MARKET CREATORS LTD.,,VADODARA vs. THE INCOME TAX OFFICER, WARD-2(1)(1),, BARODA

The captioned cross appeals have been filed by the assessee as well as by Revenue against the order of the Commissioner of Income Tax (Appeals)-2, Vadodara (‘CIT(A)’ in short), dated 27.09.2017 emanating from the assessment order dated 30.03.2016 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning assessment year 2013-14.

The grievances raised being common, both the cases were heard together and disposed of by the common order.

We shall first take up Assessee’s appeal in AY 2013-14.

The substantive grounds of appeal raised by the assessee read as under:-

Ground No.1 concerns disallowance under s.14A of the Act. & 2768/Ahd/17 [Market Creators Ltd.] A.Y. 2013-14 - 3 -

With the assistance of the learned AR for the assessee, we straightway notice that assessee has not claimed any income as exempt income from taxation. Therefore, no disallowance is permissible in view of the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Corrtech Energy P. Ltd. 372 ITR 97 (Guj.). In another judgment the Hon’ble Gujarat High Court in the case of CIT vs. Vision Finstock Ltd. Tax Appeal No. 486 of 2017 dated 31.07.2017 has once again expressed the similar view and held that disallowance of expenditure in terms of Section 14A r.w. Rule 8D cannot exceed the exempt income itself. It is noticed that SLP(Civil) [Diary No. 13152/2018] filed by the Revenue against the judgment of the Hon’ble Gujarat High Court in Vision Finstock Ltd. (supra) has been dismissed on merits by the Hon’ble Supreme Court vide order dated 07.05.2018. The reference is also made to the decision of Hon’ble Supreme Court of India in CIT vs. Chettinad Logistics (P.) Ltd. (2018) 95 taxmann.com 250 (SC). Thus, in the light of judicial precedents noted above, no disallowance is called for under s.14A of the Act in the absence of exempt income. Ground No.1 of the assessee’s appeal is accordingly allowed.

Ground No.2 is alternative ground to Ground No.1. In view of the decision taken in Ground No.1, Ground No.2 is dismissed as infructuous.

In the result, appeal of the assessee is allowed. -AY-2013-14 (Revenue’s appeal)

The substantive grounds of appeal raised by the Revenue read as under:-

Ground No.1 concerns disallowance of Rs.1,92,53,838/- made by the AO denying expenses claimed for breach of TDS provision of Section 194H of the Act as allegedly applicable to the assessee.

With the assistance of the learned AR for the assessee, we observe that the assessee company is engaged in share broking business in capital market. The assessee company has inter alia paid sub-brokerage of Rs.1,92,53,838/- in the course of its broking business in shares and securities. The AO has disallowed the expenses by invoking Section 40(a)(ia) of the Act for alleging breach of Section 194H of the Act in failing to deduct TDS on sub-brokerage so paid. In the first appeal against the aforesaid order, the CIT(A) has reversed the action of the AO and deleted the disallowance. As pointed out on behalf of the assessee, the issue has been adjudicated in favour of the assessee in its own case in & Ors. dated 08.04.2019 concerning AY 2012-13 and ITA No. 3075/Ahd/2016 order dated 06.08.2018 concerning AY 2015- 16. Thus, we do not see any warrant to re-examine the issue as concluded by the CIT(A). We thus decline to interfere.

In the result, Ground No.1 of the Revenue’s appeal is dismissed.

Ground No.2 of the Revenue’s appeal seeks to impugn the order of the CIT(A) in granting part relief to the assessee on the issue of disallowance under s.14A of the Act. In the light of the view expressed in Ground No.1 of the assessee’s appeal (supra), we do not see any merit in & 2768/Ahd/17 [Market Creators Ltd.] A.Y. 2013-14 - 5 - the grievance raised by the Revenue. Ground No.2 of the Revenue’s appeal is dismissed.

In the result, appeal of the Revenue is dismissed.

In the combined result, appeal of the assessee is allowed and appeal of the Revenue is dismissed.