DCIT, New Delhi v. M/s Jindal Photo Ltd., New Delhi

ITA 814/DEL/2011 | 2008-2009
Pronouncement Date: 23-09-2011 | Result: Dismissed

Appeal Details

RSA Number 81420114 RSA 2011
Bench Delhi
Appeal Number ITA 814/DEL/2011
Duration Of Justice 7 month(s) 12 day(s)
Appellant DCIT, New Delhi
Respondent M/s Jindal Photo Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 23-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 23-09-2011
Date Of Final Hearing 28-07-2011
Next Hearing Date 28-07-2011
Assessment Year 2008-2009
Appeal Filed On 10-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D DELHI) BEFORE SHRI G.E. VEERABHADRAPPA HONBLE VICE PRESIDENT AND SHRI A.D. JAIN JUDICIAL MEMBER ITA NO. 814(DEL)2011 ASSESSMENT YEAR: 2008-09 THE DY.COMMISSIONER OF INCOME TAX M/S. JIND AL PHOTO LIMITED CIRCLE 4(1) NEW DELHI. V . 11/5-B BASEMENT OPP. TELEPHONE EXCHANGE PUSA ROAD NEW DELHI-05. C.O. NO.91(DEL)2011 (IN ITA NO. 814(DEL)2011) ASSESSMENT YEAR: 2008-09. M/S. JINDAL PHOTO LIMITED THE DY. COMMISSIONER OF INCOME TAX 11/5-B BASEMENT OPP. V. CIRCLE 4( 1) NEW DELHI. TELEPHONE EXCHANGE PUSA ROAD NEW DELHI-05. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI R.S. NEGI SR. DR ASSESSEE BY: SHRI RUPESH SA INI ADV.& SHRI GAURAV JAIN CA ORDER PER A.D. JAIN J.M. THIS IS DEPARTMENTS APPEAL AND THE CROSS OBJECTION S ARE BY THE ASSESSEE. THE DEPARTMENT HAS TAKEN THE FOLLOWING GROUNDS:- ITA NO.814 & CO 91(DEL)2011 2 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND CO NTRARY TO FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 2 29 757/- AND ` 4 04 997/- MADE BY THE AO BY DISALLOWING THE DEDUCT ION U/S 80 IB ON ACCOUNT OF INSURANCE CLAIMED IN RESPECT OF DADRA AN D SAMBHA UNIT. 3. THE LD. CIT(A) IGNORED THE FACT THAT THE DISALLO WANCE UNDER SECTION 14A WAS WORKED OUT BY THE AO IN ACCORDANCE WITH TH E PROVISIONS OF RULE 8D OF INCOME TAX RULES 1962. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING CROSS OBJEC TIONS:- 1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CO MPUTING DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX AC T 1061 (THE ACT) AMOUNTING TO ` 19 43 022/- BY APPLYING PROVISIONS OF RULE 8D OF THE INCOME TAX RULES 1962(THE RULES). 2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NO T RESTRICTING THE DISALLOWANCE UNDER SECTION 14A TO THE AMOUNT OF ` 13 62 488/- SUO MOTO DISALLOWED BY THE APPELLANT IN THE RETURN OF I NCOME. 3. GROUND NO.1 IN THE DEPARTMENTS APPEAL IS GENERA L. 4. GROUND NO.2 CHALLENGES THE DELETION OF THE ADDIT IONS OF ` 2 29 757/- AND ` 4 04 997/- MADE BY THE AO BY DISALLOWING THE DEDUCT ION U/S 80 IB ON ACCOUNT OF INSURANCE CLAIMED IN RESPECT OF DADRA AN D SAMBHA UNIT OF THE ASSESSEE. 