Loading judgment…
No AI summary yet for this case.
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI PAVAN KUMAR GADALE
This appeal has been preferred by the assessee against order dated 27.03.2023 passed by the Ld. Commissioner of Income-tax (Appeals)-3, Gurgaon [in short ‘the Ld. CIT(A)’] for assessment year 2017-18, raising following grounds:
1.0. GROUND NO. 1: 1.1. The learned Commissioner of Income Tax (Appeals) 3, Gurgaon (the Hor'ble CIT(A)) has erred in law and in facts and in circumstances of the case in confirming the assessed income at Rs.1,41,84,940 (being business loss) as against income of Rs.1,97.78,157 (being business loss) declared by the Appellant in the return of income filed for the assessment year under consideration.
Smart Hydel Power Ltd. 2 ITA No. 1951/Mum/2023
2.0. GROUND NO. 2: 2.0. GROUND NO. 2: The Hon'ble CIT(A) has erred in law and in facts and in circumstances The Hon'ble CIT(A) has erred in law and in facts and in circumstances The Hon'ble CIT(A) has erred in law and in facts and in circumstances of the case in passing the order under section 250 of the Act without of the case in passing the order under section 250 of the Act without of the case in passing the order under section 250 of the Act without giving reasonable opportun giving reasonable opportunity of being heard to the Appellant. The said ity of being heard to the Appellant. The said assessment order is against the principle of natural justice and hence assessment order is against the principle of natural justice and hence assessment order is against the principle of natural justice and hence required to be set aside. required to be set aside. GROUND No. 3: GROUND No. 3: The Hon'ble CIT(A) has erred in law and in facts and in circumstances CIT(A) has erred in law and in facts and in circumstances CIT(A) has erred in law and in facts and in circumstances of the case in making disallowance of expenses of Rs. 55,93,217, under of the case in making disallowance of expenses of Rs. 55,93,217, under of the case in making disallowance of expenses of Rs. 55,93,217, under section 14A of the Act by applying Rule 8D of Income tax Rules, 1962 section 14A of the Act by applying Rule 8D of Income tax Rules, 1962 section 14A of the Act by applying Rule 8D of Income tax Rules, 1962 ('the Rules), for various grounds mentioned below: ('the Rules), for various grounds mentioned below: a) The Hon'ble CIT(A) has erred in law and in facts and in Hon'ble CIT(A) has erred in law and in facts and in Hon'ble CIT(A) has erred in law and in facts and in circumstances of the case in not considering the fact that the investment circumstances of the case in not considering the fact that the investment circumstances of the case in not considering the fact that the investment in shares are made out of commercial expediency in subsidiaries and in shares are made out of commercial expediency in subsidiaries and in shares are made out of commercial expediency in subsidiaries and associates. b) The Hon'ble CIT(A) ought to have appreciated t The Hon'ble CIT(A) ought to have appreciated the fact that the he fact that the Appellant has not earned any exempt income during the assessment Appellant has not earned any exempt income during the assessment Appellant has not earned any exempt income during the assessment year under consideration and hence the provisions of section 14A of the year under consideration and hence the provisions of section 14A of the year under consideration and hence the provisions of section 14A of the Act read with Rule 8D of the Rules are Act read with Rule 8D of the Rules are not applicable. c) The Hon'ble CIT(A) has erred in law and in f The Hon'ble CIT(A) has erred in law and in facts and in circumstances acts and in circumstances of the case in stating that the Explanation to section 14A of the Act of the case in stating that the Explanation to section 14A of the Act of the case in stating that the Explanation to section 14A of the Act added by Finance added by Finance Act. 2022 is retrospective in nature. d) The learned CIT(A) has erred in law and in facts and in The learned CIT(A) has erred in law and in facts and in The learned CIT(A) has erred in law and in facts and in circumstances of the case in disallowing Amoun circumstances of the case in disallowing Amount equal to 1% of annual t equal to 1% of annual average of monthly average of opening and closing balances of value of average of monthly average of opening and closing balances of value of average of monthly average of opening and closing balances of value of investment in shares without proving nexus of expenses incurred with investment in shares without proving nexus of expenses incurred with investment in shares without proving nexus of expenses incurred with investments and / or earning of exempt income and hence disallowance investments and / or earning of exempt income and hence disallowance investments and / or earning of exempt income and hence disallowance of such expenses under of such expenses under section 14A of the Act is required to be deleted. section 14A of the Act is required to be deleted. e) The Hon'ble CIT(A) has erred in law and in facts and in The Hon'ble CIT(A) has erred in law and in facts and in The Hon'ble CIT(A) has erred in law and in facts and in circumstances of the case in making disallowance of demat charges of circumstances of the case in making disallowance of demat charges of circumstances of the case in making disallowance of demat charges of Rs.12,081 by stating that it is directly incurred in relation to earning of Rs.12,081 by stating that it is directly incurred in relation to earning of Rs.12,081 by stating that it is directly incurred in relation to earning of exempt income and hence disallowance of such expenses under section empt income and hence disallowance of such expenses under section empt income and hence disallowance of such expenses under section 14A of the Act is required to be deleted. 14A of the Act is required to be deleted. Each of the above grounds of appeal is independent and without Each of the above grounds of appeal is independent and without Each of the above grounds of appeal is independent and without prejudice to the other grounds of appeal. prejudice to the other grounds of appeal.”
