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Jubilant Biosys Ltd., Plot No. 1A, Sector-16A, Noida-201301 (UP) Vs Income-tax Officer, Coy. Ward 4(1), New Delhi
May, 22nd 2014
                 DELHI BENCH `D', NEW DELHI
       Before Sh. R. S. Syal, AM And Sh. I. C. Sudhir, JM
                 ITA No. 2397/Del/2013 : Asstt. Year : 2009-10
DCIT, Circle-37(1),                Vs Mr. Kanwaljit Singh,
New Delhi                             75, Friends Colony,
                                      New Delhi-110065
(APPELLANT)                           (RESPONDENT)

                 ITA No. 5155/Del/2013 : Asstt. Year : 2009-10
Mr. Kanwaljit Singh,               Vs DCIT, Circle-37(1),
75, Friends Colony,                   New Delhi
New Delhi-110065
(APPELLANT)                            (RESPONDENT)
                Assessee by : Shri Vinod Kumar Bindal
                Revenue by : Shri S. N. Bhatia, DR
Date of Hearing : 15.5.2014        Date of Pronouncement : 19.5.2014

Per R. S. Syal, AM:

     These two cross appeals ­ one by the assessee and other by the
Revenue arise out of the order passed by the CIT(A) on 14.1.2013 in
relation to the assessment year 2009-10.

2.   The assessee is aggrieved against the action of the ld. CIT(A) in
treating a sum of Rs. 56,97,192 towards non-compete fees receivable by
him from Uzind Corporation and offered for taxation as business income
alleging the same as salary income. At the outset, the ld. AR was fair
                                     2                ITA No. 2397 & 5155/Del/2013
                                                                 Mr. Kanwaljit Singh

enough to accept that this issue has been decided by the Hon'ble Delhi
High Court against the assessee in his own case. He submitted that an
SLP has been admitted by the Hon'ble Supreme Court against the
judgment of the Hon'ble Delhi High Court. In view this background of
facts, the ld. AR agreed that his appeal was liable to be dismissed.

3.   Since the Hon'ble Delhi High Court has decided similar issue
against the assessee in the preceding years, respectfully following the
precedent, we uphold the impugned order on this issue.

4.   The first issue raised by the Revenue in its appeal is against the
deletion of addition made by the A.O u/s 14A of the Act.

5.   Briefly stated the facts of the case are that the assessee is a salaried
employee of M/s Uzind Corporation, which is a partnership form
comprising of his daughter and wife, as partners. The assessee showed
income from salary, house property, capital gain, income form other
sources and from business. A survey was carried out in the premises of
M/s Uzind Corporation, which is a general sales agent of M/s
Uzbekistan Airways. The assessee and the partnership firm consisting of
his wife and daughter entered into an agreement dated 15.3.2002 (non-
competent agreement) as per which commission was allowed @ 7%.
The assessee offered non-compete fees of Rs. 1,13,59,600/- as business
income. From the tax audit report, the Assessing Officer observed that
the assessee had made certain investment in the shares/securities
                                     3               ITA No. 2397 & 5155/Del/2013
                                                                Mr. Kanwaljit Singh

yielding exempt income. Applying the provisions of sec. 14A read with
Rule 8D, the Assessing Officer computed disallowance under Rule
8D(2)(iii) at Rs. 79,895/-, being the amount of expenses @ 0.50% of the
average value of investment. The ld. CIT(A) deleted this addition by
observing that there was no expenditure claimed by the assessee.

6.    After considering the rival submissions and perusing the relevant
material on record, it is observed that the business income declared by
the assessee towards receipt of non-compete fees amounting to Rs.
1,13,59,600/- has been taxed by the Assessing Officer under the head
`Salaries' without granting any deduction for certain expenses which
were originally claimed by the assessee. Thus, it can be seen that there is
no business income left with the assessee and consequently there are no
expenses for which any deduction could be allowed under Chapter IV-D
of the Act. Once there is no expenditure claimed as deduction by the
assessee, there can be no question of making any disallowance u/s 14A
because the disallowance under this section pre-supposes the claim for
deduction of expenses. Unless there is a deduction for any expenditure
incurred by the assessee, there cannot be any disallowance u/s 14A. On a
specific query the ld. DR could not point out any claim of deduction by
the assessee for expenses. We, therefore, uphold the impugned order on
this issue.
7.    The other issue in the Revenue's appeal is against the charging of
interest u/s 234B and 234C. As noticed above the assessee offered a sum
                                     4               ITA No. 2397 & 5155/Del/2013
                                                                Mr. Kanwaljit Singh

of Rs. 1.13 crore as business income. The Assessing Officer held that a
sum of Rs. 56,97,192/-, being the non-compete fees declared by the
partnership form was taxable as assessee's income from salary. He,
therefore, made the addition for this sum of Rs. 56.97 lakh. When the
matter came up before the ld. CIT(A), he noticed that the action of the
A.O in making addition of Rs. 56.97 lakh as salary has resulted in
double taxation because the assessee himself declared income from non-
compete fees at Rs. 1.13 crore, which was not excluded by the AO. He,
therefore, directed the Assessing Officer to exclude the said amount
from the total income vide para 5.6 of the impugned order. The Revenue
in its appeal has not challenged this finding of the ld. CIT(A). As regards
the charging of interest u/s 234B and 234C, the ld. CIT(A) held that
such interest was not chargeable because the amount of salary is an
income on which tax is required to be deducted at source. Since, the
assessee was not liable to pay any advance tax on such salary income,
there could be no charging of interest u/s 234B and 234C.

8.   After considering the rival submissions, we find that the ld. AR
has fairly accepted that the addition of Rs. 56.07 lakh, being the non-
compete fees receivable by him from Uzind Corporation should be
assessed as salary income in conformity with the judgment of the
Hon'ble Delhi High Court in assessee's own case. He further submitted
that the SLP against this judgment has been admitted by the Hon'ble
Supreme Court. In such circumstances it is clear that the character of the
                                               5                   ITA No. 2397 & 5155/Del/2013
                                                                              Mr. Kanwaljit Singh

amount of non-compete fees in the hands of the assessee is not final so
far. We, therefore, set aside the impugned order on this issue and remit
the matter to the file of A.O for taking a fresh decision in conformity
with the final position in this regard.

9.      In the result, the appeal of the assessee is dismissed and that of the
Revenue is partly allowed for statistical purposes.

Order pronounced in the open Court on 19/5/2014.

               Sd/-                                                       Sd/-
   (I. C. Sudhir)                                               (R. S. Syal)
JUDICIAL MEMBER                                            ACCOUNTANT MEMBER
Dated: 19/5 /2014
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
                                                                ASSISTANT REGISTRAR

1.     Draft dictated on                            15.5.2014               PS
2.     Draft placed before author                   19.5.2014               PS
3.     Draft proposed & placed before the second                            JM/AM
4.     Draft discussed/approved by Second Member.                           JM/AM
5.     Approved Draft comes to the Sr.PS/PS                                 PS/PS
6.     Kept for pronouncement on                                            PS
7.     File sent to the Bench Clerk                                         PS
8.     Date on which file goes to the AR
9.     Date on which file goes to the Head Clerk.
10.    Date of dispatch of Order.
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