POLA VENKATARAMAIAH & SONS,KURNOOL vs. INCOME TAX OFFICER, WARD-1, ADONI

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ITA 724/HYD/2019Status: DisposedITAT Hyderabad21 November 2019AY 2014-152 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal admitted an additional ground of appeal stating that Section 14A cannot be invoked if no exempt income is earned. The issue was remanded to the AO to verify if any exempt income was earned, with disallowance to be made only if exempt income exists.

What were the facts?

The assessee challenged a disallowance made under Section 14A for the assessment year 2014-15. The Assessing Officer (AO) made the disallowance based on investments in shares, assuming exempt income. The CIT(A) confirmed the AO's order.

What were the issues?

Whether Section 14A of the Income Tax Act can be invoked when the assessee has not earned any exempt income. The quantum of disallowance under Section 14A if exempt income is earned.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ SMC Bench, Hyderabad

Before: Smt. P. Madhavi Devi

For Respondent: Smt. E.N. Hanghal, DR
Hearing: 14/11/2019Pronounced: 21/11/2019

This is assessee’s appeal for the A.Y 2014-15 against the order of the CIT (A)-Kurnool, dated 05.03.2019.

2.

In this appeal, the assessee is challenging the disallowance made u/s 14A of the Act. The assessee has also filed additional ground of appeal stating that where the assessee has not earned any exempt income during the relevant financial year, then the AO could not have invoked the provisions of section 14A of the Act. An application for the admission of this ground is also filed before the Tribunal. Taking the same into consideration, I am inclined to admit the same because it is a legal ground and all the relevant facts are on record.

3.

I find that the AO has only considered that the assessee has made investments in shares of companies and observing that the income there from is exempt from tax, he has made disallowance u/s 14A r.w. Rule 8D of the I.T. Rules. The CIT (A) has also confirmed the

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ITA No 724 of 2019 Pola Venkataramaiah and Sons Kurnool.

order of the AO. Since I have admitted the additional ground of appeal raised by the assessee, I deem it fit and proper to remand the issue to the file of the AO with a direction to examine if the assessee has earned any exempt income during the relevant A.Y and if no such income has been earned, then no disallowance u/s 14A shall be made as held by the Hon'ble Delhi High Court in the case of Cheminvest Ltd vs. CIT in ITA 749/2014, dated 2nd September, 2015. If the assessee has earned some exempt income, then the disallowance shall be restricted to such exempt income earned by the assessee.

4.

In the result, assessee’s appeal is allowed for statistical purposes. Order pronounced in the Open Court on 21st November, 2019.

Sd/- (P. MADHAVI DEVI) JUDICIAL MEMBER

Hyderabad, dated 21st November, 2019. Vinodan/sps Copy to: 1 M/s. Pola Venkataramaiah & Sons, 18/670 Gosha Hospital Road, Adoni, Kurnool 518301, A.P 2 ITO Ward-1 Adoni, Kurnool A.P 3 CIT (A)-Kurnool 4 Pr. CIT - Kurnool 5 The DR, ITAT Hyderabad 6 Guard File By Order

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