2. Briefly stated facts of the case are th Briefly stated facts of the case are that the assessee filed its at the assessee filed its return of income electronically on 27.10.2017 declaring total loss of return of income electronically on 27.10.2017 declaring total loss of return of income electronically on 27.10.2017 declaring total loss of Rs. Nil under the normal provisions of the Income Rs. Nil under the normal provisions of the Income-tax Act, 1961 (in tax Act, 1961 (in
Smart Hydel Power Ltd. 3 ITA No. 1951/Mum/2023 short ‘the Act’) and book profit at loss of Rs.2,59,88,220/-. The short ‘the Act’) and book profit at loss of Rs.2,59,88,220/ short ‘the Act’) and book profit at loss of Rs.2,59,88,220/ return of income filed by return of income filed by the assessee was selected for the assessee was selected for scrutiny. In the scrutiny assessment order dated 14.12.201 the scrutiny assessment order dated 14.12.2019 passed u/s 143(3) 9 passed u/s 143(3) of the Act, the Assessing Officer made disallowance u/s 14A r.w.r. he Assessing Officer made disallowance u/s 14A r.w.r. he Assessing Officer made disallowance u/s 14A r.w.r. 8D of Income-tax Rules, 1962(in short ‘the Rules’) tax Rules, 1962(in short ‘the Rules’) tax Rules, 1962(in short ‘the Rules’) amounting to Rs.55,93,217/- for the purpose of computation of the for the purpose of computation of the for the purpose of computation of the income under normal provisions of the Act normal provisions of the Act and also added the same while and also added the same while computing the book profit u/s 115JB of the Act. On further appeal, computing the book profit u/s 115JB of the Act. On further appeal, computing the book profit u/s 115JB of the Act. On further appeal, the Ld. CIT(A), though upheld the disallowance u/s 14A r.w.r. 8D though upheld the disallowance u/s 14A r.w.r. 8D though upheld the disallowance u/s 14A r.w.r. 8D Rules for the purpose of total income under the purpose of total income under normal normal provisions of the Act however deleted the addition of disallowance u/s 14A for the Act however deleted the addition of disallowance u/s 14A for the Act however deleted the addition of disallowance u/s 14A for the purpose of computation of the book profit u/s 115JB of the Act. the purpose of computation of the book profit u/s 115JB of the Act. the purpose of computation of the book profit u/s 115JB of the Act.
Aggrieved the assessee is in appeal before the Tribunal by way Aggrieved the assessee is in appeal before the Tribunal by way Aggrieved the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above. f raising grounds as reproduced above.
In the grounds the only issue in dispute involved is in respect In the grounds the only issue in dispute involved is in respect In the grounds the only issue in dispute involved is in respect of sustaining of the disallowance u/s 14A of of sustaining of the disallowance u/s 14A of the Act r.w.r. 8D of the the Act r.w.r. 8D of the Rules while computing income under normal provisions of the Act. Rules while computing income under normal provisions of the Act. Rules while computing income under normal provisions of the Act.
We find that despite notifying none attended on behalf of the t despite notifying none attended on behalf of the t despite notifying none attended on behalf of the assessee, and therefore, we assessee, and therefore, we heard submission of the heard submission of the ld DR on the issue in dispute and perused t issue in dispute and perused the relevant material on record he relevant material on record. the appeal is according decided appeal is according decided expartee qua the assessee. qua the assessee.
