Jindal Stainless Steelway Ltd., Jindal Centre, Range-4, 2- Bhikaji Cama Palace,New Delhi. Vs. Additional CIT, New Delhi.
May, 29th 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH "D" NEW DELHI)
BEFORE SHRI N.K. SAINI AND SHRI I.C. SUDHIR
ITA No. 6167/Del/2012
Assessment Year: 2009-10
Jindal Stainless Steelway Ltd., Vs. Additional CIT,
Jindal Centre, Range-4,
12- Bhikaji Cama Palace, New Delhi.
Appellant by: Shri Amit Goel, CA
Respondent by: Shri Gaurav Dudeja, Sr. DR
Date of hearing : 08.04.2015
Date of pronouncement: 28:05.2015
PER I.C. SUDHIR: JUDICIAL MEMBER
The assessee has questioned first appellate order on the sole ground
that the Learned CIT(Appeals) has erred in confirming the disallowance of
interest of Rs.27,96,190 under sec. 14A made by the Assessing Officer.
2. We have heard and considered the arguments advanced by the parties
in view of orders of the authorities below, material available on record and
the decisions relied upon.
3. The relevant facts are that the assessee company is engaged in the
business of cutting/slitting of HR/CR sheets. During the course of
assessment proceedings, the Assessing Officer observed that the assessee
had earned dividend income of Rs.926 which it claimed exempt under sec.
10 of the Income-tax Act, 1961. In response to show-cause notice issued by
the Assessing Officer regarding the proposed proportionate disallowance
under sec. 14A read with Rule 8D, the assessee submitted that addition
under Rule 8D is warranted only when interest is incurred which is not
attributable to any particular income or receipt. It was submitted that no such
expenditure has been incurred in the case of the assessee, hence, there
cannot be any disallowance under Rule 8D of the Income-tax Rules, 1962.
The Assessing Officer did not agree with the assessee and observed that the
assessee has not maintained separate bank accounts in respect of investment
and other activities. Instead, funds have been used from the common bank
account of the assessee. The Assessing Officer accordingly made
disallowance of Rs.30,09,361 under sec. 14A of the Act read with Rule 8D
of the I.T. Rules. The Learned CIT(Appeals) has upheld the same.
4. In support of the ground, the Learned AR submitted that the dividend
income is Rs.926 only and 0.5% of average income i.e. Rs.2,13,171 was
offered by the assessee as a suo-moto disallowance under Rule 8D. He
contended that during the last assessment year in the assessment framed
under sec. 143(3) of the Act, no such disallowance was made. He referred
page No. 9 of the paper book i.e. audited statement of accounts to support
his contention that the dividend was earned only on the mutual fund of
Rs.14,694. The Learned AR submitted further that as per the decision of
Hon'ble jurisdictional Delhi High Court recently decided on 25.2.2015 in
ITA No. 117/2015 in the case of Joint Investment Pvt. Ltd. Vs. CIT, no
disallowance more than dividend income/exempt income can be made. He
also placed reliance on the following decisions:
1) CIT vs. Holcin India Pvt. Ltd. ITA No. 486 and 299/2014
date of decision 05.09.2014 (Del.)
2) CIT vs. HDFC Bank Ltd. ITA No. 330 of 2012 decision
dated 23.7.2014 (Bombay);
5. The Learned Senior DR on the other hand placed reliance on the
orders of the authorities below.
6. Having gone through the cited decisions and the unrebutted facts of
the present case that the disallowance in question was made for an amount
which was more than dividend income/exempt income earned by the
assessee during the year, we are of the view that the issue is fully covered in
favour of the assessee by the decision of Hon'ble jurisdictional High Court
of Delhi in the case of Joint Investment Pvt. Ltd. vs. CIT (supra). Para 9 of
the said decision is being reproduced hereunder for a ready reference:
"9. In the present case, the A.O. has not firstly disclosed why the
appellant/assessee's claim for attributing Rs.2,97,440 as a
disallowance under sec. 14A had to be rejected. Taikisha says that the
jurisdiction to proceed further and determined amounts is derived
after examination of the accounts and rejection, if any, of the
assessee's claim or explanation. The second aspect is there appears to
have been no scrutiny of the accounts by the A.O. an aspect which is
completely unnoticed by the CIT(A) and the ITAT. The third, and in
the opinion of this court, important anomaly which we cannot be
unmindful is that whereas the entire tax exempt income is
Rs.48,90,000, the disallowance ultimately directed works out to nearly
110% of that sum, i.e., Rs.52,56,197. By no stretch of imagination can
sec. 14A or Rule 8D, we interpreted so as to mean that the entire tax
exempt income is to be disallowed. The window for disallowance is
indicated in sec. 14A, and is only to the extent of disallowing
expenditure "incurred by the assessee in relation to the tax exempt
income". This proportion of portion of tax exempt income surely
cannot swallow the entire amount as has happened in this case."
7. Almost similar are the facts of the present case, hence, respectfully
following the ratios of decision of the Hon'ble Jurisdictional High Court of
Delhi in the above cited case of Joint Investment Pvt. Ltd. vs. CIT (supra),
we set aside the matter to the file of the Assessing Officer to decide the
disallowance in question afresh as per the above cited decision after
affording proper opportunity of being heard to the assessee. The ground is
thus allowed for statistical purposes.
9. In result, the appeal is allowed for statistical purposes.
Decision pronounced in the open court on 28 .05.2015
( N.K. SAINI ) ( I.C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 28 /05/2015
Copy forwarded to:
Draft dictated on computer 25 .05.2015
Draft placed before author 25 .05.2015
Draft proposed & placed before the second
Draft discussed/approved by Second Member.
Approved Draft comes to the Sr.PS/PS
Kept for pronouncement on
File sent to the Bench Clerk
Date on which file goes to the AR
Date on which file goes to the Head Clerk.
Date of dispatch of Order.