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Income Tax Appellate Tribunal, HYDERABAD BENCH “B”, HYDERABAD
Before: SHRI D. MANMOHAN & SHRI S. RIFAUR RAHMAN
PER S. RIFAUR RAHMAN, A.M.:
This appeal is preferred by the Revenue against the order of CIT(A) –36, Hyderabad, dated 06/02/2017 for the AY 2012-13.
On perusal of record, we find that there was a delay of 5 days in filing the appeal before us. Considering the submissions of the ld. DR, we hereby condone the delay and admit the appeal for hearing and adjudication.
Briefly the facts of the case are, the assessee engaged in the business of real estate filed its return of income for AY 2012-13 on 28/09/2011 after claiming 80IA(4) deduction under normal provisions. Book profit u/s 115JB was 57,72,572/-. The AO determined the
2 ITA No. 839 /Hyd/2017 SDE Engineers Pvt. Ltd. income at normal provisions of Rs. 77,71,710/- by disallowing 80IA(4) deduction and disallowance u/s 14A of the Act.
When the assessee preferred an appeal before the CIT(A), the CIT(A) confirmed the disallowance u/s 80IA(4) and deleted the disallowance u/s 14A of the Act, which is the subject matter of appeal before us.
Aggrieved by the action of the CIT(A) in deleting the disallowance u/s 14A, the revenue is in appeal before us raising the following grounds of appeal: “1. The Learned CIT(A) erred both in law and on facts of the case.
The Learned CIT(A) erred in deleting the disallowance made u/ s. 14A read with rule 8D(2) of Rs.39,32,336/-.
The learned CIT(A) erred in not considering the fact that the assessee had advanced the amounts to the sister concerns out of the borrowed funds which is clearly established by the Assessing Officer during the course of Assessment Proceedings.
The learned CIT(A) ought to have considered that the CBOT vide in Circular No.05/20 14 dt. 11-02-'2014 had clearly held that disallowance of expenditure for earning exempt income u/s.14A rwr 8D would be attracted even if the corresponding exempt income has not been earned during the financial year.”
The facts, in brief, are, during the previous year relevant to the assessment year under consideration, the assessee made investment in equity shares of M/s Meenakshi Power Ltd. and M/s. Meenakshi Ventues and Holdings India Pvt Ltd. The income derived from such investments are exempt from tax. The investments as at 31.03.2011 and 31.03.2012 were reported by the assessee in the financial statements are at Rs 4,67,00,000/- and Rs. 6,32,00,000/- respectively. The interest paid during the year was Rs. 2,34,63,255/-. The AO observed that as per the provisions of sec.14A of the Act, no deduction shall be allowed in respect of expenditure incurred by the
3 ITA No. 839 /Hyd/2017 SDE Engineers Pvt. Ltd. assessee in relation to income which does not form part of the total income under the Act. Accordingly, after considering the submissions of the assessee, AO calculated the disallowance u/s 14A along with rule 8D(2)(ii) & (iii) to the extent of Rs. 39,32,336/-. Aggrieved with the above order, assessee preferred an appeal before the CIT(A).
Ld. CIT(A) after considering the submissions of the assessee, extracted the income tax computation and profit & loss a/c of the assessee and observed that as per the said statement, the assessee has not derived any exempt income during this AY. Therefore, relying on the following cases, the CIT(A) held that disallowance u/s 14A cannot be made in this case.
i) VBC Industries Limited, Hyderabad Vs DCIT, Circle-3(3) for the assessment years 2008-09 to 2010-11 in ITA Nos.143/H/13 dated 30-04-2015.
ii)) M/s Medha Servo Drives Private Limited, Hyderabad Vs DCIT, Circle-16(2) in ITA Nos.260&261/H/2015 dated 05-06- 2015.
iii) Prathista Industries Limited, Hyderabad Vs. DCIT, Circle- 16(3) In ITA No.1302/HYd/2015 for the assessment year 2011- 12 dated 29-04-2015.
Therefore the Assessing Officer is directed not to make any disallowance u/s 14A.”
Considered the rival submissions and perused the material on record. It is observed that assessee has not earned any dividend income during this year, but, it has earned only interest income. Therefore, it is the consistent view of the Hyderabad Benches that the expenditure incurred for earning of any income, which does not form part of total income alone can be disallowed. In case, there is no exempt income, there cannot be any disallowance u/s 14A of the Act. Therefore, we do not find any infirmity in the order of the CIT(A) as his decision is in consonance with the decision of the coordinate
4 ITA No. 839 /Hyd/2017 SDE Engineers Pvt. Ltd. benches and accordingly we uphold the order of the CIT(A) and dismiss the grounds raised by the revenue on this issue.
In the result, appeal of the revenue is dismissed.
Pronounced in the open court on 12th January, 2018.
Sd/- Sd/- (D. MANMOHAN) (S. RIFAUR RAHMAN) VICE PRESIDENT ACCOUNTANT MEMBER
Hyderabad, Dated: 12th Janaury, 2018 kv Copy to:-
1) ITO, Ward –3(1), O/o 7th Floor, Signature Towers, Kondapur, Hyd. 2) M/s SDE Engineers Pvt. Ltd., Plot No. 119, Meenakshi’s, Road No. 10, Jubilee Hills, Hyd. 3) CIT(A) – 3, Hyderabad. 4) Pr. CIT – 3 , Hyderabad. 5) The Departmental Representative, I.T.A.T., Hyderabad. 6) Guard File