5. THE LD. CIT(A) UPHELD THE ACTION OF THE AO FOLL OWING HIS ORDER FOR ASSESSMENT YEAR 2007-08 WHEREIN IT HAD BEEN HELD AS FOLLOWS:- ITA NO.814 & CO 91(DEL)2011 3 5.3 IN THE LIGHT OF THE BINDING DECISIONS OF HON BLE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF SHRI RAM HONDA POWE R EQUIPMENTS (SUPRA) WHICH HAS BEEN FOLLOWED IN A LATER DECISIO N IN THE CASE OF DELHI BRASS & METAL WORKS LTD. (SUPRA) AND IN THE L IGHT OF SEVERAL DECISIONS OF KERALA HIGH COURT WHICH HAS BEEN AFFIR MED BY THE HONBLE SUPREME COURT BY WAY OF DISMISSAL OF SPECIA L LEAVE PETITION AS SO NOTED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF SHRI RAM HONDA POWER EQUIPMENTS (SUPRA) AND IN THE LIGHT OF THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) PANDIAN CHEMICALS LTD.(SUPRA) AND OTHER DECISIONS REFERRED TO ABOVE. IT IS HELD THAT THE AO WAS JUSTIFIED IN EXCLUDING THE INT EREST INCOME PERTAINING TO DADRA AND SAMBHA UNITS FOR THE PURPOS E OF CALCULATION OF DEDUCTION U/S 80 IB OF THE ACT. AS A RESULT G ROUND OF APPEAL NO. 2 IS DISMISSED. 6. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEND ED BEFORE US THAT THE MATTER NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION DATED 22.12.2010 FOR ASSESSMENT YEAR 2007-08 (COPY AT PAGES 152 TO 158 OF THE ASSESSEES PAPER BOOK). 7. THE LEARNED DR ON THE OTHER HAND HAS PLACED ST RONG RELIANCE ON THE IMPUGNED ORDER. 8. IN THIS REGARD WE FIND THAT INDEED THE ISSUE H AS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL VIDE ITS AFO RESAID ORDER DATED 22.12.2010 (AUTHORED BY ONE OF US THE J.M.). TH EREIN IT HAS BEEN HELD AS FOLLOWS:- 11. WE FIND THAT RELIANCE PLACED BY THE CIT(A) O N SPOT KING INDIA LTD.(SUPRA) IS PROPER. IN THAT CASE THE PLEA OF THE ASSESSEE REGARDING CLAIM OF DEDUCTION U/S 80 IB IN RESPECT O F INSURANCE CLAIM RECEIPT WAS ACCEPTED. THE PROVISIONS OF SECTION 80 IA ARE IN PARA ITA NO.814 & CO 91(DEL)2011 4 MATERIA WITH SECTION 80 IB OF THE ACT. SPOT KI NG INDIA LTD. (SUPRA) BEING A DECISION RENDERED BY THE JURISDICTI ONAL HIGH COURT OF DELHI IS AS SUCH SQUARELY APPLICABLE. KHEMKA CO NTAINER LTD. (SUPRA) RELIED ON BY THE AO AGAINST THE ASSESSEE IS A DECISION OF A NON-JUDICIAL HIGH COURT QUA-THE-ASSESSEE AND AS S UCH IT GIVES WAY TO THE CASE OF SPOT KING INDIA LTD. WHICH HAS BE EN RENDERED AS NOTED BY THE JURISDICTIONAL HIGH COURT OF DELHI. ACCORDINGLY GROUND NO.2 RAISED BY THE DEPARTMENT IS REJECTED. 9. THE FACTS FOR THE YEAR UNDER CONSIDERATION BEING NO DIFFERENT FROM THOSE BEFORE THE TRIBUNAL IN THE ASSESSEES CASE FO R ASSESSMENT YEAR 2007-08 WE FIND NO REASON TO DIFFER THEREFROM. AS SUCH F OLLOWING THE AFORESAID TRIBUNAL ORDER IN THE ASSESSEES CASE FOR ASSESSMEN T YEAR 2007-08 GROUND NO.2 RAISED BY THE DEPARTMENT IS REJECTED. 