ACIT, CIRCLE-16(1), HYD, HYDERABAD vs. LANCO POWER LIMITED, HYDERABAD, HYDERABAD

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ITA 1611/HYD/2016Status: DisposedITAT Hyderabad06 April 2018AY 2012-134 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that since no exempt income was earned, no disallowance under Section 14A can be made. This decision was based on High Court precedents.

What were the facts?

The assessee company invested in shares but did not earn any dividend income during the assessment year. The Assessing Officer disallowed expenses related to this investment under Section 14A.

What were the issues?

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

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCH “B”, HYDERABAD

Before: SMT P. MADHAVI DEVI & SHRI B. RAMAKOTAIAH

For Appellant: Shri P. Murali Mohan Rao
For Respondent: Shri Srinivas Reddy, Shri P. Murali Mohan Rao

PER P. MADHAVI DEVI, J.M.: This is Revenue’s appeal for the A.Y 2012-13 against the order of the CIT(A)-4, Hyderabad dated 06.09.2016. 2. Brief facts of the case are that, the assessee company, engaged in the business of generation of power, filed its return of income for the A.Y 2012-13 on 29.09.2012 admitting total income of Rs. 33,16,770/-. During the assessment proceedings u/s 143(3) of the IT Act, the A.O observed that during the year under consideration, the assessee has shown an M/s Lanco Power Ltd., Hyderabad. amount of Rs. 43,09,85,66,00/- towards investment in shares. Observing that the income from shares is dividend income which is exempt from tax u/s 10(38) of the Act, the A.O asked the 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, vide letter dated 23.03.2015, 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, A.O was not convinced with the said contentions and made the disallowance of Rs. 11,08,27,759/- u/s 14A r.w.r 8D of the IT Rules.

3.

Aggrieved, the assessee preferred an appeal before the CIT(A), who deleted the disallowance by observing that assessee has not earned any dividend income which is exempt from tax during the relevant assessment year and therefore no disallowance u/s 14A can be made. For coming to this conclusion, the CIT(A) had followed the decision of the coordinate Bench of this Tribunal in the case of Prathista Industries Ltd., Secunderabad in ITA No. M/s Lanco Power Ltd., Hyderabad. 1302/Hyd/2015 dated 29.04.2016 for the A.Y 2011-

12.

Aggrieved by the relief granted by the CIT(A), the Revenue is in appeal before us.

4.

The Ld. DR supported the order of the A.O, while the Ld. Counsel for the assessee supported the order of the CIT(A).

5.

Having regard to the rival contentions and the material on record, we find that there is no exempt income earned by the assessee from the investments during the relevant assessment year. Therefore, the CIT(A)’s finding that no disallowance u/s 14A r.w.r 8D of the IT Rules cannot be interfered with, because this issue covered in favour of the assessee by the decision of the Hon’ble Delhi High Court in the case of Cheminvest Ltd., reported in (2015) 378 ITR 33 (Del) and also by the decision of the Hon’ble Madras High Court in the case of Redington (India) Ltd., reported in 392 ITR 633. Respectfully following the same, we do not see any reason to interfere with order of the CIT(A), the Revenue’s appeal is accordingly dismissed. M/s Lanco Power Ltd., Hyderabad.

8.

In the result, the appeal filed by the Revenue is dismissed.

Pronounced in the open court on 06th April, 2018. (B. RAMAKOTAIAH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 06th April, 2018 KRK 1 M/s Lanco Power Ltd., Lanco House, Plot No. 4, Software Units Layout, Hitech City, Madhapur, Hyderabad-81 2 The ACIT, Circle-16(1), Hyderabad 3 The CIT(A)-4, Hyderabad. 4 The Pr. Commissioner of Income tax-4, Hyderabad. 5 The DR, ITAT Hyderabad 6 Guard File

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