DCIT, C-1, LUDHIANA vs. M/S BBF INDUSTRIES LIMITED, LUDHIANA

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ITA 1263/CHANDI/2018Status: DisposedITAT Chandigarh03 June 2019AY 2011-124 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that Section 14A of the Income Tax Act cannot be invoked if the assessee has not earned any tax-exempt income during the relevant assessment year. Therefore, no disallowance is attracted.

What were the facts?

The Revenue appealed against the CIT(A)'s deletion of an addition made by the Assessing Officer. The addition was on account of disallowance under Section 14A read with Rule 8D for expenses incurred in earning tax-exempt income.

What were the issues?

Whether disallowance under Section 14A is attracted when no tax-exempt income has been earned by the assessee in the assessment year.

Which sections of the Income-tax Act were involved?

Section 14A

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आदेश/Order

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the Revenue against the order dated 31/07/2018 of the Commissioner of Income Tax (Appeals)- I, Ludhiana [hereinafter referred to as CIT(A)] agitating the action of the Ld. CIT(A) in deleting the addition made by the Assessing officer on account of disallowance of ₹ 2,14,68,549/- u/s 14A of the Income Tax

Act read with Rule 8D of the Income Tax Rules in respect of the expenditure incurred for earing of tax exempt income.

ITA No. 1263-c-18 M./s B.B.F. Industries ltd., Ludhiana 2 2. At the outset, it was the plea of the Ld. Counsel for the assessee

that all the investments in the subsidiary companies were made in the

earlier years out of own funds and that the assessee had not earned any

exempt income from such investments as is evident from the profit and

loss account. That it is also a matter of record that no dividend income

was received by the assessee company during the year under

consideration. The Ld. Counsel for the assessee has relied upon certain

case laws and the decision of the Hon'ble Jurisdictional High Court in

‘CIT, Faridabad Vs. Lakhani Marketing Inc.’ [2014] 49 taxmann.com

257 wherein the Hon'ble Court by making reference to the earlier

decisions of the of ‘CIT Vs. Hero Cycles Ltd.’ [2010] 323 ITR 518 and

‘CIT Vs. Winsome Industries Ltd.’ [2009] 319 ITR 203, categorically

held that unless and until there is a receipt of exempt income for the

concerned assessment year, provisions of section 14A cannot be

invoked.

3.

The Ld. DR, though supported the order of the Assessing officer

but could not rebut the factual findings given by the Ld. CIT(A).

4.

We have considered the rival submissions. From the record it is

an undisputed fact that the assessee has not earned tax exempt income

during the year. We find that the issue is now squarely covered by the

various decisions of the Hon'ble High Courts. Even the different

Hon'ble High Courts of the country have been unanimous to hold that no

ITA No. 1263-c-18 M./s B.B.F. Industries ltd., Ludhiana 3 disallowance is attracted u/s 14A in case the assessee has not earned any

income not forming part of the total income. Reliance in this respect

can be placed on various decisions of the Hon'ble High Courts

including that of the Hon'ble Jurisdictional High Court of Punjab and

Haryana in the case of ‘CIT Vs. Winsome Textiles’ (2009) 319 ITR 204

(P&H) and in the case of CIT Faridabad v. Lakhani Marketing INC 226

Taxmann 45 (P&H); Hon'ble Delhi High Court in the case of

‘Cheminvest Ltd Vs. ITO’ (2015) 378 ITR 33 (Delhi) and of the

Hon'ble Gujarat High Court in the case of ‘Corrtech Energy P. Ltd.

(2014) 45 Taxman.com 116’ and further of the Hon'ble Allahabad High

Court in the case of ‘CIT Vs. M/s Shivam Motors (P) Ltd’ (2014) 272

CTR (All) 277.

5.

Since the assessee did not earn any tax exempt income, hence, no

disallowance u/s 14A is attracted. In view of this, we do not find

reason to interfere with the order of the Ld. CIT(A) and the same is

accordingly upheld.

The appeal of the Revenue is hereby allowed.

Order pronounced in the Open Court on 03.06.2019.

Sd/- Sd/- (संजय गग� / SANJAY GARG) (एन. के. सैनी / N.K. SAINI) उपा�य� / Vice President �या�यक सद�य/ Judicial Member Dated : 03.06. 2019 “आर.के.”

ITA No. 1263-c-18 M./s B.B.F. Industries ltd., Ludhiana 4 आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar

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