Nalwa Sons Investments Ltd., Hissar v. DCIT, Circle- 18(1), New Delhi

ITA 7807/DEL/2017 | 2012-2013
Pronouncement Date: 17-03-2021 | Result: Allowed

Appeal Details

RSA Number 780720114 RSA 2017
Assessee PAN AAACJ2734R
Bench Delhi
Appeal Number ITA 7807/DEL/2017
Duration Of Justice 3 year(s) 2 month(s) 18 day(s)
Appellant Nalwa Sons Investments Ltd., Hissar
Respondent DCIT, Circle- 18(1), New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 17-03-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 17-03-2021
Assessment Year 2012-2013
Appeal Filed On 28-12-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI AMIT SHUKLA JUDICIAL MEMBER & SHRI O.P. KANT ACCOUNTANT MEMBER I.T.A. NO.7807/DEL/2017 ASSESSMENT YEAR 2012-13 NALWA SONS INVESTMENT LTD. O.P. JINDAL MARG HISAR HARYANA. V. DCIT CIRCLE-18(1) NEW DELHI. TAN/PAN: AAACJ 2734R (APPELLANT) (RESPONDENT) ITA NO.420/DEL/2018 ASSESSMENT YEAR 2012-13 ACIT CIRCLE-17(2) NEW DELHI. V. NALWA SONS INVESTMENT LTD. O.P. JINDAL MARG HISAR HARYANA. TAN/PAN: AAACJ 2734R (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI ASHWANI KUMAR CA DEPARTMENT BY: MS. RINKU SINGH SR.D.R. DATE OF HEARING: 02 03 2021 DATE OF PRONOUNCEMENT: 17 03 2021 O R D E R PER AMIT SHUKLA J.M.: THE AFORESAID CROSS APPEALS HAVE BEEN FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST THE IMPU GNED ORDER DATED 13.10.2017 PASSED BY COMMISSIONER OF INCOME T AX (APPEALS)-XXXIII NEW DELHI FOR THE QUANTUM OF ASS ESSMENT PASSED U/S.143(3) FOR THE ASSESSMENT YEAR 2012-13. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. I.T.AS. NO.7807/DEL/2017 & 420/DEL/2018 2 WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD.CIT(A) IS LEGALLY JUSTIFIED IN DELETING RS. 52 4 1 459/- ON ACCOUNT ACCRUED INTEREST ON ADVANCES TO M/S NALWA M ETAL ALLOYS LIMITED M/S GAGAN TRADING COMPANY LIMITED A ND M/S JSW STEEL LIMITED ON THE BASIS OF THE DECISION OF H IS PREDECESSOR ON IDENTICAL ISSUE IN THE ASSESSEES OW N CASE BY IGNORING THE FACT THAT PRINCIPLE OF RES-JUDICATA IS NOT APPLICABLE TO INCOME TAX PROCEEDINGS AS EACH ASSESSMENT YEAR I S A SEPARATE YEAR? 2. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CAS E THE LD.CIT(A) IS LEGALLY JUSTIFIED IN ALLOWING APPEAL O F THE ASSESSEE BY IGNORING A FACT THAT SECTION 145 OF THE INCOME TAX ACT 1961 (THE ACT) IS MANDATORY FOR EVERY ASSESSEE PERMITS USE OF ONE TYPE OF ACCOUNTING SYSTEM AND DOES NOT P ERMIT HYBRID ACCOUNTING SYSTEM IN A PARTICULAR YEAR? 3. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CAS E THE LD. CIT (A) IS LEGALLY JUSTIFIED IN DELETING THE AD DITION OF RS. 53 56 151/- ON ACCOUNT OF DISALLOWANCE U/S 14 A OF THE ACT MADE WHILE CALCULATING BOOK PROFIT U/S 115JB OF THE ACT BY IGNORING CLAUSES TO EXPLANATION 1 TO SECTION 115JB( 2) OF THE ACT INTRODUCED BY FINANCE ACT 2006 IS APPLICABLE TO THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION? 2. AT THE OUTSET IT WAS POINTED OUT THAT THE TAX E FFECT ON THE ISSUE RAISED WITH REVENUES APPEAL IS MUCH BELOW TH E PRESCRIBED MONETARY LIMIT OF RS.50 LACS IN VIEW OF THE CBDT CIRCULAR NO. 17/2019 DATED 08.08.2019. FURTHER CBDT VIDE CLARIFICATION DATED 20.08.2019 HAS CLARIFIED THAT T HE AFORESAID CIRCULAR WILL APPLY TO ALL PENDING APPEALS ALSO. AC CORDINGLY THE I.T.AS. NO.7807/DEL/2017 & 420/DEL/2018 3 APPEAL OF THE REVENUE IS DISMISSED AS NON MAINTAINA BLE AS THE TAX EFFECT IS BELOW RS.50 LAKHS. THUS THE APPEAL F ILED BY THE REVENUE IS DISMISSED. 