Pr. Commissioner of Income-tax-7 v. Oscar Investment Ltd - 2017-LL-1009-2

Citation	2017-LL-1009-2
Appellant Name	Pr. Commissioner of Income-tax-7
Respondent Name	Oscar Investment Ltd.
Court	HIGH COURT OF DELHI AT NEW DELHI
Relevant Act	Income-tax
Date of Order	09/10/2017
Assessment Year	2011-12
Judgment	View Judgment
Keyword Tags	total income • expenditure incurred in relation to income not includible in total income • computation of disallowance • exempted income
Bot Summary:	This is an appeal by the Revenue against an order dated 9th February 2017 passed by the Income Tax Appellate Tribunal in ITA No. 4088/Del./2014 for the Assessment Year 2011-12. The question sought to be urged by the Revenue is as under: Whether on facts and in the circumstances of the case the Ld. ITAT was correct in law in holding that the Disallowance U/s 14A has to be limited 10 the quantum of income not forming pan of the Total income of the assessee even when clear, explicit and unambiguous provisions of section 14A read with Rule 8D do not stipulate any such condition 3. In the present case, the AO has not firstly disclosed why the appellant/assessee s claim for attributing Rs. 2,97,440/- as ITA 779/2017 Page 1 of 2 a disallowance under Section 14A had to be rejected. The second aspect is there appears to have been no scrutiny of the accounts by the AO - an aspect which is completely unnoticed by the CIT 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 Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure incurred by the assessee in relation to the tax exempt income. This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case.

$ * IN HIGH COURT OF DELHI AT NEW DELHI 4 + ITA 779/2017 PR. COMMOSSIONER OF INCOME TAX-7 Appellant Through: Mr Sanjay Kumar, Advocate versus OSCAR INVESTMENT LTD. Respondent Through: None CORAM: JUSTICE S. MURALIDHAR JUSTICE PRATHIBA M. SINGH ORDER % 09.10.2017 1. This is appeal by Revenue against order dated 9th February 2017 passed by Income Tax Appellate Tribunal ( ITAT ) in ITA No. 4088/Del./2014 for Assessment Year ( AY ) 2011-12. 2. question sought to be urged by Revenue is as under: Whether on facts and in circumstances of case Ld. ITAT was correct in law in holding that Disallowance U/s 14A has to be limited 10 quantum of income not forming pan of Total income of assessee even when clear, explicit and unambiguous provisions of section 14A read with Rule 8D do not stipulate any such condition? 3. In Joint Investments Pvt. Ltd. v. Commissioner of Income Tax [2015] 372 ITR 694 (Delhi) wherein this Court held as under: 9. In present case, AO has not firstly disclosed why appellant/assessee s claim for attributing Rs. 2,97,440/- as ITA 779/2017 Page 1 of 2 disallowance under Section 14A had to be rejected. Taikisha says that jurisdiction to proceed further and determine amounts is derived after examination of accounts and rejection if any of assessee s claim or explanation. second aspect is there appears to have been no scrutiny of accounts by AO - aspect which is completely unnoticed by CIT (A) and ITAT. third, and in opinion of this court, important anomaly which we cannot be unmindful is that whereas entire tax exempt income is Rs. 48,90,000/- disallowance ultimately directed works out to nearly 110% of that sum, i.e., Rs. 52,56,197/-. By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that entire tax exempt income is to be disallowed. window for disallowance is indicated in Section 14A, and is only to extent of disallowing expenditure incurred by assessee in relation to tax exempt income . This proportion or portion of tax exempt income surely cannot swallow entire amount as has happened in this case. 4. In that view of matter, aforementioned question stands answered against Revenue and in favour of Assessee. 5. appeal is accordingly dismissed. S. MURALIDHAR, J. PRATHIBA M. SINGH, J. OCTOBER 09, 2017 rd ITA 779/2017 Page 2 of 2 Pr. Commissioner of Income-tax-7 v. Oscar Investment Ltd

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