DLF Universal Ltd. appeals that Commissioner of Income-tax (Appeals) erred in re-computing and restricting the disallowance u/s 14A of the Income Tax Act

INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “E”: NEW DELHI

BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER

AND

SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
(Through Video Conferencing)

ITA No. 3391/Del/2016
(Assessment Year: 2011-12)

DLF Universal Ltd,
3rd Floor, Shopping Mall, Arjun
Marg, DLF City, Phase-1,
Gurgaon
PAN: AAACJ1655P
(Appellant) 

Vs. 

DCIT,
Circle-1(1),
Gurgaon
(Respondent)

ITA No. 3342/Del/2016
(Assessment Year: 2011-12)

ACIT,
Circle-1(1),
Gurgaon
PAN: AAACJ1655P
(Appellant)

Vs. 

DLF Universal Ltd,
3rd Floor, Shopping Mall,
Arjun Marg, DLF City,
Phase-1, Gurgaon
(Respondent)

Assessee by : Shri R. S. Singhvi, CA
Shri Satyajeet Goel, CA
Revenue by: Ms. Aman Preet, Sr. DR

Date of Hearing 22/03/2021
Date of pronouncement 24/05/2021

O R D E R

PER PRASHANT MAHARISHI, A. M.

1. These are the cross appeals filed by the assessee DLF Universal Ltd (The appellant/ assessee) and The Assistant Commissioner Of Income Tax ,Circle-1(1), Gurgaon (The ld AO) against the order passed by the ld Commissioner of Income tax (A)-1, Gurgaon[ The ld CIT (A) ] dated 31.03.2016 for the Assessment Year 2011-12.

2. The assessee in its appeal in ITA No. 3391/Del/2016 has raised the following grounds of appeal:-

“1. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in re-computing and restricting the disallowance u/s 14A at Rs. 15,42,000 which is 0.5% of investment of Rs. 30.84 Cr, without giving any cogent reasons or pointing any inaccuracy in the amount already disallowed by the appellant of Rs. 6,23,210/- in the return of Income..

2. That learned Commissioner of Income-tax (Appeals) failed to bring anything on record to show as to how expenditure of Rs 6,23,210/-already disallowed by the appellant company is not sufficient to earn the tax free income of Rs. 22,34,355/-.

3. That learned Commissioner of Income-tax (Appeals) failed to bring to record anything to show the proximity of expenditure calculated under Section 14A with the dividend income earned, apart from the expenditure already disallowed by the appellant.

4. That the impugned order dated 31.03.2016 passed by the learned Commissioner of Income-tax (Appeals), Gurgaon is bad in law and wrong on facts to the extent as stated above.”

3. The revenue in its appeal in ITA No. 3432/Del/2016 has raised the following grounds of appeal:-

“1. Ld. CIT(A) has erred on fact and in law in deleting the addition u/s 40A(2)(b) of the Act of Rs.8308348/- made by the Assessing Officer on account of payment made to related party M/s DLF Home Developers Ltd.

2. Ld.CIT(A) has erred on fact and in law in deleting the addition of 2,38,26,486/- made by the Assessing Officer on account of payment claimed to be made to Associated Infrastructure Company(AIC) for construction of compound wall, leveling of land, construction of labour quarter etc. when the assessee had not furnished any documentary evidence of development work actually done on the land during assessment proceedings.

3. Ld. CIT(A) has erred on fact and in law in deleting the addition of Rs. 1.72.72,980/- made by the Assessing Officer on account of brokerage paid to M/s Totem Infrastructure Pvt. Ltd., on sale of land at Vadora as the asessee had failed to produce any agreement with M/s Totem Infrastructure Ltd for any such arrangement during assessment proceedings.

4. Ld. CIT(A) has erred on fact and in law in restricting the disallowance from Rs.6,03,51,403/- to Rs.15.42.000/ made by the Assessing Officer under Section 14A of the Income Tax Act, 1961, since the Assessing Officer has made the addition on proper application of Section 14A of the Income Tax Act, 1961.

5. Ld.CIT(A) has erred on fact and in law in ignoring CBDT Circular No.5 of 2014 dated 11.02.2014 .clarifying that disallowance under Rule 8D read with Section 14A of the Income Tax Act is to be made even where taxpayer in a particular year ^has not earned any exempt income.”

4. Brief facts of the case shows that the assessee is a company carrying on the business of real estate development. For Assessment Year 2011-12 the assessee filed its return of income on 31.09.2011 declaring total loss of Rs. 1,63,24,28,377/-. The return of income was revised on 31.03.2012 at income of Rs. 41,49,07,760/-. On selection of scrutiny the ld AO assessed the income u/s 143(3) of the Act per order dated 31.03.2014 at Rs. 52,46,66,977/-. The ld AO made the following additions/ disallowances:-

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