULAE AS IT WERE UN DER RULE 8D BECAUSE OF SECTION 14A(2). IF IN A GIVEN CASE THER EFORE THE AO IS CONFRONTED WITH A FIGURE WHICH PRIMA FACIE IS NOT IN ACCORD WITH 5 ITA NO.6503/DEL./2017 WHAT SHOULD APPROXIMATELY BE THE FIGURE ON A FAIR W ORKING OUT OF THE PROVISIONS HE IS BUT BOUND TO REJECT IT. IN SUCH C IRCUMSTANCES THE AO ORDINARILY WOULD EXPRESS HIS OPINION BY REJECTING T HE DISALLOWANCE OFFERED AND THEN PROCEED TO WORK OUT THE METHODOLOG Y ENACTED.' THUS THE HON'BLE COURT ALSO HOLDS THAT IF THE AO I S NOT SATISFIED WITH THE AMOUNT OFFERED BY WAY OF DISALLOWANCE BY THE AS SESSEE HE HAS NO CHOICE EXCEPT TO FOLLOW THE PARTICULAR METHODOLO GY ENACTED AS PER PROVISIONS OF 14A(2) R.W. RULE 8D (2) (1) OF IT RUL ES. HON'BLE COURT CLEARLY SAYS THAT THE AO IS UNDER MANDATE TO APPLY THE FORMULA AS PER AFORESAID PROVISIONS IN SUCH CASES. IN THE CASE OF APPELLANT AO WAS NOT SATISFIED WITH THE DISALLOWANCE OF RS. 17 5 00/- MADE BY APPELLANT AGAINST THE EXEMPT INCOME EARNED BY IT. T HE APPELLANT ITSELF IS NOT SURE OF DISALLOWANCE MADE BY IT AS DU RING THE APPELLATE PROCEEDINGS IT HAS WORKED OUT THE DISALLOWANCE AT 2 10 590/- AGAINST THE DISALLOWANCE OF RS. 17 500/- MADE BY IT IN THE COMPUTATION OF INCOME. IN SUCH SITUATION THE AO WA S JUSTIFIED IN COMPUTING THE DISALLOWANCE AS PER RULE 8D OF THE AC T AFTER ANALYZING THE AMOUNTS OF INVESTMENTS MADE BY APPELL ANT EXEMPT INCOME SHOWN AND EXPENSES CLAIMED AGAINST IT BY APP ELLANT. THE AO HAS ALSO APPLIED THE LEGAL PROVISIONS TO THE SIT UATION AND ALSO THE CIRCULAR ISSUED BY THE CBDT NEW DELHI IN THIS REGA RD WHICH IS MANDATORY ON HIS PART. IN VIEW OF THIS I UPHOLD TH E DISALLOWANCE MADE BY AO AT RS.20 88 399/- U/S 14A R.W. RULE 8D O F IT RULES AND DISMISS THE GROUNDS TAKEN BY APPELLANT. 4.2 WE HAVE HEARD THE SUBMISSION OF LEARNED DR WHO APPEARE D THROUGH VIDEO CONFERENCING FACILITY AND ALSO PERUSE D THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE FIND THAT BEFORE T HE LEARNED CIT(A) THE ASSESSEE MAINLY SUBMITTED AS UNDER: (I) THAT THE INVESTMENT HAS BEEN MADE BY THE ASSES SEE IN THE GROUP CONCERNS WITH THE PRIMARY OBJECT OF INVESTMENT IN HOLDING/CONTROLLING STAKE IN THE GROU P CONCERNS AND NOT FOR INCOME OUT OF THE INVESTMENT. (II) THAT THE INVESTMENT WAS MADE OUT OF THE SHAREH OLDERS OWN FUND. (III) THAT ALL THE INVESTMENTS WERE FOR LONG TERM A ND NO DECISION WAS REQUIRED IN MAKING THE INVESTMENT OR DISINVESTMENT ON REGULAR BASIS BECAUSE THOSE 6 ITA NO.6503/DEL./2017 INVESTMENTS WERE STRATEGIC IN NATURE ON LONG TERM BASIS. (IV) THAT THE DIVIDEND INCOME WAS DIRECTLY LINKED WITH DEMAT ACCOUNT AND CREDITED TO THE BANK ACCOUNT OF T HE ASSESSEE COMPANY HENCE NO EXPENDITURE HAS BEEN INCURRED IN RELATING TO THE EXEMPT INCOME THUS THE PRINCIPLE OF APPORTIONMENT EMBEDDED IN SECTION 14A IS NOT APPLICABLE. 