HCC INFRASTRUCTURE COMPANY LTD,MUMBAI vs. THE ACIT, CIR-15(2)(1), MUMBAI

Since, the grounds raised in all the three appeals emanates from same set of facts, these appeals are taken up together for adjudication and are decided by this composite order. The appeals are decided in seriatim of Assessment Years.

The assessee in appeal has raised four grounds. The ground No.1 to 3 of appeal are in respect of disallowance made u/s. 14A of the Income Tax Act, 1961 [in short ‘ the Act’] r.w.r 8D of the Income Tax Rules,1962 [in short ‘the Rules’].

Shri Kalpesh Unadkat appearing on behalf of the assessee submitted that during the period relevant to assessment year under appeal the assessee has not earned any exempt income, hence, no disallowance is warranted.

Per contra, Smt. Usha Gaikhwad representing the Department submitted that an Explanation to section 14A of the Act has been inserted by the Finance Act, 2022 clarifying that irrespect of the fact whether exempt income is earned during the previous year or not, if the expenditure is incurred in relation to earning of such income disallowance u/s. 14A of the Act has to be made. The said explanation is clarificatory in nature and operates retrospectively.

Both sides heard. The ground No.1 to 3 of appeal deal with single issue of disallowance u/s.14A r.w.r. 8D. The short contention of the assessee is that since assessee has not earned any exempt income, no disallowance u/s. 14A of the Act is to be made. A perusal of the assessment order shows that it is not in dispute that the assessee has not earned any exempt income during previous year. The Assessing Officer has made disallowance u/s. 14A r.w.r 8D of Rs.112,38,04,540/-. It is no more res-integra that where the assessee has not earned any exempt income during the relevant period, no disallowance u/s.14A of the Act is required to be made.

An Explanation to Section 14A of the Act was inserted by the Finance Act,2022 w.e.f. 01/04/2022. The said Explanation reads as under:

In ground No.4 of appeal, the assessee has assailed disallowance of carry forward of losses of assessment year 2011-12.

The ld. Departmental Representative relied on the order of CIT(A).

Both sides heard. A perusal of the impugned order shows that the CIT(A) has not adjudicated the ground raised by the assessee with respect to rejection of carry forward of losses for assessment year 2011-12. In view of the prayer made by ld.Authorized Representative of the assessee, the Assessing Officer is directed to decide the application dated 28/04/2016 filed by the assessee, expeditiously and preferably within a period of six months from the date of receipt of this order. The ground No.4 of appeal is thus, allowed for statistical purpose.

In the result, appeal of assessee is partly allowed. -A.Y. 2018-19 13. Both sides are unanimous in stating that the facts germane to the issue raised in appeal with regard to disallowance u/s. 14A of the Act r.w.r. 8D are identical to assessment year 2013-14. Since, the facts in impugned assessment years are similar to assessment year 2013-14, the findings given by us while adjudicating the issue would mutatis mutandis apply to the present appeal. Consequently, ground No.1 and 2 raised in the appeals are allowed for parity of reasons.

In ground No.3 of appeal the assessee has assailed initiation of penalty proceedings u/s. 270A of the Act. Challenge to penalty proceedings at this stage is premature, hence, ground No.3 of the appeals is dismissed.

In the result, appeal of assessee for assessment year 2017-18 and 2018- 19 are partly allowed.

To sum up for A.Y. 2013-14, A.Y. 2017-18 and ITA No. 1222/Mum/2023 for A.Y. 2018- 19 are partly allowed.