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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘A’
Before: SHRI RAJPAL YADAV & SHRI AMARJIT SINGH
आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ - अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD – BENCH ‘A’
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No.2112/Ahd/2017 �नधा�रण वष�/Asstt. Year: 2014-15 ACIT, Cir.2(1)(1) Vs. M/s.Harsha Engineerings Ltd. Ahmedabad. Sakhej Bavla Road PO Changodar Ahmedabad. PAN : AAACH 4828 C
अपीलाथ�/ (Appellant) �त् यथ�/ (Respondent)
Revenue by : Shri S.K. Dev, Sr.DR Assessee by : Shri Tushar Hemani, AR सुनवाई क� तार�ख/Date of Hearing : 20/02/2019 घोषणा क� तार�ख /Date of Pronouncement: 21 /02/2019 आदेश/O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER:
Revenue is in appeal before the Tribunal against order of the ld.CIT(A)-2, Ahmedabad dated 2.6.2017 passed for the Asstt.Year 2014-15.
At the outset it was pointed out to the Bench that the appeal of the Revenue is barred by limitation, i.e. Revenue has filed the present appeal late by 20 days. Revenue has filed an application dated 22.9.2017 requesting for condonation of delay in filing the appeal. It is pleaded in the application that competent authority i.e. Pr.CIT at the relevant time was holding additional charges of
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PCIT-1, PCIT-5, PCIT-6 besides holding the charge of CIT(Exemption), therefore, due to tremendous work load, appeal of the Revenue could not be filed within time. The ld.DR submitted that since delay was caused due to the reasons beyond its control, the delay in filing appeal may be condoned.
After hearing both the parties, we are of the view that Revenue is prevented by reasonable cause as narrated in their letter dated 22.9.2017. Therefore, we condone the delay of 20 days in filing appeal by the Revenue, and we proceed to adjudicate the issue agitated in the appeal.
Only substantive ground raised in the Revenue’s appeal is that the ld.CIT(A) has erred in deleting disallowance of Rs.1,54,01,047/- under section 14A of the Act r.w. 8D of the Rule.
Brief facts of the case are that assessee has filed its return of income on 25.11.2014 declaring total income of Rs.51,36,60,937/- under normal provisions of Act and book profit of Rs.65,80,3,122/- under the MAT provisions under section 115JB of the Act. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) of the Act was issued and served upon the assessee. During the assessment proceedings, the AO noticed that the assessee has invested in shares of different limited company, and accordingly the assessee was asked to furnish details of investment in shares along with working of disallowance under section 14A of the Act. In response to that the assessee explained that since the assessee has not claimed any exempt income, therefore, the provisions of section 14A would not be applicable to the assessee’s case. However, the
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ld.AO did not accept contentions of the assessee, and made addition by invoking Rule 8D.
Dissatisfied with the order of the ld.AO, assessee carried the matter in appeal before the ld.CIT(A). The ld.first Appellate Authority found that identical issue on similar facts has been decided in favour of the assessee in preceding year i.e. Asstt.Year 2013-14 whereby it was held that the assessee did not earn any exempt income during the previous year, and in such cases, provisions of section 14A would not be applicable. Following the decision taken in the Asstt.Year 2013-14, and also relying on large number of authoritative judgments on similar issue, the ld.CIT(A) deleted disallowance made under section 14A. Aggrieved Revenue is now before the Tribunal.
Before us, the ld.DR relied upon the order of the AO, while ld.counsel for the assessee relied upon the order of the ld.CIT(A). He also made reference to the decision of Hon’ble Gujarat High Court in the case of CIT Vs. Corretech Energy P.Ltd., 372 ITR 97 (Guj) wherein it is held that if there is no tax free income in the hands of the assessee, then no disallowance under section 14A r.w. rule 8D of Income Tax Rules ought to be made.
We have considered rival submissions and gone through the record carefully. We find that the issue in dispute is squarely covered in favour of the assessee by the decision of the Hon’ble High Court rendered in the case of Correctech Energy (supra). The Hon’ble High Court has observed that if no tax free income was earned by the assessee, then no expenses can be construed as incurred by the assessee, because plain reading of section 14A provides that if an
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assessee incurred expenditure in relation to earning of tax free income then such expenditure would not be allowed. The ld.CIT(A) has recorded a finding that neither interest/other expenses were incurred nor any exempt income was earned by the assessee, and therefore, there is no question of allocating expenditure. The relevant observation of the Hon’ble High Court in this regard reads as under:
“4. Counsel for the Revenue submitted that the Assessing Officer as well as CIT(Appeals) had applied formula of rule 8D of the Income Tax Rules, since this case arose after the assessment year 2009-2010. Since in the present case, we are concerned with the assessment year 2009-2010, such formula was correctly applied by the Revenue. We however, notice that sub-section(l) of section 14A provides that for the purpose of computing total income under chapter IV of the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact that the assessee did not ijnake any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made. In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of CIT v Winsome Textile Industries Ltd. [2009] 319 ITR 204 in which also the Court had observed as under :
"7. We do not find any merit in this submission. The judgement of this court in Abhishek Industries Ltd (2006) 286 ITR 1 was on the issue of allowability of interest paid on loans given to sister concerns, without interest. It was held that deduction for interest was permissible when loan was taken for business purpose and not for diverting the same to sister concern without having nexus with the business. The observations made therein have to be read in that context. In the present case, admittedly the assessee did not make any claim for exemption. In such a situation section 14A could have no application."
We do not find any question of law arising, Tax Appeal is therefore dismissed.” 9. Respectfully following the judgment of the Hon’ble High Court cited (supra), we are of the view that the CIT(A) is justified in deleting the disallowance.
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In the result, appeal of the Revenue is dismissed. Order pronounced in the Court on 21st February, 2019.
Sd/- Sd/- (AMARJIT SINGH) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER