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Deltronic India Ltd. E 3, Sector 59 Noida 201 301 Vs. DCIT, Circle 10(1) New Delhi
November, 13th 2014
                   DELHI BENCHES : "B" NEW DELHI

                     AND SHRI C.M.GARG, J.M.

                              ITA No: 5264/Del/2013
                                  AY : - 2010-11

Deltronic India Ltd.                 Vs.   DCIT, Circle 10(1)
E 3, Sector 59                             New Delhi
Noida 201 301


(Appellant)                                        (Respondent)

                         Appellant by : Shri K.Sampath, Adv.
                       Respondent by: Smt.Parwinder Kaur, Sr. D.R.



      This is an appeal filed by the assessee directed against the order dated
29.7.2013 of Ld.CIT(Appeals)-XIII, New Delhi pertaining to the AY 2010-11
on the following ground.

"On the facts and in the circumstances of the case and in law the authorities
below erred in invoking provisions of section 14A of the Act and making an
addition of Rs.6,90,285/-.     The action being arbitrary, erroneous and
untenable must be quashed with directions for relief."

2.    We have heard Shri K.Sampath, the Ld.Counsel for the assessee and
Smt.Parwinder Kaur, the Ld.Sr.D.R. on behalf of the Revenue.

3.    After hearing rival contentions, we find that the undisputed fact is
that the assessee during the year does not have any income which is exempt
from tax. As per the proposition laid down by the Jurisdictional High Court
in the case of M/s Holcim India P.Ltd. in ITA no.486/2014 and ITA
no.299/2014 vide judgement dated 05th September,2014, Sec.14A cannot be

                                 ITA No. 5264/Del/2013
                                       AY 2010-11
                             M/s Deltronic India Ltd., Noida

invoked. The Hon'ble Jurisdictional Court at para nos. 14, 15 and 16 held
as follows.

"14.       On the issue whether the respondent-assessee could have earned
dividend income and even if no dividend income was earned, yet Section 14A
can be invoked and disallowance of expenditure can be made, there are three
decisions of the different High Courts directly on the issue and against the
appellant-Revenue. No contrary decision of a High Court has been shown to
us. The Punjab and Haryana High Court in Commissioner of Income Tax,
Faridabad vs. M/s Lakhani Marketing Incl,, ITA No. 970/2008, decided on
2.4.2014, made reference to two earlier decisions of the same Court in CIT vs.
Hero Cycles Ltd. (2010) 232 ITR 518 and CIT vs. Winsome Textile Industries
Ltd.(2009) 319 ITR 204 to hold that Section 14A cannot be invoked when no
exempt income was earned. The second decision is of the Gujarat High Court
in CIT-I vs. Corrtech Energy (P.) Ltd. [2014] 223 Taxmann 130 (Guj.). The third
decision is of the Allahabad High Court in Income Tax Appeal No. 88 of 2014,
Commissioner of Income Tax (Ii) Kanpur, Vs. M/s. Shivam Motors (P) Ltd.
decided on 05.05.2014. In the said decision it has been held:

"As regards the second question, Section 14A of the Act provides that for the
purposes of computing the total income under the Chapter, no deduction shall
be allowed in respect of expenditure incurred by the assessee in relation to
income which does not form part of the total income under the Act. Hence,
what Section 14A provides is that if there is any income which does not form
part of the income under the Act, the expenditure which is incurred for earning
the income is not an allowable deduction. For the year in question, the finding
of fact is that the assessee had not earned any tax free income. Hence, in the
absence of any tax free income, the corresponding expenditure could not be
worked out for disallowance. The view of the CIT(A), which has been affirmed
by the Tribunal, hence does not give rise to any substantial question of law.
Hence, the deletion of the disallowance of Rs.2,03,752/- - made by the
Assessing Officer was in order.".

15. Income exempt under Section 10 in a particular assessment year, may not
have been exempt earlier and can become taxable in future years. Further,
whether income earned in a subsequent year would or would not be taxable,
may depend upon the nature of transaction entered into in the subsequent
assessment year. For example, long term capital gain on sale of shares is
presently not taxable where security transaction tax has been paid, but a
private sale of shares in an off market transaction attracts capital gains tax. It
is an undisputed position that respondent assessee is an investment company
and had invested by purchasing a substantial number of shares and thereby

                                ITA No. 5264/Del/2013
                                      AY 2010-11
                            M/s Deltronic India Ltd., Noida

securing right to management. Possibility of sale of shares by private
placement etc. cannot be ruled out and is not an improbability. Dividend
mayor may not be declared. Dividend is declared by the company and strictly
in legal sense, a shareholder has no control and cannot insist on payment of
dividend. When declared, it is subjected to dividend distribution tax.

16.      What is also noticeable is that the entire or whole expenditure has
been disallowed as if there was no expenditure incurred by the respondent-
assessee for conducting business. The CIT(A) has positively held that the
business was set up and had commenced. The said finding is accepted. The
respondent-assessee, therefore, had to incur expenditure for the business in
the form of investment in shares of cement companies and to further expand
and consolidate their business. Expenditure had to be also incurred to protect
the investment made. The genuineness of the said expenditure and the fact
that it was incurred for business activities was not doubted by the AO and
has also not been doubted by the CIT(A)."

3.1.   Respectfully following the same, we allow this appeal of the assessee.

4.     In the result the appeal of the assessee is allowed.

       Order pronounced in the Open Court on 11th November,2014.

              Sd/-                                            Sd/-

       (C.M. GARG)                                     (J.SUDHAKAR REDDY)
     JUDICIAL MEMBER                                  ACCOUNTANT MEMBER

Dated: the 11th November, ,2014


                              ITA No. 5264/Del/2013
                                    AY 2010-11
                          M/s Deltronic India Ltd., Noida

Copy of the Order forwarded to:

 1.    Appellant;
 6.Guard File

                                                             By Order

                                                            Asst. Registrar

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