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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI SHAMIM YAHYA & SHRI RAM LAL NEGI
PER SHAMIM YAHYA, A.M.
This appeal by the assessee is against the impugned order dated
2nd August 2013, passed by the learned Commissioner (Appeals)–16,
Mumbai (Camp at Nagpur), pertaining to assessment year 2005–06.
The grounds raised by the assessee are reproduced below:–
That the order of the Asstt. Commissioner of Income Tax, Central Circle 2(3), Nagpur is bad in law and wrong on facts and the learned C.I.T.(A) has erred in confirming the same. On the facts and circumstances of the case action of both the authorities is unjustified.
That the Assessing officer erred in law and on facts in invoking
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the provisions of Section 14A and making disallowance of expenses of Rs.4,26,086/- in nature of interest on loan, deprecation on fixed assets, vehicle insurance and professional expenses incurred during the course of carrying out business operations of the partnership concerns of the assessee for earning taxable business income and the learned CIT(A) further erred in confirming the action of the Assessing Officer.
That the Assessing Officer failed to appreciate that the assessee, being a partner of the partnership firms was required to invest his borrowed capital and use his personal assets for carrying out business activities of the firms and hence is entitled to claim deduction of such expenditures and the learned CIT(A) further erred in upholding the action of Assessing Officer.”
The learned Counsel for assessee has also filed additional
grounds of appeal which are reproduced below:–
(1) "That the AO was unjustified in making separate addition of Rs. 4,26,086/- while computing the income, even after making disallowance of the loss of Rs. 4,26,086/- claimed under the head "Profits and Gains of Business and Profession" and the learned CIT(A) erred in not deleting the addition made erroneously by the AO. On the facts and circumstances of the case, the action of the AO has resulted into double addition in hands of the assessee."
(2) "That the AO was unjustified in making separate addition of Rs. 1,50,000/- while computing the income, even after making disallowance of the loss of Rs. 1,50,000/- claimed under the head "Income from House Property" and the learned CIT(A) erred in not deleting the addition made erroneously by the AO. On the facts and circumstances of the case, the action of the AO has resulted into double addition in hands of the assessee."
As regards the additional ground as referred to above, it
transpires that the same relates to double disallowance made by the
Assessing Officer which the learned CIT(A) has failed to address. We
find that on both the issues, it is the plea of the assessee that double
disallowance has been made by the Assessing Officer. The same was
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to put before the learned Departmental Representative. The learned
Departmental Representative fairly agreed with the statements of the
assessee in the additional ground of appeal as above. Accordingly, the
assessee succeeds in these additional grounds inasmuch as the
Assessing Officer is directed to delete the double disallowance.
Insofar as the merit of the main appeal is concerned, we find that
the same relates to disallowance under section 14A of the Act when
the assessee has not earned any exempt income. It is undisputed fact
that the assessee has not earned any exempt income. Under these
circumstances, the learned Counsel for assessee placed reliance upon
the decision of the Hon’ble Jurisdictional High Court in PCIT s Ballarpur Paper Industries Ltd., ITA no.33 of 2016, order dated 16th September
2016. In the said case, the Hon’ble Jurisdictional High Court has
expounded as under:–
“By this income tax appeal, the appellant - Department challenges the orders of the Commissioner of Income Tax and the Income Tax Appellate Tribunal, Nagpur.
On hearing the learned Counsel for the Department and on a perusal of the impugned orders, it appears that both the Authorities have recorded a clear finding of fact that there was no exempt income earned by the assessee. While holding so, the Authorities relied on the judgment of the Delhi High Court in Income Tax Appeal No. 749/2014, which holds that the expression "does not form part of the total income" in Section 14A of the Income Tax Act, 1961 envisages that there should be an actual receipt of the income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. The Income Tax Appellate Tribunal held that the
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provisions of Section 14A of the Income Tax Act, 1961 would not apply to the facts of this case as no exempt income was received or receivable during the relevant previous year. It is not the case of the Assessing Officer that any actual income was received by the assessee and the same was includible in the total income. The Authorities have rightly held that since the order of the Assessing Officer was based on the order of the Income Tax Appellate Tribunal that was reversed by the Delhi High Court, the order of the Assessing Officer should fall as the order on the basis of which it was passed, was reversed. In the facts of the case, the Authorities held that since the investments made by the assessee in the sister concerns were not the actual income received by the assessee, they-could not have been included in the total income.
The findings of facts recorded by both the Authorities do not give rise to any substantial question of law.
Since no substantial question of law arises in this income tax appeal, the income tax appeal is dismissed with no order as to costs.”
Learned Counsel for assessee also relied upon the decision of the
Hon’ble Delhi High Court in Cheminvest Ltd. v/s CIT, [2015
taxmann.com 118 (Del.).
Learned Departmental Representative relied upon the orders of
the authorities below.
Having heard the rival contentions and on a perusal of the
material on record, we find that the issue before us is covered in
favour of the assessee by the aforesaid decision of the Hon’ble
Jurisdictional High Court and respectfully following the same, we set
aside the impugned order passed by the learned Commissioner
(Appeals) and decide the issue in favour of the assessee.
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In the result, assessee’s appeal is allowed.
Order pronounced in the open Court on 09.05.2018
Sd/- Sd/- RAM LAL NEGI SHAMIM YAHYA JUDICIAL MEMBER ACCOUNTANT MEMBER
NAGPUR, DATED: 09.05.2018
Copy of the order forwarded to:
(1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary
(Sr. P.S./P.S.) ITAT, Nagpur