ADDL.CIT, SPECIAL RANGE-3, NEW DELHI vs. DCM LTD., NEW DELHI

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ITA 8137/DEL/2018Status: DisposedITAT Delhi30 September 2021AY 2015-163 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that disallowance of notional interest on interest-free advances is not warranted when the company has sufficient interest-free funds. It also held that no disallowance under Section 14A can be made if there is no exempt income.

What were the facts?

The Revenue appealed the deletion of additions made by the Assessing Officer regarding notional interest on an interest-free advance and disallowance under Section 14A. The assessee argued that loans were given from sufficient interest-free funds.

What were the issues?

Whether disallowance of notional interest on interest-free advances is valid and whether disallowance under Section 14A is applicable when no exempt income is earned.

Which sections of the Income-tax Act were involved?

Section 14A,Section 115JB

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH “B” NEW DELHI

Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI

For Appellant: Shri V.P. Gupta, Adv
For Respondent: Dr. Maninder Kaur, Sr.D.R

O R D E R PER AMIT SHUKLA, JM

The aforesaid appeal has been filed by the Revenue against the impugned order dated 31.10.2018, passed by Ld. Commissioner of Income Tax (Appeals)-XXXIV, New Delhi for the quantum of assessment passed u/s.143(3) for the Assessment Year 2015-16. In the grounds of the appeal the Revenue has raised following grounds:- “

1. Whether on facts and in circumstances of the case and in law, the CIT(A) has erred in deleting the addition/disallowance of interest on interest free advance of Rs. 22,32,000/- made by the Assessing Officer.

2. Whether on facts and in circumstances of the case and in law, the CIT(A) has erred in deleting the addition/disallowance u/s. 14A read with rule 8D of Rs. 3,09,02,000/- made by the Assessing Officer. 3. Whether on facts and in circumstances of the case and in law, the CIT(A) has erred in deleting the adjustment made by the Assessing Officer in book profit u/s 115JB on account of disallowance u/s. 14A read with rule 8D amounting to Rs. 3,09,02,000/-.”

2. At the outset, ld. counsel submitted that both the issues involved are covered by the decision of the Tribunal in assessee’s own case for the earlier years in favour of the assessee. In support, he has also filed the decision of the Tribunal for Assessment Year 2014-15 in ITA No.5376/Del/2018. In so far as issue relating to ground no.1 regarding disallowance of Rs.22,32,000/- being the notional interest with reference to interest free advance given to DCM Employees Welfare Trust. Before the ld. Assessing Officer, the assessee’s submission was that loan given to the company was out own sufficient interest free funds in form of reserves and share capitals, and therefore, it cannot be said that loans have been given out of borrowed funds. Ld. Assessing Officer noted that similar disallowance was made in the earlier years and has simply made the disallowance on the ground that ITAT order in the earlier years is subjudice before the Hon’ble Since this issue is covered by the order of the Tribunal, of the earlier year’s order for the Assessment Years 2011-12 and 2012-13, therefore, respectfully following the same and consistent with the view taken in the earlier years, the grounds raised by the Revenue are dismissed.

3. In so far as disallowance of 14A, it is an admitted fact that there is no exempt income during the year, therefore, no disallowance u/s.14A can be made in view of the decision of Hon’ble Delhi High Court in the case of Joint Investment Pvt. Ltd. (2015) 59 taxmann.com 295. It has also been pointed out before us that this Tribunal in earlier years had deleted the similar disallowance made by the Assessing Officer. Even the ld. CIT(A) have deleted the disallowance following various judicial decisions upholding that disallowance u/s.14A cannot be involved when no exempt income has been earned by the assessee in the relevant Assessment Year. Accordingly, this ground is also dismissed.

4. Lastly, in so far as adjustment in book profit u/s.115JB on account of disallowance u/s.14A then again when there is no exempt income, no disallowance is called for and moreover, similar issue has been decided in favour of the assessee by the Tribunal in Assessment Year 2014-15. Accordingly, the appeal of the Revenue is dismissed. 5. In the result, the appeal filed by the Revenue is dismissed. Above decision was announced on conclusion of Virtual Hearing in the presence of both the parties on 30th September, 2021.

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