BIJMAN PROJECTS PRIVATE LIMITED,HYDERABAD vs. INCOME TAX OFFICER, WARD-1(3), HYDERABAD

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ITA 158/HYD/2018Status: DisposedITAT Hyderabad11 April 2018AY 2013-144 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that disallowance under Section 14A cannot be made when there is no exempt income earned during the assessment year. Therefore, the addition made by the AO was deleted.

What were the facts?

The assessee company made significant investments in shares. The Assessing Officer disallowed expenditure under Section 14A, citing the possibility of earning exempt dividend income, even though no dividend income was earned in the relevant year. The CIT(A) upheld this disallowance.

What were the issues?

Whether disallowance under Section 14A is permissible when no exempt income is earned during the assessment year.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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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.

2.

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

ITA No. 158/Hyd/2018 :- 2 -:

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.

3.

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.

4.

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).

ITA No. 158/Hyd/2018 :- 3 -:

5.

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.

6.

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

ITA No. 158/Hyd/2018 :- 4 -:

Copy to : 1. M/s. Bijman Projects Private Limited, C/o. Venugopal & Chenoy, Chartered Accountants, 4-1-889/16/2, Tilak Road, Hyderabad.

2.

The Income Tax Officer, Ward-1(3), Hyderabad.

3.

CIT(Appeals)-1, Hyderabad.

4.

Pr.CIT-1, Hyderabad.

5.

D.R. ITAT, Hyderabad.

6.

Guard File.

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