DY. COMMISSIONER OF INCOME TAX, CIRCLE-16(2), HYDERABAD vs. MODI BUILDERS AND REALTORS PRIVATE LIMITED, HYDERABAD

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ITA 1167/HYD/2017Status: DisposedITAT Hyderabad03 April 2018AY 2013-143 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 upheld the CIT(A)'s decision, agreeing that Section 14A is applicable only when exempt income is actually earned by the assessee. Since no exempt income was earned in the relevant assessment year, no disallowance could be made.

What were the facts?

The assessee, a real estate company, made investments in subsidiary companies. The Assessing Officer (AO) invoked Section 14A to disallow expenditure related to these investments, even though no exempt income was earned. The CIT(A) deleted this disallowance.

What were the issues?

Whether disallowance under Section 14A can be made when no exempt income is earned by the assessee. The applicability of Section 14A in the absence of exempt income.

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 BENCHES “A” BENCH: HYDERABAD

Before: SHRI D. MANMOHAN & SHRI S. RIFAUR RAHMAN

Hearing: 03.04.2018Pronounced: 03.04.2018

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A” BENCH: HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA. No.1167/Hyd/2017 (Assessment Year: 2013-2014) DCIT, vs. M/s. Modi Builders and Circle-16(2), Realtors Private Limited, Hyderabad. Hyderabad. PAN: AACCM 2490 D (Appellant) (Respondent) For Assessee: Shri S. Rama Rao For Revenue : Smt. Suman Malik, DR Date of Hearing : 03.04.2018 Date of Pronouncement : 03.04.2018 ORDER PER D. MANMOHAN, VP. This appeal is directed against the order passed by Ld. CIT(A)-4, Hyderabad and it pertains to A.Y. 2013-14. The only ground urged in this appeal reads as under:

“On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance made u/s 14A by holding that assessee did not earn any exempt income.”

2.

Facts necessary for the disposal of appeal are stated in brief. Assessee-company is into real estate business. For the year under consideration it admitted taxable income of Rs. 46.36 lakhs. The case having been selected for scrutiny, the A.O. called for the books of account and noticed that the assessee-company made investment in subsidiary companies which can yield exempt income and therefore, the provisions of section 14A was sought to be invoked. The case of the assessee, on the other hand, was that the provisions of section 14A comes into play only when the an assessee earns exempt income in the year under consideration since the section speaks of disallowance of

expenditure incurred to earn the exempt income. Since there is no income earned there cannot be any disallowance in this year. A.O. rejected the contention of the assessee and proceeded to compute the disallowance u/s 14A read with Rule 8D and accordingly made disallowance of Rs. 39,92,033/-.

3.

On an appeal filed by the assessee, Ld. CIT(A) observed that the assessee having not earned any income out of such investments it falls out of the ken of section 14A, in the light of the decision of the ITAT, Hyderabad “A” Bench in the assessee’s own case for the A.Y. 2009-10 (ITA No.1786/Hyd/2013). Accordingly she set aside the disallowance made by the A.O. Aggrieved, Revenue is in appeal before the Tribunal.

4.

It is not in dispute that the assessee has not earned any dividend income in the year under consideration. In the light of the consistent view taken by the ITAT Hyderabad Bench (in the assessee’s own case for the A.Y. 2009-10) we are of the opinion that the view taken by the Ld. CIT(A) does not call for any interference.

5.

It may be noted that the Learned Counsel for the Assessee requested for time which was not granted; In fact he has not even filed his power of attorney. Considering the fact that there is no need for appearance of the assessee in the instant case, we reject the request for adjournment and proceed to dispose of the appeal. In view of the circumstances stated hereinabove, we are of the view that the order passed by the Ld. CIT(A) deserves to be upheld. As pronounced in the open court, the appeal filed by the Revenue is dismissed.

Sd/- Sd/- (S. RIFAUR RAHMAN) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT Hyderabad, Dated: 03rd April, 2018.

OKK, Sr.PS Copy to

1.

M/s. Modi Builders and Realtors Private Limited, 4th Floor, Ashoka Hitech Chambers, 8-2- 120/76/1/B/16,17 & 18, Road No.2, Banjara Hills, Hyderabad-34. 2. Dy. Commissioner of Income Tax, Circle 16(2), 2nd Floor, B-Block, IT Towers, Masab Tank, Hyderabad. 3. CIT (A)-4, Hyderabad. 4. Pr. CIT-4, Hyderabad. 5. DR, ITAT, Hyderabad. 6. Guard File

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