3. IN ASSESSEES APPEAL THE ONLY GROUND RAISED BY T HE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF RS.53 56 151/- INCURRED IN RELATION TO EARNING TAX FREE INCOME BY INVOKING THE PROVISION OF SECTION 14A READ WITH RULE 8D. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS EAR NED DIVIDEND INCOME OF RS.11 04 41 092/- WHICH WAS CLAI MED AS EXEMPT INCOME U/S.10(34). IN RESPONSE TO THE SHOW C AUSE NOTICE THE ASSESSEE SUBMITTED THAT IT HAS SUO MOTU DISALLOWED RS.33 99 679/- U/S.14A OUT OF EXPENDITURE IN ITS CO MPUTATION OF INCOME. IT WAS FURTHER SUBMITTED THAT THESE INVE STMENTS WERE EXISTING SINCE 1985 AND NO BORROWED FUNDS WERE UTIL IZED FOR MAKING SUCH INVESTMENTS. FURTHER NO ONE TO ONE OF CORRESPONDENCE CAN BE ARRIVED BETWEEN INCOME AND TH E EXPENDITURE INCURRED FOR THE PURPOSE OF SECTION 14A . HOWEVER LD. ASSESSING OFFICER HELD THAT EXPENDITURE INCURRE D BY THE ASSESSEE TOWARDS EXEMPT INCOME WHETHER DIRECT INCOM E OR INDIRECT HAS TO BE DISALLOWED IN TERMS OF SECTION 1 4A READ WITH RULE 8D WHICH HAS PRESCRIBED THE METHOD OF DETERMIN ING THE AMOUNT OF EXPENDITURE TO BE DISALLOWED U/S.14A. SIN CE THERE WAS NO EXPENDITURE ATTRIBUTABLE TO INTEREST ASSESS ING OFFICER MADE DISALLOWANCE OF INDIRECT EXPENSES UNDER RULE 8 D (2)(III) WHICH WORKED OUT AT RS. 87 55 830/-; AND AFTER DEDU CTING THE AMOUNT SUO MOTU DISALLOWED AT RS.33 99 679/- HE FINALLY MADE THE ADDITION OF RS.53 56 151/-. I.T.AS. NO.7807/DEL/2017 & 420/DEL/2018 4 5. BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED TH AT ASSESSING OFFICER HAS NOT RECORDED HIS SATISFACTION HAVING REGARD TO THE ACCOUNT MAINTAINED BY THE ASSESSEE AN D THE CORRECTNESS OF THE CLAIM AND THE EXPENSES INCURRED TOWARDS EXEMPT INCOME. IT WAS FURTHER SUBMITTED THAT THE AS SESSEE MADE DISALLOWANCE U/S.14A AT RS.33 99 679/- ON PROP ORTIONATE BASIS COMPUTED ON THE PROPORTION OF PERSONNEL AND ADMINISTRATIVE EXPENSES RELATABLE TO EARNING OF EXE MPT INCOME. HOWEVER THE LD. CIT (A) HELD THAT NO SEPARATE AMOU NT OF EXPENSES RELATABLE TO EARNING OF EXEMPT INCOME HAS BEEN MAINTAINED BY THE ASSESSEE. FURTHER ASSESSEE HAS F AILED TO EXPLAIN HOW THE EXPENSE HAS BEEN DISALLOWED ON PROP ORTIONATE BASIS. ACCORDINGLY HE CONFIRMED THE SAID DISALLOWA NCE. 6. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THIS TRIBUNAL IN ASSESSEES OWN CASE RIGHT FROM THE ASSESSMENT YEARS 2005-06 TO 2011-12 HAD CONSIDERED SIMILAR ISS UE OF DISALLOWANCE MADE BY THE ASSESSING OFFICER WHICH HA S BEEN DELETED. HE DREW OUR ATTENTION TO PARAGRAPHS 7 AND 8 OF ITAT ORDER DATED 16.04.2018. APART FROM THAT HE SUBMITT ED THAT NO SATISFACTION HAS BEEN RECORDED BY THE ASSESSING OFF ICER AFTER THE ASSESSEES EXPLANATION AND THEREFORE NO DISALLOWA NCE SHOULD HAVE BEEN MADE BY THE ASSESSING OFFICER BY INVOKING RULE 8 D. 7. ON THE OTHER HAND LD. DR