THE PR. COMMISSIONER OF INCOME TAX -6 vs. MACHINO PLASTIC LTD.

PDF · subscribers
ITA/438/2016HC DelhiDLHC01158988201613 February 2017Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE NAJMI WAZIRI2 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that no question of law arose in the present appeal. Regarding the first issue, it noted that for previous and later years, the Revenue had accepted the assessee's explanation that the amounts were made towards reimbursement, making Section 194C of the Act inapplicable. Therefore, the disallowance under Section 40(a)(ia) was not sustained. Concerning the second issue, the Tribunal applied the reasoning from the High Court's judgment in Cheminvest Ltd. vs CIT. It found that since the dividend income computation was nil, the disallowance under Section 14A did not arise. Consequently, the appeal filed by the Revenue was found to be without merit and was dismissed.

What were the facts?

This appeal by the Revenue challenges an order of the Income Tax Appellate Tribunal (ITAT). The assessee is Machino Plastic Ltd. The assessment years are not explicitly stated but implied to be those for which the ITAT's order was passed. The appeal concerns two disallowances made by the Assessing Officer (AO) and challenged before the ITAT. The first disallowance was under Section 40(a)(ia) amounting to ₹5,96,83,010/-. The second disallowance was ₹13,51,985/- related to income received by the assessee towards investment in Caparo Maruti Ltd., where the AO had brushed aside the assessee's computation of disallowance under Section 14A. The ITAT had previously accepted the assessee's explanation for similar reimbursements in prior and subsequent years.

What were the issues?

The Tribunal had to decide two questions of law raised by the Revenue: 1. Whether the disallowance made under Section 40(a)(ia) to the extent of ₹5,96,83,010/- was justified. 2. Whether the disallowance of ₹13,51,985/- in respect of income received by the assessee towards investment in Caparo Maruti Ltd., where the assessee’s computation under Section 14A was brushed aside, was justified. The Revenue argued that these were valid questions of law. The assessee contended that for the first issue, the amounts were made towards reimbursement, and Section 194C was not applicable, an explanation accepted by the Revenue in previous and subsequent years. For the second issue, the assessee argued, and the ITAT agreed, that since the dividend income computation was nil, no disallowance under Section 14A arose. The ITAT applied the reasoning from this Court's judgment in Cheminvest Ltd. vs CIT.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 194C,Section 14A,Section 260A

AI-generated summary — verify with the full judgment below

$~14 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 438/2016 THE PR. COMMISSIONER OF INCOME TAX -6 ..... Appellant Through: Mr. Ruchir Bhatia and Mr. Puneet Rai, Advs. versus MACHINO PLASTIC LTD. ..... Respondent Through: Mr. Gautam Jain and Mr. Piyush Kumar Kamal, Advs. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE NAJMI WAZIRI O R D E R % 13.02.2017 The Revenue urges two questions of law in the present appeal under Section 260A of the Income Tax Act, 1961. First, the disallowance made under Section 40(a)(ia) to the extent of ` 5,96,83,010/-. The ITAT noticed that for the previous year as well as the later years the Revenue had accepted the assessee’s explanation that since the amounts were made towards reimbursement, Section 194C of the Act was not applicable. In these circumstances, the question of law does not arise. The second question which the ITAT had to deal with was the disallowance of ` 13.51,985/- made by the AO in respect of income received by the assessee towards the investment in Caparo Maruti Ltd. The assessee had computed certain disallowance under Section 14A which was brushed aside. The ITAT applied the reasoning

propounded by this Court in its judgment reported as Cheminvest Ltd. vs CIT 61 Taxman.com 118. In these circumstances, given that there was no income, as the dividend income computation was nil, the disallowance under Section 14A did not arise. No question of law arises. For the above reasons, the appeal is without merit and is, accordingly, dismissed. S. RAVINDRA BHAT, J NAJMI WAZIRI, J FEBRUARY 13, 2017/kk

More judgments on Section 40(a)(ia)

All 7,300 judgments and leading authorities on Section 40(a)(ia) →

Recent GST High Court judgments

Search GST case law →