INCOME TAX OFFICER, KOTA vs. SHRI VIMAL BIHANI, KOTA

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ITA 90/JPR/2018Status: DisposedITAT Jaipur08 June 2018AY 2013-143 pages
AI SummaryDismissed

What did the Tribunal hold?

The CIT(A) deleted the addition, holding that no disallowance under Section 14A is warranted if no exempt income has been earned by the assessee. This was based on the decisions of the Delhi High Court in Cheminvest Ltd. and the Special Bench in Vireet Investment.

What were the facts?

The Assessing Officer (AO) disallowed Rs. 1,21,582/- under Section 14A read with Rule 8D on investments made by the assessee. The assessee had suo moto disallowed Rs. 1,82,984/- towards interest expenses related to these investments.

What were the issues?

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

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR

Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No.90/JP/2018

Hearing: 05/06/2018Pronounced: 08/06/2018

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; ikWy jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No.90/JP/2018 fu/kZkj.k o"kZ@Assessment Year : 2013-14 cuke Income-tax Officer Shri Vimal Bihani, Ward-1(3), Kota Vs. Prop. M/s Madhu Trade Agencies, 125, New Grain Mandi, Kota

LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABVPB3323R vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksj ls@ Revenue by : Smt. Poonam Rai (DCIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA) lquokbZ dh rkjh[k@ Date of Hearing : 05/06/2018 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 08/06/2018 vkns'k@ ORDER

PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the Revenue against the order of ld. CIT(A) Kota dated 14.11.2017 for Assessment Year 2013-14 wherein the Revenue has challenged the deletion of addition of Rs. 1,21,582/- made by the AO u/s 14A r/w Rule 8D.

2.

Briefly stated, the facts of the case are that the assessee has made investment in shares of M/s KRP Industries Ltd. in F.Y 2010-11 amounting to Rs. 39,99,966/-. During the course of assessment proceedings, the AO issued a show cause as to why the provisions of section 14A read with rule 8D should not be applied. In response, the assessee submitted that the assessee has suo moto disallowed Rs. 1,82,984/- towards interest expenses relating to

ITA No. 90/JP/2018 ITO, Ward-1 (3), Kota Vs Shri Vimal Bihani, Kota the amount of investments in shares. Hence, no further disallowance is called for u/s 14A of the Act. The Assessing Officer, referring to the Circular No. 5/2014 dated 11.02.2014 and the provisions of section 14A read with rule 8D, worked out disallowance of Rs. 3,04,000/- and after giving credit of 1,82,984/- worked out the net disallowance of Rs. 1,21,582/- which was brought to tax in the hands of the assessee.

3.

Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). The ld. CIT(A) referring to the decision of the Hon’ble Delhi High in case M/s Cheminvest Ltd. vs. CIT (2015) 61 taxman.com 118 and the decision of the Special Bench in case of ACIT vs. Vireet Investment dated 22 June, 2017 has held that where no exempt income has been earned by the appellant, it doesn’t warrant any disallowance as per the provisions laid down u/s 14A read with rule 8D. It was further held that since the AO has not brought any nexus between the interest bearing funds having been diverted towards such investment of Rs. 39,99,966/-, the addition of Rs. 1,21,582/- was directed to be deleted.

4.

In M/s Cheminvest Ltd. (supra), the Hon’ble Delhi High Court held that section 14A emphasise that there should be actual receipt of income which is not includible in the total income during the relevant previous year for purposes of disallowing any expenditure incurred in relation to the said income. Further the Special Bench in case of ACIT vs. Vireet Investment (supra) has held that only those investments are to be considered for computing average value of investments in respect of which exempts income has been received during the year. In light of the same, given that no exempt income has been earned/received during the year, we do not see any infirmity in the order of ld. CIT(A) who has rightly followed the ratio laid down by the above referred decisions.

In the result, the appeal of the Revenue is dismissed.

ITA No. 90/JP/2018 ITO, Ward-1 (3), Kota Vs Shri Vimal Bihani, Kota

Order pronounced in the open Court on 08/06/2018.

Sd/- Sd/- ¼fot; ikWy jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Jaipur Dated:- 08/06/2018 *Ganesh Kr आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- ITO, Ward-1(3), Kota 1. izR;FkhZ@The Respondent- Shri Vimal Bihani, Kota 2. vk;dj vk;qDr@CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@Guard File (ITA No. 90/JP/2018) 6.

vkns'kkuqlkj@ By order, सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत.

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