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Income Tax Appellate Tribunal, DELHI BENCH ‘C’ : NEW DELHI
Before: SHRI ANIL CHATURVEDI & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
Appellant, M/s. Hero Solar Energy (P) Ltd. (hereinafter referred to as ‘the assessee’) by filing the present appeal sought to set aside the impugned order dated 05.10.2017 passed by the Commissioner of Income-tax (Appeals)-35, New Delhi qua the assessment year 2014-15 on the grounds inter alia that :-
“1. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in making disallowance of Rs.2,03,30,249/- being the loss claimed under the head business. 2. Ld. CIT (A) ought to have deleted the disallowance so made and in any case and in any view of the matter, action of Ld. CIT (A) in not deleting the said loss, is bad in law and against the facts and circumstances of the case..”
Briefly stated the facts necessary for adjudication of the controversy at hand are : It is the first year of incorporation of assessee company, which has returned a loss under the head “business & profession” to the tune of Rs.2,03,30,249/-. During the year under assessment, assessee company made an investment of Rs.9.15 crores in the wholly owned subsidiary, namely, Hero Future Energies Pvt. Ltd. Assessing Officer (AO) disallowed the loss of Rs.2,03,30,249/- claimed by the assessee company under the head “business & profession” on the ground that since there is no activity during the year under assessment but for setting up of the company and that too by making investments only. AO framed the assessment at total income of Rs.4,69,058/- under section 143(3) of the Income-tax Act, 1961 (for short ‘the Act’).
Assessee carried the matter before the ld. CIT (A) by way of filing appeal who has allowed the appeal but without deciding the issue as to allowing the loss claimed by the assessee under the head “business”. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Assessee company has specifically raised the ground that, “Ld. CIT (A) has erred in law and facts in confirming the action of AO in making disallowance of Rs.2,03,30,249/- being the loss claimed under the head “business”?”
We have perused the order passed by the ld. CIT (A) who has allowed the appeal by returning following findings :-
“4.3.3. In view of submissions of appellant and judicial pronouncement It Is observed that the decision by the Hon'ble ITAT Delhi has been reversed by the Hon'ble Delhi High Court In the same case i.e. Chemnivest Ltd. vs. CIT-IV 61 Taxmann.com 118 (Delhi) vide order dated 02.09.2015 holding that "the the expression ‘does not form part of the total Income’. In section 14A envisages that there should be an actual receipt of Income, which Is not includible in the total Income, during the relevant previous year for the purpose of disallowing any expenditure Incurred in relation to the said Income. In other words, section 14A will not apply if no exempt Income is received or receivable during the relevant previous year. [Para 23]." In the said judgment the Hon'ble Delhi High Court followed the case of CIT vs. Holsim India P. Ltd. 57 Taxmann.com 28 (2015) Delhi and distinguished the decision of Maxopp Investment Ltd. 347 ITR 272. Appellant has also relied upon various judgments in his favour on the same lines. Since, there is no exempt income during the year, the ratio laid down by Hon'ble Delhi High Court is squarely applicable In the case of appellant and accordingly, no additions are called for. Hence, Ground no.3 is allowed.”
Bare perusal of the findings returned by the ld. CIT (A) in the impugned order goes to prove that he has not minced a word to return the findings as to disallowance of the loss of Rs.2,03,30,249/- claimed under the head “business & profession”. So, we are of the considered view that when ld. CIT (A) being a first appellate authority/fact finding authority has not touched the issue, the case is required to be remanded back to ld. CIT (A) to decide afresh qua the issue as to whether AO has erred in making disallowance of Rs.2,03,30,249/- being the loss claimed by the assessee company under the head “business & profession” by providing an opportunity of being heard. We order accordingly.
Resultantly, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in open court on this 27th day of August, 2021.