ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE2-(2), HYDERABAD vs. M/S. SUJANA UNIVERSAL INDUSTRIES LIMITED, HYDERABAD

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ITA 88/HYD/2021Status: DisposedITAT Hyderabad17 November 2021AY 2017-184 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that Section 14A read with Rule 8D applies only in relation to exempt income. As the assessee had not earned any exempt income, the order of the CIT(A) deleting the disallowance was sustained.

What were the facts?

The Revenue appealed against the deletion of disallowance made under Section 14A read with Rule 8D. The assessee had not earned any exempt income during the assessment year.

What were the issues?

Whether Section 14A disallowance is attracted when no exempt income is earned by the assessee.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B” : HYDERABAD

Before: SHRI S.S.GODARA & SHRI LAXMI PRASAD SAHU

O R D E R PER S.S.GODARA, J.M. : This Revenue’s appeal for AY.2017-18 arises from the CIT(A)-3, Hyderabad’s order dated 03-09-2020 passed in case No.10663/2019-20/B3/CIT(A)-3, in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused.

2.

It transpires at the outset that this assessee’s instant appeal suffers from fifty days’ delay stated to be attributable to the reason(s) beyond its control as per condonation petition/affidavit. No rebuttal has come from the departmental side. The impugned delay is condoned therefore.

3.

The Revenue has raised the following substantive grounds in the instant appeal:

1.The Ld.CIT(A) erred in holding that provisions of section 14A are not attracted when assessee has not earned any exempt income during the year. 2.The Ld.CIT(A) erred in deleting the disallowance made by AO under Rule 8D(2)(iii) of Income Tax rules by ignoring CBDT’s Circular 5/2014 which states that the AO may consider disallowance u/s.14A even if no exempt income was claimed in the particular year. In view of the above, the disallowance of Rs.2,42,64,032/- made by the AO u/s.14A of the Act read with rule 8D may be sustained. 3.Any other ground that be urged at the time of hearing.

4.

At the outset, learned authorised representative submitted that since there is no dividend income earned in the relevant previous year the CIT(A)’s order deleting the impugned Section 14A disallowance r.w. rule 8D disallowance may be upheld. In this connection, he relied on the following case law:

i. CIT Vs. Chettinad Logistics Pvt. Ltd., [80 taxmann.com 221] (Madras); ii. CIT Vs. Corrtech Energy Pvt. Ltd., [223 Taxman 130] (Guj); iii. Cheminvest Ltd., Vs. CIT (2015) [378 ITR 33] (Del)

Their lordships hold that Section 14A read with Rule 8D applies only in relation to an assessee’s exempt income and not otherwise. It is an admitted fact that the assessee has not derived any exempt income in the relevant previous year. We therefore sustain the order of CIT(A) under challenge for this precise reason alone. 5. This Revenue’s appeal is dismissed in above terms.

Order pronounced in the open court on 18th November, 2021

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