HOLTEC CONSULTING PVT. LTD.,NEW DELHI vs. ADDL. CIT, SPECIAL RANGE - 4, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “C” : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA RAGHUNATH KAMBLE, JUDICIAL MEMBER ITA No.5891/Del./2018 Assessment Year 2014-15 M/s. Holtec Consulting The Addl. CIT, Pvt. Ltd., 01-0103, Special Range-4, C-Block, Imperial Tower, vs., Community Centre, Central Revenue Building, Naraina Vihar, I.P. Estate, New Delhi – 110 028. PAN AAACH0031M New Delhi – 110 002. (Appellant) (Respondent) For Assessee : Shri Atul Ninawat, C.A. For Revenue : Shri Kumar Padmapani Bora, Sr. DR Date of Hearing : 18.11.2021 Date of Pronouncement : 13.01.2022 ORDER PER R.K. PANDA, A.M.

This appeal filed by the assessee is directed against the order dated 30.07.2018 of the Ld. CIT(A)-35, New Delhi, relating to the A.Y. 2014-15.

2. The grounds raised by the assessee are as under :

2 ITA.No.5891/Del./2018 M/s. Holtec Consulting India Pvt. Ltd., New Delhi. “1. That on the facts and circumstances of the case and law on the point, the assessment order passed by the Learned Assessing Officer (‘Ld. A.O.’) and upheld by Ld. Commissioner of Income Tax Appeals-35 (‘Ld. CIT(A)’) is bad in law.

1.1. That on the facts and circumstances of the case and law on the point, the Ld.CIT(A) has erred in upholding the disallowance of Rs.1,03,35,000/- made by Ld. AO under Section 14A of Income Tax Act, 1961 (hereinafter referred to as "Act") read with Rule 8D of the Income Tax Rules, 1962 (hereinafter referred to as "Rules") on account of expenditure incurred for earning dividend or other exempt income.

1.2 That the Ld. CIT(A) has erred in facts and in law in confirming the calculation made by Ld. AO without appreciating that investments which did not yield any exempt income were not required to be taken into consideration for purposes of computing the 3 ITA.No.5891/Del./2018 M/s. Holtec Consulting India Pvt. Ltd., New Delhi. average value of investment under Rule 8D(2)(iii) of the Rules, for the purposes of making disallowance under section 14A of the Act.

1.3 That on the facts and circumstances of the case and law on the point, the Hon'ble CIT(A) has also erred in adopting and relying upon generic hypothesis in respect of the aforesaid issue of disallowance without correlating it with the facts of the case of the appellant.

1.4 That on the facts and circumstances of the case and law on the point, Hon'ble CIT(A) has erred in law by passing a general and non-speaking order and disregarded detailed submission and arguments placed on record by the appellant company.

2. The above grounds are without prejudice to each other.

3. The Appellant craves to add to, alter, modify, substantiate, delete and/or to rescind all or any of 4 ITA.No.5891/Del./2018 M/s. Holtec Consulting India Pvt. Ltd., New Delhi. the grounds of appeal on or before the final hearing, if necessity so arises”.

Exempt Income Section Amount Dividend 10(34) & 10(35) Rs. 43,67,708 Profit share from LLP 10(2 A) Rs. 4,62,00,217 2.1. From the perusal of the balance sheet of the assessee company, the A.O. noted that the company has made investments to the tune of Rs.213,66,97,411/- for earning exempt income. From the perusal of the computation of total income filed by the assessee, he noted that an amount of Rs.79,880/- was disallowed u/s 14A of the Income Tax Act, 1961. Since the amount disallowed by 5 ITA.No.5891/Del./2018 M/s. Holtec Consulting India Pvt. Ltd., New Delhi. the assessee was not commensurate to the total investment made by the assessee for earning the exempt income earned during the year, the A.O. asked the assessee to explain as to why disallowance under section 14A read with Rule 8D should not be made. Rejecting the various explanations given by the assessee and distinguishing the various decisions cited before him, the A.O. made addition of Rs.1,03,35,000/- to the total income of the assessee under section 14A read with Rule 8D of the I.T. Rules.

2.2. In appeal, the Ld. CIT(A) upheld the action of the A.O. by observing as under :

“4.4.3. A perusal of the balance sheet of the appellant suggests that as on 31/03/2014, an amount of Rs.1,82,46,21,506/- was invested in two LLPs. The appellant has earned exempt income from these two LLPs amounting to Rs.4,62,09,397/- which have been claimed exempt u/s 10(2A). The AO worked out the disallowance u/s. 14A r.w. Rule 8D at Rs.l,04,14,880/-and

6 ITA.No.5891/Del./2018 M/s. Holtec Consulting India Pvt. Ltd., New Delhi. after reducing the suo-moto disallowance done by the appellant of Rs.79,880/-, the AO added Rs.1,03,35,000/- to the income of the appellant. The AO has recorded his satisfaction that the appellant had not correctly worked out the expenses attributable to the earning of exempt income and has held that Rule 8D of I.T. Rule 1962 is squarely applicable in this case. Since, the Appellant Company could not justify the method adopted by it for determination of disallowance u/s. 14A, the AO correctly held that the method provided under Rule 8D of I.T. Rule, 1962 is applicable in this case. In view of the decision of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT, New Delhi (civil Appeal nos. 104-109 of 2015) dated 12.02.2018, the addition u/s. 14A r.w. Rule 8D is upheld. The working of disallowance u/s 14A rw Rule 8D at Rs.1,03,35,000/- is upheld. I find no reason to 7 ITA.No.5891/Del./2018 M/s. Holtec Consulting India Pvt. Ltd., New Delhi. interfere with the AO's order on this issue.