4.3 WE FIND THAT THE ISSUE OF THE STRATEGIC INVESTMENT IN GROUP CONCERN HAS ALREADY BEEN ADJUDICATED BY THE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. & ORS. VS. CIT 402 ITR 640 (SC). THE HONBLE HIGH COURT HELD THAT SUCH STRATEGIC INVESTMENT IS ALSO SUBJECT TO THE DISALLO WANCE UNDER SECTION 14A OF THE ACT. THE RELEVANT FINDING OF THE HONBLE SUPREME COURT IS REPRODUCED AS UNDER: 34. HAVING CLARIFIED THE AFORESAID POSITION THE F IRST AND FOREMOST ISSUE THAT FALLS FOR CONSIDERATION IS AS TO WHETHER THE DOMINANT PURPOSE TEST WHICH IS PRESSED INTO SERVICE BY THE ASSESSEES WOULD APPLY WHILE INTERPRETING SECTION 14A OF THE ACT OR WE HAVE TO GO BY THE THEORY OF APPORTIONMENT. WE ARE OF THE OPINION THAT THE DOMINANT PURPOSE FOR WHICH THE INVESTMENT INTO SHARES IS MAD E BY AN ASSESSEE MAY NOT BE RELEVANT. NO DOUBT THE ASSESSE E LIKE MAXOPP INVESTMENT LIMITED MAY HAVE MADE THE INVESTMENT IN ORDER TO GAIN CONTROL OF THE INVESTEE COMPANY. HOWEVER THAT DOES NOT APPEAR TO BE A RELEVANT FACTOR IN DETERMINING THE ISSUE AT HA ND. FACT REMAINS THAT SUCH DIVIDEND INCOME IS NON-TAXABLE. IN THIS S CENARIO IF EXPENDITURE IS INCURRED ON EARNING THE DIVIDEND INC OME THAT MUCH OF THE EXPENDITURE WHICH IS ATTRIBUTABLE TO THE DIVIDE ND INCOME HAS TO BE DISALLOWED AND CANNOT BE TREATED AS BUSINESS EXP ENDITURE. KEEPING THIS OBJECTIVE BEHIND SECTIONL4A OF THE ACT IN MIND THE SAID PROVISION HAS TO BE INTERPRETED PARTICULARLY THE WORD 'IN RELATION TO THE INCOME1 THAT DOES NOT FORM PART OF TOTAL INCOME . CONSIDERED IN THIS HUE THE PRINCIPLE OF APPORTIONMENT OF EXPENSE S COMES INTO PLAY AS THAT IS THE PRINCIPLE WHICH IS ENGRAINED IN SECT ION 14A OF THE ACT. THIS IS SO HELD IN WALFORT SHARE AND STOCK BROKERS P LTD. RELEVANT PASSAGE WHEREOF IS ALREADY REPRODUCED ABOVE FOR TH E SAKE OF 7 ITA NO.6503/DEL./2017 CONTINUITY OF DISCUSSION WE WOULD LIKE TO QUOTE TH E FOLLOWING FEW LINES THEREFROM. 'THE NEXT PHRASE IS 'IN RELATION TO INCOME WHICH D OES NOT FORM PART OF TOTAL INCOME UNDER THE ACT'. IT MEANS THAT IF AN INCOME DOES NOT FORM PART OF TOTAL INCOME THEN THE RELATE D EXPENDITURE IS OUTSIDE THE AMBIT OF THE APPLICABILI TY OF SECTION 14A . XXX XXX XXX THE THEORY OF APPORTIONMENT OF EXPENDITURE BETWEEN TAXABLE AND NON-TAXABLE HAS IN PRINCIPLE BEEN NOW WIDENED UNDER SECTION 14A.' 35. THE DELHI HIGH COURT THEREFORE