COMMISSIONER OF INCOME TAX-I JALANDHAR vs. DEEPAK MITTAL

ITA/109/2013HC Punjab & HaryanaPHHC01104954201303 September 2013Author: MR. JUSTICE DR. BHARAT BHUSHAN PARSOON,MR. JUSTICE RAJIVE BHALLA8 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the plea of the revenue that the onus was on the assessee to prove the quantum of expenditure incurred on earning tax-free dividend income was correct. However, when the assessee consistently stated that no expenditure was made, the AO, in terms of sub-section 2 of Section 14A, was required to collect material to determine any expenditure incurred. Instead, the AO incorrectly applied Rule 8D as a formula, which was applicable to assessees who incurred interest expenditure not directly attributable to specific income, which was not the case here. This was a wrong application and not permissible. The Tribunal's finding that no expenditure was brought on record by the AO, and therefore, no disallowance under Rule 8D or otherwise against exempt income could be made, was supported by the High Court's earlier decision in Commissioner of Income Tax-II Versus M/s Hero Cycles Limited. The Court found that disallowance under Section 14A requires a finding of expenditure being incurred, and if no expenditure is found, the disallowance cannot stand. The appeals were dismissed as no substantial question of law arose.

What were the facts?

These six appeals by the Commissioner of Income Tax, Jalandhar-I, concern assessment years 2007-08, 2008-09, and 2009-10, involving two assessees, Deepak Mittal and Amrit Sagar Mittal. The appeals challenge a common order of the Income Tax Appellate Tribunal (ITAT) which deleted a disallowance of ₹30,31,212 made by the Assessing Officer (AO) under Section 14A of the Income Tax Act, 1961, read with Rule 8D of the Income Tax Rules. The assessees reported dividend income as exempt. The AO disallowed expenses, but the Commissioner of Income Tax (Appeals) deleted the addition, a view upheld by the ITAT, which relied on a previous High Court decision.

What were the issues?

1. Whether, on the facts and in law, the ITAT was legally justified in deleting the disallowance of ₹30,31,212 under Section 14A of the Income Tax Act, 1961, read with Rule 8D of the Income Tax Rules, by ignoring evidence relied on by the AO and holding that a clear nexus was not established between interest-bearing funds and investments generating tax-free dividend income? Assessee's contentions: The assessee argued that the ITAT's decision was correct, particularly referencing the sweep of sub-section 2 of Section 14A, and that no expenditure was incurred to earn the exempt income. The ITAT's finding that the AO failed to establish that the assessee incurred any expenditure to earn non-exempt or exempt income was supported. Revenue's contentions: The revenue contended that Section 14A is a special provision and the onus was on the assessee to prove no expenditure was incurred for earning exempted income. The revenue argued that the ITAT overlooked the scope of Rule 8D in relation to Section 14A and that dividend income could not have been earned without direct or indirect expenses. The revenue referred to sub-section 3 of Section 14A.

Which sections of the Income-tax Act were involved?

Section 14A,Section 147,Section 154

AI-generated summary — verify with the full judgment below

Cited by 66 judgments on BharatTax

See all citing judgments →

Counted from the text of the judgments hosted here. Most recent first.

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

(1)

I.T.A. No.109 of 2013 (O&M).

(Assessment Year 2007-08)

Date of Decision:-03.09.2013. Commissioner of Income Tax, Jalandhar-I, Jalandhar. .........Appellant.

Versus Deepak Mittal. .........Respondent.

(2)

I.T.A. No.110 of 2013 (O&M).

(Assessment Year 2008-09)

Date of Decision:-03.09.2013. Commissioner of Income Tax, Jalandhar-I, Jalandhar. .........Appellant.

Versus Deepak Mittal. .........Respondent.

(3)

I.T.A. No.108 of 2013 (O&M).

(Assessment Year 2009-10)

Date of Decision:-03.09.2013. Commissioner of Income Tax, Jalandhar-I, Jalandhar. .........Appellant.

Versus Deepak Mittal. .........Respondent. Yag Dutt 2013.09.10 14:42 I attest to the accuracy and integrity of this document -2-

(4)

I.T.A. No.105 of 2013 (O&M).

(Assessment Year 2007-08)

Date of Decision:-03.09.2013. Commissioner of Income Tax, Jalandhar-I, Jalandhar. .........Appellant.

Versus Amrit Sagar Mittal. .........Respondent.

(5)

I.T.A. No.107 of 2013 (O&M).

(Assessment Year 2008-09)

Date of Decision:-03.09.2013. Commissioner of Income Tax, Jalandhar-

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 14A

All 15,875 judgments and leading authorities on Section 14A →

Recent GST High Court judgments

Search GST case law →