10. NOW. COMING TO GROUND NO.3 THE DEPARTMENT ALLE GES THAT THE CIT(A) HAS ERRED IN RESTRICTING THE ADDITION U/S 14A OF TH E ACT TO ` 19 43 022 AS AGAINST THAT OF ` 31 01 542/- MADE BY THE AO. THIS ISSUE WAS ALSO T HERE BEFORE THE TRIBUNAL IN THE ASSESSEES CASE FOR ASSE SSMENT YEAR 2007-08. ON BEHALF OF THE ASSESSEE IT HAS BEEN CONTENDED THAT RULE 8D OF THE I.T. RULES WAS NOT APPLICABLE FOR THAT YEAR; THAT HOWEVER IN THE YEAR UNDER CONSIDERATION NO SATISFACTION HAS BEEN RECORDED BY THE AO AS TO HOW THE ASSESSEES CALCULATION IS NOT CORRECT; THAT HOWEVER THE AO STILL WENT ON TO APPLY RULE 8D TO THE CASE; THAT THE LD. CIT(A) ALSO APPLIED RULE 8D BUT GAVE ONLY PART RELIEF TO THE ASSESSEE BY REDUCING THE IN TEREST WHEREAS REGARDING ITA NO.814 & CO 91(DEL)2011 5 0.5% OF EXEMPT INVESTMENTS HE APPROVED THE ACTION OF THE AO; AND THAT ONCE RULE 8D CANNOT BE APPLIED THE ASSESSEES WORK ING IS TO BE ACCEPTED. 11. THE LD. DR ON THE OTHER HAND HAS STRONGLY SUP PORTED THE IMPUGNED ORDER IN THIS REGARD ALSO CONTENDING THAT THE LD. CIT(A) HAS EXCLUDED SECURITY TAKEN FROM CUSTOMERS . 12. THE LD. CIT(A) IT IS SEEN RESTRICTED THE DISA LLOWANCE U/S 14A TO ` 19 43 022/- CALCULATING THE DISALLOWANCE OF EXPEND ITURE IN TERMS OF SECTION 14A READ WITH RULE 8D OF THE RULES AS FOLLOWS:- ` A) DIRECT EXPENSES ATTRIBUTABLE TO EARNING OF EXEMPT INCOME: NIL B) AVERAGE EXEMPT INVESTMENTS 37 82 57 180/- C) AVERAGE ASSETS 157 64 90 333/- D) INTEREST PAYMENTS MADE BY THE ASSESSEE 2 15 625/- E) INTEREST DISALLOWED: (D) X (B)/(C) = 51 736/- F) 0.5% OF EXEMPT INVESTMENTS = 18 91 286/- TOTAL DISALLOWANCE U/S 14A [ (E) + (F) ] = 1 9 43 022/-. 13. THE TRIBUNAL (SUPRA) FOR ASSESSMENT YEAR 2007- 08 HAD HELD AS FOLLOWS:- ITA NO.814 & CO 91(DEL)2011 6 17. WE HAVE HEARD THE PARTIES ON THIS ISSUE AND H AVE PERUSED THE MATERIAL ON RECORD. DURING THE YEAR THE ASSESSEE HAD EARNED EXEMPT DIVIDEND INCOME OF ` 17 97 010/- IN RESPECT OF INVESTMENT MADE IN MUTUAL FUNDS. IN THE RETURN OF INCOME FILED A SU O MOTO DISALLOWANCE OF EXPENSES TO THE TUNE OF ` 1 73 038/- HAD BEEN MADE BY THE ASSESSEE U/S 14A OF THE ACT. IN THE ASSESSMENT ORDER THE AO MADE A DISALLOWANCE OF ` 32 18 475/- BY APPLYING THE METHOD PROVIDED IN RULE 8D OF THE I.T. RULES 1962. THIS WAS DONE WITHOUT POINTING OUT ANY INACCURACY IN THE METHOD OF APPORTIONMENT OR ALLOCA TION OF EXPENSES AS ADOPTED BY THE ASSESSEE. ALL THROUGH THE ASS ESSEE WAS MAINTAINED THAT THE ASSESSEE WAS DURING THE YEAR C ARRYING ON MANUFACTURING ACTIVITIES AT ITS MANUFACTURING UNITS AT SEVERAL PLACES. ITS HEAD OFFICE WAS AT DELHI. THE ASSESSEE HAD M AINTAINED SEPARATE BOOKS OF ACCOUNT FOR EACH UNIT. COMMON EXPENSES I NCURRED AT THE HEAD OFFICE AND THE BRANCHES WERE ATTRIBUTED TO ALL THE UNITS INCLUDING THE HEAD OFFICE. INVESTMENT IN MUTUAL FUNDS WHICH GAVE RISE TO EXEMPT DIVIDEND INCOME WAS DONE THROUGH THE HEAD O FFICE. IT WAS THE CASE OF THE ASSESSEE THAT TO EARN SUCH DIVIDEND INC OME NO DIRECT EXPENDITURE WAS REQUIRED AND NO EXPENSES WERE INCUR RED TO MAKE INVESTMENT OF SURPLUS AMOUNTS IN MUTUAL FUNDS. THE SUO MOTO DISALLOWANCE HAD HOWEVER BEEN MADE BY THE ASSESSE E KEEPING IN CONSIDERATION THE PROVISIONS OF SECTION 14A OF THE ACT. 18. NOW AS PER SECTION 14A(2) OF THE ACT IF THE AO HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE