M/S. SOFCOM SYSTEMS LTD, D-36, SUBHASH MARG, FLAT NO.802, SHEEL MOHAR APARTMENT, C-SCHEME, JAIPUR,JAIPUR vs. ITO WARD-6(4), JAIPUR, ITO WARD-6(4), JAIPUR

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ITA 258/JPR/2019Status: DisposedITAT Jaipur11 June 2019AY 2015-163 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that Section 14A applies only when there is exempt income. In the absence of any tax-free income, no disallowance of expenditure can be made. Therefore, the disallowance made by the AO was not justified.

What were the facts?

The assessee contended that no disallowance under Section 14A could be made as there was no exempt income during the assessment year. The Assessing Officer (AO) disagreed and made a disallowance. The assessee's appeal was against this disallowance.

What were the issues?

Whether disallowance under Section 14A read with Rule 8D is permissible when the assessee has not earned any exempt income.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, JAIPUR BENCHES “SMC”, JAIPUR

Before: SHRI RAMESH C SHARMAvk;dj vihy la-@ITA No. 258/JP/2019

For Appellant: Shri Rohan Sogani (CA) jktLo dh vksj ls@
Hearing: 15/04/2019Pronounced: 11/06/2019

M/s. Sofcom Systems Ltd. cuke I.T.O., Vs. D-36, Subhash Marg, Flat No. Ward-6(4), 802, Sheel Mohar Apartments, Alwar C-Scheme, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCS4859A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by: Shri Rohan Sogani (CA) jktLo dh vksj ls@ Revenue by : Smt. Roshanta Meena (JCIT) lquokbZ dh rkjh[k@ Date of Hearing 15/04/2019 : mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 11/06/2019 vkns'k@ ORDER PER: R.C. SHARMA, A.M. This is an appeal filed by the assessee against the order of ld.CIT(A), Ajmer dated 14/12/2018 for the A.Y. 2015-16 in the matter of order passed U/s 143(3) of the Income Tax Act, 1961 (in short the Act).

2.

Rival contentions have been heard and record perused. The only grievance of the assessee relates to disallowance U/s 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (in short, the Rules) in respect of exempted income.

2 M/s. Sofcom Systems Ltd. Vs ITO 3. It was the contention of the assessee before the A.O. as well as before the Ld. CIT(A) to the effect that during the year under consideration, there was no exempt income, accordingly, no disallowance can be made. However, the A.O. did not agree and made disallowance U/s 14A r.w.r 8D. As per our considered view, the provisions of Section 14A provides that if there is any income which does not form part of the total income under the Act, the expenditure which is incurred for earning such income is not an allowable deduction. Hence, in the absence of any tax-free income, the corresponding expenditure, if any, could not be worked out for disallowance. Since the assessee did not earn any exempt income in the form of divided from its investment in the company, no disallowance can be made with reference to such investment in the calculation prescribed under Rule 8D of the Rules. In this regard, reliance can be placed on the following judicial pronouncements: (i) Oil Industry Development Board (2019) 103 taxmann.com 326 (SC). (ii) Jayneer Infrapower & Multiventures (P) Ltd. (2019) 103 taxmann.com 118 (Mum-Trib) (iii) Chemnivest Ltd. (2015) 61 taxmann.com 118 (Delhi).

4.

Respectfully following the above judicial pronouncements, I do not find any merit in the disallowance so made when no exempt income was earned during the year under consideration.

Sd/- ¼jes'k lh 'kekZ½ (RAMESH C SHARMA) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 11th June, 2019 *PP, SPS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- M/s Sofcom Systems Ltd., Jaipur 1. izR;FkhZ@ The Respondent- The I.T.O. Ward 6(4), Jaipur 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 258/JP/2019) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत

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