CORRECTLY OBSE RVED THAT PRIOR TO INTRODUCTION OF SECTION 14A OF THE ACT THE LAW WAS THAT WHEN AN ASSESSEE HAD A COMPOSITE AND INDIVISIBLE BUSINESS W HICH HAD ELEMENTS OF BOTH TAXABLE AND NON-TAXABLE INCOME TH E ENTIRE EXPENDITURE IN RESPECT OF SAID BUSINESS WAS DEDUCTI BLE AND IN SUCH A CASE THE PRINCIPLE OF APPORTIONMENT OF THE EXPEN DITURE RELATING TO THE NON-TAXABLE INCOME DID NOT APPLY. THE PRINCIPLE OF APPORTIONMENT WAS MADE AVAILABLE ONLY WHERE THE BUSINESS WAS DIVI SIBLE. IT IS TO FIND A CURE TO THE AFORESAID PROBLEM THAT THE LEGIS LATURE HAS NOT ONLY INSERTED SECTION 14A BY THE FINANCE (AMENDMENT) ACT 2001 BUT ALSO MADE IT RETROSPECTIVE I.E. 1962 WHEN THE INCOME T AX ACT ITSELF CAME INTO FORCE. THE AFORESAID INTENT WAS EXPRESSED LOUD LY AND CLEARLY IN THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FIN ANCE BILL 2001. WE THUS AGREE WITH THE VIEW TAKEN BY THE DELHI HI GH COURT AND ARE NOT INCLINED TO ACCEPT THE OPINION OF PUNJAB & HARYANA HIGH COURT WHICH WENT BY DOMINANT PURPOSE THEORY. THE AF ORESAID REASONING WOULD BE APPLICABLE IN CASES WHERE SHARES ARE HELD AS INVESTMENT IN THE INVESTEE COMPANY MAY BE FOR THE PURPOSE OF HAVING CONTROLLING INTEREST THEREIN. ON THAT REASON ING APPEALS OF MAXOPP INVESTMENT LIMITED AS WELL AS SIMILAR CASES WHERE SHARES WERE PURCHASED BY THE ASSESSEES TO HAVE CONTROLLING INTEREST IN THE INVESTEE COMPANIES HAVE TO FAIL AND ARE THEREFORE DISMISSED. 4.4 FURTHER WE FIND THAT THE OBJECTION OF THE ASSESSEE ON THE ABSENCE OF DISSATISFACTION FOR INVOKING RULE 8D OF THE RULES HAVE ALREADY BEEN DEALT WITH BY THE LEARNED CIT(A). THE LEARNED CIT(A) HAS REFERRED THE DECISION OF THE HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF INDIA BULLS FINANCIAL SERVICES LTD. VS. DCIT 395 ITR 242 WHEREIN IT HAS HELD THAT IF THE ASSESSING OFFICER HAS 8 ITA NO.6503/DEL./2017 CARRIED OUT ELABORATED ANALYSIS OUT OF THE FACTS AN D THE ISSUE BUT DID NOT EXPRESSLY RECORD HIS DISSATISFACTION WOULD NOT PER SE JUSTIFY THAT HE HAS NOT RECORDED COGENT REASON FOR HIS DISS ATISFACTION. IN OUR OPINION THE LEARNED CIT(A) HAS DEALT WITH ALL THE OBJECTIONS OF THE ASSESSEE THEREFORE WE DO NOT FIND ANY INFIRMI TY IN THE SAME. ACCORDINGLY WE UPHOLD THE FINDINGS OF THE LEARNED CIT(A) ON THE ISSUE IN DISPUTE. THE GROUNDS OF APPEAL OF THE ASSE SSEE ARE ACCORDINGLY DISMISSED. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH MARCH 2021 SD/- SD/- (AMIT SHUKLA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11 TH MARCH 2021. RK/- COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR ITAT NEW DELHI