SUBMITTED THAT BEFORE THE ASSESSING OFFICER THE ASSESSEE COULD NOT GIVE THE WORKING IN RESPECT OF SUO MOTU DISALLOWANCE AND THEREFORE IT CANNOT BE SAID THAT ONUS CAST UPON THE ASSESSEE STANDS DISCHA RGE AND I.T.AS. NO.7807/DEL/2017 & 420/DEL/2018 5 ASSESSING OFFICER THEN HAS NO OPTION BUT TO COMPUTE THE DISALLOWANCE UNDER THE PRESCRIBED METHOD PROVIDED I N RULE 8D. EVEN THE LD. CIT (A) HAS NOTED THAT ASSESSEE HAS FA ILED TO MAINTAIN SEPARATE ACCOUNT AND THE BASIS FOR PROPORT IONATE DISALLOWANCE. ACCORDINGLY ASSESSING OFFICER WAS JU STIFIED IN MAKING THE DISALLOWANCE UNDER RULE 8D (2)(III). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PER USED THE RELEVANT MATERIAL PLACED ON RECORD. IT IS AN ADMITT ED FACT THAT ASSESSEE HAS EARNED DIVIDEND INCOME ON THE INVESTME NT WHICH WAS MADE IN MUCH EARLIER YEARS. THE ASSESSEE HAD MA DE SUO MOTU DISALLOWANCE OF RS.33 99 679/- ON PROPORTIONATE BAS IS BY TAKING PROPORTION OF PERSONNEL AND ADMINISTRATIVE E XPENSES WHICH CAN HELD TO BE RELATABLE FOR EARNING OF THE E XEMPT INCOME. ADMITTEDLY NO INTEREST EXPENDITURE IS ATTRIBUTABLE FOR EARNING OF EXEMPT INCOME. THE ONLY DISPUTE IS WITH REGARD TO I NDIRECT EXPENDITURE UNDER RULE 8D (2)(III). ONCE THE INVEST MENT HAS BEEN MADE IN THE EARLIER YEARS AND ONLY IF THE DIVI DEND AMOUNT HAS BEEN CREDITED THEN THE ONLY RATIONAL BASIS AT THE MOST COULD BE THE PROPORTION OF SALARY AND ADMINISTRATIVE EXPE NSES. THE ASSESSING OFFICER THEREAFTER HAVING REGARD TO THE A CCOUNTS MAINTAINED BY THE ASSESSEE AND THE NATURE OF EXPENS ES INCURRED WAS REQUIRED TO RECORD HIS SATISFACTION THAT EXPEND ITURE CLAIMED BY THE ASSESSEE FOR EARNING OF EXEMPT INCOME IS INC ORRECT OR THE EXPENSE DISALLOWED BY THE ASSESSEE IS NOT REASONABL E. IT IS ONLY AFTER RECORDING OF SUCH SATISFACTION THAT ASSESSING OFFICER CAN PROCEED TO MAKE A DISALLOWANCE UNDER THE PRESCRIBED METHOD OF RULE 8D AND THIS IS THE MANDATE OF SECTION 14A(2). HERE IN THIS CASE THE ASSESSING OFFICER HAS MECHANICALLY APPLIE D RULE 8D BY I.T.AS. NO.7807/DEL/2017 & 420/DEL/2018 6 STATING THAT THE EXPENDITURE INCURRED BY THE ASSESS EE TOWARDS EXEMPT INCOME WHETHER DIRECT OR INDIRECT HAS TO BE DISALLOWED IN VIEW OF METHOD PROVIDED UNDER RULE 8D. THERE IS NO SPECIFIC SATISFACTION OF ASSESSING OFFICER AS TO HOW THE CLA IM MADE BY THE ASSESSEE IS NOT TENABLE HAVING REGARD TO THE NATURE OF ACCOUNT MAINTAINED BY THE ASSESSEE AND THE NATURE OF EXPEND ITURE DEBITED IN THE P&L ACCOUNT ESPECIALLY WHEN THE DIV IDEND HAS COME FROM OLD INVESTMENTS AND NOT FRESH INVESTMENT. EXACTLY ON THE SAME REASONING THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ALL THE EARLIER YEARS RIGHT FROM ASSESSMENT YEARS 2005- 06 TO 2011- 12 HAS DELETED THE DISALLOWANCE MADE UNDER RULE 8D( 2)(III). THUS RESPECTFULLY FOLLOWING THE PRECEDENT IN ASSES SEES OWN CASE FOR THE EARLIER YEARS WE DO NOT FIND ANY REAS ON TO SUSTAIN THE DISALLOWANCE WHICH HAS BEEN MADE BY THE ASSESSI NG OFFICER BY MECHANICALLY APPLYING RULE 8D. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MARCH 2021. SD/- SD/- [O.P. KANT] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17 TH MARCH 2021 PKK: