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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri Rajesh Kumar & Shri Sonjoy Sarma]
This is an appeal preferred by the revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-20, Kolkata (hereinafter referred to as the Ld. CIT(A)”] dated 28.04.2022 for the AY 2013-14.
The only issue raised in various grounds of appeal is against the order of Ld. CIT(A) holding that the provisions of Section 14A of the Act are not applicable where the assessee has not earned any exempt income by ignoring the explanation to Section 14A inserted by Finance Act,, 2022 which provides the provisions of section 14A can be applied irrespective of receipt of exempt income.
Facts in brief are that the AO noted from the balance sheet that the assessee has huge investment of Rs. 93,97,02,000/- in unquoted shares the income from which would not be part of total income. The AO also noted during the year the assessee has not earned any exempt income by way of dividend income on these investments. However the AO came to the conclusion that Section 14A of the Act read with Rule 8D are attracted and accordingly computed a disallowance of Rs. 3,11,82,000/- and added to the income of the assesse in the assessment framed vide order dated 12.03.2016.
The Ld. CIT(A) allowed the appeal of the assessee by observing and holding as under:
“3.2. In appellate proceedings, appellant has reiterated that no disallowance u/s 14A should be made in its case as it has not earned any exempt income during the current year. In support of its contention, appellant has cited the order of the Hon’ble Supreme Court in CIT vs. Chettinad Logistics Pvt. Ltd. (2018) 95 taxmann.com 250 (SC) wherein the Hon’ble Supreme Court has dismissed the SLP filed by the Department against the judgment of Hon’ble Madras High Court on this issue. Hon’ble Madras High Court had held that in the absence of any exempt income, no disallowance for expenditure can be made under provisions of Section 14A. Appellant has cited another order of Hon’ble Supreme Court in PCIT-18 vs. Oil Industry Development Board, Diary No. 2755/2019. Here also SLP filed by the Department against the order of Hon’ble Delhi High Court was dismissed by the Hon’ble Supreme Court. In this case, the Hon’ble Delhi High Court had held that in the absence of any exempt income, disallowance u/s 14A of any amount was not permissible. Appellant has further cited the judgment of Hon’ble Calcutta High Court in CIT, Kol-1 vs. Ashika Global Securities Ltd., ITAT 100 of 2014 dated 11.06.2018. Here the Hon’ble Calcutta High Court had not admitted the Department’s appeal against the order of the ITAT which held that in the absence of exempt income, no disallowance can be made u/s 14A. Appellant has further submitted that there are several decisions of the ITAT which have held that in view of the contrary views of the Hon’ble Courts, Circular No. 5/ 2014 dated 11.02.2014 is bad in law and not applicable any more. Appellant has cited the decision of Chennai ITAT in M. Bhaskaran vs. ACIT, Circle-1(2), Chennai, and decision of Bangalore ITAT in the case of Anriya Project Management Services (P) Ltd. vs. DCIT ITA No. 1799/Bang/2013 dated 21.02.2015. 3.3 I have carefully considered the facts of the case and submission of the appellant. It is an undisputed fact that the assessee has not earned any dividend income (exempt income) on its investments during the current year. Hence, in view of the several judgments cited by the appellant, as above, no disallowance can be made u/s 14A in the current year. AO’s reliance on Circular No. 5 of 2014 is not sustainable, as the Hon’ble Courts have unequivocally held 3 Assessment Year: 2013-14 M/s Abhijeet Ferrotech Limited that provisions of Section 14A cannot be applied in the year in the which no exempt income has been earned on investments made by the assessee. As in the current year assessee has not earned any exempt income on its investment. AO is directed to delete the addition of Rs. 3,11,82,000/-, in view of the judgments cited by the appellant.”
After hearing the rival contentions and perusing the material on record and appellate order passed by the Ld. CIT(A), we do not find any infirmity in the appellate order as the Ld. CIT(A) has passed the order after following various decisions as discussed in para 3.2 of the appellate order and also recording a finding of fact that during the year the assessee has not earned any exempt income. It is settled judicial position that no disallowance is to be made where the assesse has not received any dividend income on the investments. Accordingly we upheld the order of Ld. CIT(A) by dismissing the appeal of the revenue.
In the result, the appeal of the revenue is dismissed.
Order is pronounced in the open court on 28th March, 2023