IS NOT SATISFIED W ITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE ASSESSEE S TOTAL INCOME UNDER THE ACT THE AO SHALL DETERMINE THE AMOUNT IN CURRED IN RELATION TO SUCH INCOME IN ACCORDANCE WITH SUCH METHOD AS M AY BE PRESCRIBED I.E. UNDER RULE 8D OF THE I.T. RULES. HOWEVER IN THE PRESENT CASE THE ASSESSMENT ORDER DOES NOT EVINCE ANY SUCH SATISFACTION OF THE AO REGARDING THE CORRECTNESS O F THE CLAIM OF THE ASSESSEE. AS SUCH RULE 8D OF THE RULES WAS NOT A PPROPRIATELY APPLIED BY THE AO AS CORRECTLY HELD BY THE CIT(A). IT HAS NOT BEEN SHOWN BY THE AO THAT ANY EXPENDITURE HAD BEEN INCUR RED BY THE ASSESSEE FOR EARNING ITS DIVIDEND INCOME. MERELY AN AD HOC DISALLOWANCE WAS MADE. THE ONUS WAS ON THE AO TO E STABLISH ANY SUCH EXPENDITURE . THIS ONUS HAS NOT BEEN DISCHAR GED. IN CIT V. HERO CYCLES (P&H) 323 ITR 518 UNDER SIMILAR CIRCU MSTANCES IT ITA NO.814 & CO 91(DEL)2011 7 WAS HELD THAT THE DISALLOWANCE U/S 14A OF THE ACT R EQUIRES A CLEAR FINDING OF INCURRING OF EXPENDITURE AND THAT NO DI SALLOWANCE CAN BE MADE ON THE BASIS OF PRESUMPTIONS IN ACIT V. EICHE R LTD. 101 TTJ (DEL)369 THAT IT WAS HELD THAT THE BURDEN IS ON TH E AO TO ESTABLISH NEXUS OF EXPENSES INCURRED WITH THE EARNING OF EXEM PT INCOME BEFORE MAKING ANY DISALLOWANCE U/S 14A OF THE ACT. IN MA RUTI UDYOG V. DCIT 92 ITD 119(DEL) IT HAS BEEN HELD THAT BEFORE MAKING ANY DISALLOWANCE U/S 14A OF THE ACT THE ONUS TO ESTABL ISH THE NEXUS OF THE SAME WITH THE EXEMPT INCOME IS ON THE REVENUE. IN WIMCO SEEDLINGS LIMITED V. DCIT 107 ITD 267 (DEL) (TM) IT HAS BEE N HELD THAT THERE CAN BE NO PRESUMPTION THAT THE ASSESSEE MUST HAVE I NCURRED EXPENDITURE TO EARN TAX FREE INCOME. SIMILAR ARE THE DECISIONS IN: 1. PUNJAB NATIONAL BANK V. DCIT 103 TTJ 908(DEL); 2. VIDYUT INVESTMENT LTD. 10 SOT 284(DEL); AND 3. D.J. MEHTA V. ITO 290 ITR 238(MUM.)(AT). 19. IN VIEW OF THE ABOVE FINDING NO ERROR WIT H THE ORDER OF THE CIT(A) ON THE POINT AT ISSUE THE SAME IS HEREBY CO NFIRMED. GROUND NO.3 IS THUS REJECTED. 14. IN THE YEAR UNDER CONSIDERATION IT IS SEEN THA T IT IS NOT INCORRECT WHEN THE ASSESSEE CONTENDS THAT NO SATISFACTION HAS BEEN RECORDED BY THE AO REGARDING THE ASSESSEES CALCULATION BEING INCORREC T. EVEN SO RULE 8D OF THE RULES HAS BEEN APPLIED. THIS IN OUR OPINION IS NOT CORRECT. SUCH SATISFACTION OF THE AO IS A PRE-REQUISITE TO INVOKE THE PROVISIONS OF RULE 8D OF THE RULES. THE LD. CIT(A) THEREFORE ERRED I N PARTIALLY APPROVING THE ACTION OF THE AO. ITA NO.814 & CO 91(DEL)2011 8 15. THEREFORE THE GRIEVANCE OF THE DEPARTMENT IN T HIS REGARD BY WAY OF GROUND NO.2 IS UNJUSTIFIED AND IS REJECTED WHEREA S THE CROSS OBJECTIONS RAISED BY THE ASSESSEE ARE JUSTIFIED AND ACCEPTED A S SUCH. 16. IN THE RESULT THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.09.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 23.09.2011. *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR