Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI ANIL CHATURVEDI, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER ANIL CHATURVEDI, AM :
This appeal filed by the assessee is emanating out of the order of 1. the Commissioner of Income Tax – (Appeals) – 2, Nashik dated 15.05.2018 for the assessment year 2013-14.
The relevant facts as culled out from the material on record are as under :-
Assessee is an HUF stated to be engaged in the business of cotton ginning pressing and trading. Assessee electronically filed its return of income for A.Y. 2013-14 on 30.09.2013 declaring total income at Rs.1,05,670/-. The case was selected for scrutiny and thereafter
assessment was framed u/s 143(3) of the Act vide order dt.11.02.2016
and the total income was determined at Rs.5,78,250/-. Aggrieved by
the order of AO, assessee carried the matter before Ld.CIT(A), who vide
order dt.15.05.2018 (in appeal No.NSK/CIT(A)-2/319/2015-16)
dismissed the appeal of assessee. Aggrieved by the order of Ld.CIT(A),
assessee is now in appeal before us and has raised the following
grounds :
That the learned CIT(A) erred in confirming the disallowance of Rs.2,66,965/- u/s 14A Rule 8D of the Act. He failed to appreciate that in the absence of any exempt income Sec.14A/Rule D had no application. 2. That the learned CIT(A) ought to have restricted the disallowance to the extent of exempt income earned which was Rs.Nil in view of the decisions relied upon by the appellant. 3. That the learned CIT(A) failed to appreciate that CBDT Circular No.5/2014 dt.11.02.2014 is not in line with the provisions of the Act and judicial view in this regard and as such must be held to be bad-in-law.
That the learned CIT(A) erred in not considering the Ground No.4 stated in para 5 of his order and confirming the disallowance u/s 14A without disposing of the said ground. 5. That the learned CIT(A) failed to appreciate that the facts of the decision of the Hon’ble Supreme Court in MAXOPP Investments Ltd. Vs. CIT (402 ITR 640) and CIT Vs. Rajendra Prasad Mody, (115, ITR 519) were distinguishable and consequently erred in confirming the disallowance u/s 14A relying upon the said decision. 6. That the learned CIT(A) ought to have ignored the investment of Rs.2.37 crore in group companies on which no dividend was received while working out disallowance in terms of Rule 8D. 7. That the learned CIT(A) erroneously concluded that borrowed funds on which net interest of Rs.14,22,965/- was paid were utilized inter-alia on the amount invested in group companies. 8. That assuming without admitting that relevant provisions of Sec.14A Rule 8D are capable of more than one interpretation, the learned CIT(A) ought to have followed the one favourable to the appellant.”
Before us, at the outset, Ld.A.R. submitted that though assessee
has raised various grounds but the only issue is with respect to
disallowance u/s 14A r.w. Rule 8D of the Income Tax Rules.
During the course of assessment proceedings, AO noticed that
assessee had investments of Rs.2.37 crore in the shares for various
companies which were purchased in earlier years. The assessee was
asked to explain as to why the disallowance u/s 14A r.w. Rule 8D of I.T.
Rules not be made. Assessee inter-alia submitted that it has not earned
any exempt income from the aforesaid investments and therefore there
cannot be any disallowance. The submissions of the assessee were not
found acceptable to the AO. AO was of the view that even if assessee
has not earned any exempt income, disallowance u/s 14A r.w. Rule 8D
of I.T. Rules was required to be made and for the aforesaid view, he
relied on CBDT Circular No.5 dated 11.02.2014. He thereafter worked
out the disallowance u/s 14A r.w. Rule 8D of I.T. Rules at Rs.2,66,965/-
and disallowed the same. Aggrieved by the order of AO, assessee carried
the matter before Ld.CIT(A), who upheld the order of AO. Aggrieved by
the order of Ld.CIT(A), assessee is now in appeal before us.
Before us, Ld.A.R. reiterated the submissions made before AO and
Ld.CIT(A) and further submitted that since assessee has not earned any
exempt income, no disallowance u/s 14A of the Act is called for. In
support of her contention that when no exempt income is earned, there
cannot be any disallowance u/s 14A of the Act, she relied on the
decision of Hon’ble Punjab and Haryana High Court in the case of PCIT
Vs. State Bank of Patiala in ITA No.359 of 2017 dt.14.11.2017 and
submitted that disallowance u/s 14A of the Act is to be restricted upto
the extent of exempt income only and not a higher figure. She further
submitted that against the aforesaid decision of Punjab and Haryana
High Court, Revenue had filed S.L.P. before the Hon’ble Apex Court.
She submitted that the said S.L.P. was dismissed by the Hon’ble Apex
Court and is reported in (2018) 99 taxmann.com 286. She also placed
on record the copy of the aforesaid decision. She also relied on the
decision of Hon’ble Delhi High Court in the case of Cheminvest Limited
Vs. CIT reported in (2015) 378 ITR 33 for the proposition that when
assessee has not earned exempt income, no disallowance u/s 14A of the
Act can be worked out. She therefore submitted that in the present
case, the disallowance cannot exceed exempt income. Ld.D.R. on the
other hand, did not controvert the submissions made by Ld.A.R. but
however supported the order of lower authorities.
We have heard the rival submissions and perused the material on
record. The issue in the present ground is with respect to disallowance
u/s 14A r.w. Rule 8D of the Act. It is an undisputed fact that assessee
has incurred expenditure on account of interest etc., for making
investment in shares of various companies to the extent of Rs.2.37
crores and has not earned any any exempt income. We find that the
Hon’ble Punjab and Haryana High Court in the case of PCIT Vs. State
Bank of Patiala (supra) has held that the amount of disallowance u/s
14A of the Act has to be restricted to the amount of exempt income only
and not at a higher figure. We find that against the aforesaid order of
Punjab and Haryana High Court, Revenue filed S.L.P. before the Hon’ble
Apex Court and the S.L.P. was dismissed by the Hon’ble Apex Court.
We further find that Hon’ble Delhi High Court in the case of PCIT Vs
Caraf Builders & Construction (P) Ltd., (2019) 101 Taxmann.com 167
(Del) after considering the decisions of Hon’ble Apex Court in the case of
Maxopp Investment Ltd. Vs. CIT (2018) 402 ITR 640, Cheminvest Vs.
CIT (2015) 378 ITR 33 and other decisions has held that disallowance
u/s 14A cannot exceed exempt income of the relevant year. In the
present case, since assessee has not earned any exempt income from dividends, no disallowance is called for in the present case. We direct accordingly. Thus, the grounds of the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced on 7th day of March, 2019.
Sd/- Sd/- (VIKAS AWASTHY) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER
पुणे Pune; �दनांक Dated : 7th March, 2019. Yamini
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A) –2, Nashik 4 Pr.CIT-2, Nashik. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक सद�य” / 5. DR, ITAT, “SMC” Pune; 6. गाड� फाईल / Guard file.
आदेशानुसार/ BY ORDER
// True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.