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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आयकर अपीलीय अिधकरण “ए” �यायपीठ पुणे म� । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE �ी डी. क�णाकरा राव, लेखा सद�य एवं �ी िवकास अव�थी, �याियक सद�य के सम� BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM आयकर अपील सं. / ITA No.2214/PUN/2016 िनधा�रण वष� / Assessment Year : 2012-13 Laxmi Metal Pressing Works Pvt. Ltd., Plot No.M-170, MIDC, Waluj, Aurangabad. PAN : AAACL5640G .......अपीलाथ� / Appellant बनाम / V/s. DCIT, Circle- 1, ……��यथ� / Respondent Aurangabad. Assessee by : Shri S. N. Puranik Revenue by : Shri Sanjeev Ghei सुनवाई क� तारीख / Date of Hearing : 03.01.2019 घोषणा क� तारीख / Date of Pronouncement : 09.01.2019 आदेश / ORDER PER D. KARUNAKARA RAO, AM: This appeal is filed by the assessee against the order of CIT(A)-1, Aurangabad dated 01.07.2016 for the Assessment Year 2012-13. 2. The grounds raised by the assessee are as under :- “1] The learned CIT(A) erred in confirming the disallowance of Rs.13,92,090/- u/s. 14A r.w.r. 8D. 2] The learned CIT(A) erred in confirming the disallowance of interest of Rs.13,92,090/- u/s. 14A r.w.r. 8D(2)(ii) without appreciating that the assessee company had sufficient interest free funds available for making investments in group companies and accordingly, the disallowance made of interest was not justified at all. 3] The learned CIT(A) failed to appreciate that the investments in shares of various group companies were made on account of business expediency and not with an intention to earn exempt income and hence, there was no reason to make any disallowance u/s 14A r.w.r. 8D in relation to such investments.
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4] The learned CIT(A) further erred in not appreciating that the assessee company had not earned any divided on the investments made in group companies during the current year and therefore, no disallowance u/s. 14A r.w.r. 8D of interest expenditure and indirect expenditure could be made. 5] Without prejudice to the above grounds, the assessee submits that the disallowance made is very high and may be reduced substantially. 6] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.” 3. The issue raised in all above grounds relates to the disallowance of Rs.13,92,090/- made by the Assessing Officer u/s 14A of the Act read with Rule 8D of the Rules. 4. Deviating from the above grounds, ld. Counsel for the assessee submitted that the assessee made investments in the shares and however, never he earned any exempt income, which formed the part of the total income of the assessee. On these facts, ld. Counsel filed a note stating that the provisions of section 14A of the Act r.w. Rule 8D of the Rules has no role to play in such cases where the dividend income is not earned by the assessee. Referring to the judgement of the Hon’ble Supreme Court in the case of CIT vs. Chettinad Logistics (P) Ltd. 95 taxmann.com 250 (SC), ld. Counsel submitted that the grounds should be allowed in favour of the assessee. 5. Ld. DR for the Revenue relied heavily on the orders of the authorities below.
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On hearing of the above short argument of the ld. Counsel for assessee, we proceed to extract the relevant legal propositions on this aspect of section 14A r.w. rule 8D(2) of the IT Act/Rules :- “14A disallowance, Issue is covered in favour of Assessee, as Assessee has not earned any exempt income during the year. 1. Commissioner of Income Tax vs. Chettinad Logistics (P) Ltd. (S.C.) dated 2nd July 2018. “Held that where no exempt income i.e. Dividend was earned in relevant assessment year by Assessee, Section 14A could not be invoked. Special Leave Petition is dismissed on the ground of Delay as well as on merits. 2. Pune ITAT i) Force Motors Limited vs. DCIT Circle – 9 (Para 9) dated 18.07.2018 Restrict the disallowance to Exempt Income which formed part of the total income of the assessee. ii) Dy. CIT vs. Dishti Industries Ltd. dated 25.06.2018 (Para 14) Reliance placed on Delite Enterprises (Bombay). “When Assessee has not shown any exempt income in returned income, there is no jurisdiction to invoke the provisions of section 14A r.w. rule 8D of the Act”. 3. ITA No.2506/PUN/2016 (SMC) Sarangdhar Ramchandra Nirmal Date 28.09.2018 Relying above Pune ITAT decisions. 4. Pr. CIT vs. M/s Ballarpur Industries Ltd. (Bombay – Nagpur Bench) dated 13.10.2016 No actual Income received on Investment in Sister Concern. “Tribunal held that Provision of Section 14A of the Income Tax would not apply to the facts of this case as no exempt income was received or receivable during the previous year.” 7. From the above, it is settled legal proposition that where there is no exempt income in the relevant assessment year earned by the assessee, section 14A of the Act could not be invoked. Considering the
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settled legal proposition on the limited issue, we are of the opinion that the grounds raised by the assessee should be allowed in favour of the assessee. Accordingly, all the grounds raised by the assessee are allowed. 8. In the result, the appeal of the assessee is allowed. Order pronounced on 09th day of January, 2019. Sd/- Sd/- (िवकास अव�थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �याियक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 09th January, 2019. Sujeet आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A)-1, Aurangabad. 4. The Pr. CIT- 1, Aurangabad. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.