5.1 We find that in the in the case, the assessee made investment in assessee made investment in shares, which could earn exempted income in the form of dividend shares, which could earn exempted income in the form of dividend shares, which could earn exempted income in the form of dividend
Smart Hydel Power Ltd. 4 ITA No. 1951/Mum/2023 but not made any suo suo-moto disallowance in terms of section 14A of disallowance in terms of section 14A of the Act in respect of the expenditure incurred for exempted income the Act in respect of the expenditure incurred for exempted income the Act in respect of the expenditure incurred for exempted income on the ground that no exempted income was earned during the year nd that no exempted income was earned during the year nd that no exempted income was earned during the year under consideration. The Assessing officer referred to the CBDT under consideration. The Assessing officer referred to the under consideration. The Assessing officer referred to the circular No. 5/ 2014 circular No. 5/ 2014 wherein it is stated that disallowance u/s wherein it is stated that disallowance u/s 14A read with rule 8D has to be made even no exempted income is 14A read with rule 8D has to be made even no exempted income is 14A read with rule 8D has to be made even no exempted income is earned in any particular year. He also n any particular year. He also referred to the decision of the to the decision of the ITAT in the case of Cheminvest Limited Vs ITO 317 ITR 86(AT), Cheminvest Limited Vs ITO 317 ITR 86(AT), Cheminvest Limited Vs ITO 317 ITR 86(AT), where in it is held that disallowance u/s 14A can be made even if where in it is held that disallowance u/s 14A can be made even if where in it is held that disallowance u/s 14A can be made even if no exempt income is actually earned during the year. The Assessing no exempt income is actually earned during the year. The Assessin no exempt income is actually earned during the year. The Assessin officer officer accordingly, accordingly, invoking rule 8D of Rules Rules computed disallowance amounting to Rs. 55,93,217/ disallowance amounting to Rs. 55,93,217/-. The Ld. CIT(A) has he Ld. CIT(A) has mainly sustained the disallowance mainly sustained the disallowance in view of the amendment the amendment introduced by way of Finance Act, 2022 wherein Explanation has introduced by way of Finance Act, 2022 wherein Explanation has introduced by way of Finance Act, 2022 wherein Explanation has been added to clarify to clarify that disallowance shall be applicable even shall be applicable even if no exempt income accrued/received during the year under exempt income accrued/received during the year under exempt income accrued/received during the year under consideration. The Ld. CIT(A) has noted that such Explanation has consideration. The Ld. CIT(A) has noted that such Explanation has consideration. The Ld. CIT(A) has noted that such Explanation has been held to be retrospective by the ITAT Gowhati ITAT Gowhati in the case of been held to be retrospective ACIT v. William Son Financial Services Ltd. (2022) 140 ACIT v. William Son Financial Services Ltd. (2022) 140 ACIT v. William Son Financial Services Ltd. (2022) 140 taxmann.com 164. However, we find that the Hon’ble Delhi High However, we find that the Hon’ble Delhi High Court in the case of PCIT Central v. Era Infrastructure (India) PCIT Central v. Era Infrastructure (India) Court in the case of Ltd. [2022] 141 taxmann.com 289 (Delhi) Ltd. [2022] 141 taxmann.com 289 (Delhi) has held that said has held that said amendment is prospective in nature and not applicable in respect of prospective in nature and not applicable in respect of prospective in nature and not applicable in respect of assessment year prior to AY 2021 assessment year prior to AY 2021-22. In such circumstances, we circumstances, we feel appropriate to follow feel appropriate to follow the decision of the Hon’ble Delhi High the decision of the Hon’ble Delhi High
Smart Hydel Power Ltd. 5 ITA No. 1951/Mum/2023 Court in the case of Cheminvest Ltd Cheminvest Ltd. vs CIT (378 ITR 378 ITR 33) that no disallowance could be made u/s 14A of the Act w disallowance could be made u/s 14A of the Act wh here no exempt income has been earned by the assessee. Since, in the instant case income has been earned by the assessee. Since, in the instant case income has been earned by the assessee. Since, in the instant case admittedly no exempted income has been earned and therefore, admittedly no exempted income has been earned and therefore, admittedly no exempted income has been earned and therefore, following the judicial precedent on the issue in dispute cited above, following the judicial precedent on the issue in dispute ci following the judicial precedent on the issue in dispute ci we set aside the finding of the Ld. CIT(A) on we set aside the finding of the Ld. CIT(A) on the issue in dispute the issue in dispute and delete the disallowance made u/s 14A r.w.r. 8D of the Rules. the disallowance made u/s 14A r.w.r. 8D of the Rules. the disallowance made u/s 14A r.w.r. 8D of the Rules. The grounds of appeal of the assessee are accordingly allowed. of appeal of the assessee are accordingly allowed. of appeal of the assessee are accordingly allowed.
In the result, the appeal of the assessee is al In the result, the appeal of the assessee is allowed. lowed.