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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI B. RAMAKOTAIAH
PER B. RAMAKOTAIAH, A.M. :
This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-1, Hyderabad, dated 02-11-2017 for the AY. 2013-14.
Brief facts of the case are that, assessee-company, engaged in providing coal handling and supervision services, filed its return of income for the AY. 2013-14 on 23-09-2013 admitting total income of Rs. 8,68,530/-. During the assessment proceedings u/s 143(3) of the Act, the AO observed
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that during the year under consideration, the assessee has made investments to the tune of Rs. 3,04,93,664/- as on 31-03-2013 in shares from which the dividend income is exempt. The expenditure as per P&L A/c was Rs. 14,70,411/- towards interest. Observing that the dividend income is exempt from tax u/s 10(38) of the Act, the AO asked assessee to show cause as to why disallowance u/s 14A of the IT Act r.w.r 8D of IT Rules should not be made. In response to the same, the assessee submitted that there was no dividend income earned during the relevant financial year and hence no disallowance u/s 14A of the Act is called for. However, AO was not convinced with the said contentions and made the disallowance of Rs. 1,30,742/- u/s 14A r.w. Rule 8D of the IT Rules.
Aggrieved, the assessee preferred an appeal before the CIT(A), confirmed the disallowance by observing that even though assessee has not earned any dividend income which is exempt from tax during the relevant assessment year there were huge interest payments and possibility of earning dividend is there. Thus, CIT(A) upheld the addition of Rs. 1,30,742/- made by the AO.
Ld. Counsel submitted that there is no dividend income earned during the year and relied on the Co-ordinate Bench decision in the case of ACIT Vs. Mishra Dhatu Nigam Ltd., in ITA No. 471/Hyd/2015, dt. 15-07-2015. Ld.DR, however, relied on the orders of AO/CIT(A).
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Having considered the rival contentions we find that assessee has not earned any dividend income during the relevant assessment year. The Co-ordinate Bench in the case Prathista Industries Ltd., Vs. DCIT in ITA No. of 1302/Hyd/2015 dated 29-04-2016, directed to delete the disallowance since there is no income claiming exemption during the year. The Hon'ble Delhi High Court in the case of Cheminvest Ltd., in (2015) [378 ITR 33] (Del) and the Hon'ble Madras High Court in the case of Redington (India) Ltd., Vs. Addl. CIT in TCA No. 520/2016 dt. 26-06-2015 have held that the disallowance u/s. 14A cannot be made where there is no exempt income during the relevant assessment year. Therefore, we set aside the order of Ld.CIT(A) and direct the AO to delete the addition of Rs. 1,30,742/- made by him.
In the result, appeal of assessee is allowed.
Order pronounced in the open court on 11th April, 2018
Sd/- Sd/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 11th April, 2018 TNMM
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Copy to : 1. M/s. Bijman Projects Private Limited, C/o. Venugopal & Chenoy, Chartered Accountants, 4-1-889/16/2, Tilak Road, Hyderabad.
The Income Tax Officer, Ward-1(3), Hyderabad.
CIT(Appeals)-1, Hyderabad.
Pr.CIT-1, Hyderabad.
D.R. ITAT, Hyderabad.
Guard File.