DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYDERABAD vs. CHINTALAPATI HOLDING PRIVATE LIMITED, HYDERABAD

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ITA 1526/HYD/2018Status: DisposedITAT Hyderabad22 May 2019AY 2013-144 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that no disallowance under Section 14A is permissible if the assessee has not earned any exempt income during the relevant assessment year. This decision followed precedents from various High Courts and the Tribunal's coordinate bench.

What were the facts?

The assessee, engaged in investment in securities, declared a total loss. The Assessing Officer disallowed expenses related to investments under Section 14A, citing CBDT circulars, despite the assessee claiming no exempt income was earned.

What were the issues?

Whether disallowance under Section 14A is applicable when no exempt income has been earned by the assessee during the financial year.

Which sections of the Income-tax Act were involved?

Section 14A

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Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, HYDERABAD “A” BENCH, HYDERABAD

Before: SMT. P. MADHAVI DEVI, HON’BLE & SHRI S. RIFAUR RAHMAN, HON’BLE

For Appellant: Shri G. Rajavenkat – CA
For Respondent: Shri Dinesh Paduchuri – DR
Hearing: 14/05/2019

PER P. MADHAVI DEVI, JM

This is a Revenue’s appeal for the A.Y. 2013-14 against the order of the Commissioner of Income Tax (Appeals)-1, Hyderabad, dated 01/05/2018. 2. Facts of the case in brief are that the assessee-company engaged in the business of investment in securities, filed its return of income on 30/09/2013 declaring total loss of Rs. 43,98,97,710/-

2 ITA No.459 /HYD/2018 (Mrs. A.V.N.C. High School)

under normal provisions and total income of Rs. 23,23,39,777/- under section 115JB of the Act. Subsequently, the assessee- company filed revised return of income on 18/12/2013 declaring total loss of Rs. 43,87,65,890/- under normal provisions and book profit of Rs. 23,23,39,777/- under section 115JB of the Act. During the course of scrutiny proceedings under section 143(3) pursuant to selection under CASS, the Assessing Officer observed that the assessee has made investments of Rs. 158,89,42,329/-, the income from which would be exempt under section 10(34) of the Act in the hands of the assessee. He also observed that the assessee company has taken huge interest bearing loan of Rs. 2,67,33,920/- on which assessee has paid an interest of Rs. 2,41,48,800/-. Therefore, he asked the assessee to explain as to why the provisions of section 14A should not be applied to the assessee’s case. The assessee, vide its letter dated 21/03/2016, submitted that the assessee has not earned any exempt income during the F.Y. 2012-13 and therefore, the provisions of section 14A are not applicable. The Assessing Officer, however, did not accept the contention of the assessee and by relying upon the CBDT Circular No. 05/2014, he made the disallowance under section 14A r.w.r. 8D and brought it to tax.

3 ITA No.459 /HYD/2018 (Mrs. A.V.N.C. High School)

3.

Aggrieved, the assessee preferred an appeal before the ld.CIT(A), who allowed the same by following the decision of the ITAT, Hyderabad ‘A’ Bench in assessee’s own case for the A.Y. 2012-13. 4. Aggrieved by the relief granted by the ld.CIT(A), the Revenue is in appeal before us. 5. Ld. Departmental Representative supported the order of the Assessing Officer, whereas ld. Authorized Representative of the assessee supported the order of the ld.CIT(A) and also filed the copy of the decision of the ITAT, Hyderabad ‘A’ Bench in assessee’s own for the A.Y. 2012-13. 6. Having regard to the rival contentions and material on record, we find that the issue as to whether the disallowance under section 14A can be made when there is no exempt income earned by the assessee during the financial year has been considered and held in favour of the assessee by various High Courts and also by the coordinate Bench of this Tribunal. For the sake of ready reference, the decision of the ITAT in assessee’s own case for the A.Y. 2012- 13 is reproduced hereunder:- “6. Having regard to the rival contentions and material on record, we find that this issue is covered in favour of the assessee by the following decisions:- 1. Cheminvest Ltd. Vs. CIT [2015] 378 ITR 33 (Del.)

4 ITA No.459 /HYD/2018 (Mrs. A.V.N.C. High School)

2.

CIT vs. Corrtech Energy Pvt. Ltd. [2015] 372 ITR 97 (Guj.) 3. CIT vs. Shivam Motors Pvt. Ltd. [2014] 272 CTR 299 (All.) 4. CIT vs. Wilsome Textile Industries 319 ITR 204 (P & H) 5. ACIT vs. M. Baskaran [2014] 50 Taxmann. com 138 6.1 Respectfully following the same, we hold that no disallowance u/s. 14A of the IT Act is called for where the assessee has not earned any exempt income during the relevant assessment year. 7. Respectfully following the same, the appeal of the Revenue is dismissed. 8. In the result, appeal filed by the Revenue is dismissed. Order Pronounced in open Court on this 22nd day of May, 2019. Sd/- Sd/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) Accountant Member Judicial Member Dated: 22nd May, 2019. vr/- Copy to: 1. The Assessee -M/s. Chintalapati Holdings Pvt. Ltd., Plot No. 18, Software Units Layout, iLabs Centre Building-3, Madhapur, Hyderabad. 2. The Revenue- DCIT, Circle-1(2), Hyderabad. 3. The Pr.CIT-1, Hyderabad. 4. The CIT(A)-1, Hyderabad. 5. The D.R., Hyderabad. 6. Guard file.

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