Therefore, Ground no. 3 is dismissed.”

3.1. Learned Counsel for the Assessee filed the following chart and submitted that neither the A.O. nor the Ld. CIT(A) have analyzed the nature of investments as to whether the investment is yielding exempt income, taxable income or no income.

Average Income earned during % of total Particulars Investment the year investment amount Taxable Exempt Investment in Group 1,76,81,28,517 85.47% - 462,00,217 Entities Investment in Equity 5,95,690 0.03% - 38,585 Shares Investment in Dividend 34,319 0.002% - 42,43,984 Reinvestment- MF’s Investment in PMS 3,42,17,314 1.40% 71,52,333 85,139 Investment in Mutual 25,00,00,000 11.70% - - Funds - Debt Investment in Mutual 3,00,00,000 1.40% - “ Funds - Equity Total 2,08,29,75,840 100% 71,52,333 5,05,67,925

8 ITA.No.5891/Del./2018 M/s. Holtec Consulting India Pvt. Ltd., New Delhi. 3.2. Referring to the decision of the Tribunal in assessee’s own case for the A.Ys. 2009-10 to 2013-14, he submitted that similar issue has been restored to the file of A.O. by the Tribunal. He submitted that he has no objection for restoring the matter to the file of A.O. in the light of decision of the Tribunal in assessee’s own case for the earlier assessment years.

5. We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the A.O. in the instant case invoking the provisions of Section 14A read with Rule 8D made disallowance of Rs.1,03,35,000/- which has been upheld by the Ld. CIT(A). We find an identical

9 ITA.No.5891/Del./2018 M/s. Holtec Consulting India Pvt. Ltd., New Delhi. issue had come-up before the Tribunal in assessee’s own case in A.Y. 2012-13, we find the Tribunal vide ITA.No.1773/Del./ 2018 order dated 31.03.2021 for the A.Y. 2012-13 has restored the issue to the file of A.O. by observing as under :

“5. We have given thoughtful consideration to the orders of the authorities below. We findforce in the contentions of the Id. counsel for the assessee. This Tribunal in assessee’s own case in for A.Y 2013-14 vide order dated 23.12.2021, has held as under :

“4. Learned AR submitted that the authorities below failed to analyse the nature of investment as to whether the investment is yielding taxable income, exempt income or no income and that the satisfaction regarding the incorrect amount disallowed by the assessee was not recorded by the Assessing Officer. He, however, submitted that facts & circumstances and questions of law involved this year are identical to the ones involved

10 ITA.No.5891/Del./2018 M/s. Holtec Consulting India Pvt. Ltd., New Delhi. for the assessment years 2009-10, 2010-11 and 2011-12, in which years, a coordinate Bench of this Tribunal in ITA.No.4563/ Del/2012 for assessment year 2009-10, 1057/ Del/ 2014 for A. Y. 2010-11 and 2148/Del/2015 for A. Y. 2011-12, restored the issue back to the file of Assessing Officer to consider the issue afresh in the light of observations made in for assessment year 2009-10. Learned AR prayed that this issue for this year may also be restored back to the file of Assessing Officer to consider the same in consonance with the view to be taken for assessment year 2009-10.

11 ITA.No.5891/Del./2018 M/s. Holtec Consulting India Pvt. Ltd., New Delhi. 2009-10, we are of the considered opinion that the request of the assessee can be accepted. We accordingly, while setting aside the impugned findings of the authorities below, restore the issue to the file of Assessing Officer to decide the same in the light of the view to be taken for earlier assessment years."

5.1. Since the facts of the case of the impugned appeal are identical to the facts of the case decided by the Tribunal in assessee’s own case in the preceding assessment years, therefore, respectfully following the decision of the Tribunal in assessee’s own case for the A.Ys. 2009-10 to 2013-14, we restore the issue to the file of A.O. with a direction to decide the issue afresh in the light of decision of the Tribunal in assessee’s own case (supra). Needless to say A.O. shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. Grounds raised by the assessee are accordingly allowed for statistical purposes.

12 ITA.No.5891/Del./2018 M/s. Holtec Consulting India Pvt. Ltd., New Delhi. 6. In the result, appeal of the Assessee is allowed for statistical purposes.

Order pronounced in the open court on 13.01.2022.