ACIT, CORPORATE CIRCLE - 4 (1),, CHENNAI vs. M/S. L & T INFRSTRUCTURE DEVELOPMENT PROJECTS LTD.,, CHENNAI

These three appeals by the Revenue are arising out of three different orders of the learned Commissioner of Income Tax (Appeals)- 8, Chennai in 76/CIT(A)-8/2017-18 & 49/CIT(A)-8/2019-20 of different dates 21.02.2020 & 17.03.2020. to 729/Chny/2020 2 The assessments were framed by the DCIT / ACIT, Corporate Circle – 4(1), Chennai for the assessment years 2013-14, 2014-15 & 2017-18 u/s.143(3) of the of the Income Tax Act, 1961 (hereinafter ‘the Act’)vide orders of different dates i.e., 30.12.2016 & 19.12.2019 respectively.

At the outset, it is noticed that the two appeals were barred by 98 days and one appeal is barred by 87 days and Revenue has filed condonation petitions stating the reason that the orders of CIT(A) dated 21.02.2020 & 17.03.2020 were received by the PCIT on 12.03.2020 & 23.03.2020 and the due dates for filling of appeals before the Tribunal was 12.05.2020 & 22.05.2020 respectively. The Revenue in its condonation petitions stated the reason that due to Covid-19 pandemic, the appeals could not be filed in time, as the appeal before the Tribunal was to be filed on 12.05.2020 & 22.05.2020 but instead on that actually these appeals were filed only on 17.08.2020 with a delay of 98 days and 87 days. We noted that the Hon’ble Supreme Court in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. In term of to 729/Chny/2020 3 the directions of Hon’ble Supreme Court, we condone the delay in filing of these appeals by Revenue and admit these appeals for adjudication.

The only issue in these three appeals of Revenue is as regards to the order of CIT(A) deleting the disallowance of expenses relatable to exempt income by invoking the provisions of Section 14A of the Act, read with Rule 8D(2)(iii) of the Income Tax Rules, 1962 i.e., administrative expenses, made by the AO by computing the investments made in Special Purpose Vehicles. The CIT(A) restricted the disallowance at 2% of income derived from investments other than investments in SPV as disallowance u/s.14A r.w.rule 8D. The assessee has filed a chart of computation of disallowance u/s.14A, which reads as under:- Suo Motto Disallowance Outcome Exempt Income of CIT(A) Disallowance u/s 14A as per AY claimed by order made by Assessment assessee assessee Order disallow 2017-18 983000 20,02,219 21,68,10,699 2% of 2014-15 983000 16,30,480 13,33,90,378 dividend 2013-14 0 14,25,407 10,92,72,713 income

At the outset, the ld.counsel for the assessee stated that as far as assessment year 2013-14 in is concerned there is no exempt income earned by the assessee and to 729/Chny/2020 4 for this a specific ground has been raised by the assessee before the CIT(A) and despite the fact, that CIT(A) restricted the disallowance @ 2% of the dividend income earned excluding the investments made in SPVs. According to ld.counsel once there is no dividend income earned, the CIT(A) has rightly deleted the disallowance. The ld.DR could not controvert the above fact situation in this year.

After hearing both the sides, we noted that for the assessment year 2013-14, the assessee has not earned any exempt income and in view of the decision of Hon’ble Supreme Court in the case of CIT v. Chettinad Logistics (P) Ltd., (2018) 95 taxmann.com 250 (SC). The Hon’ble Supreme Court has dismissed the SLP against decision of Hon’ble Madras High Court in the case of CIT v. Chettinad Logistics (P.) Ltd., (2017) (80 taxmann.com 221) wherein it was held that that section 14A cannot be invoked where no exempt income was earned by assessee in relevant assessment year. In view of the decision of Hon’ble Supreme Court in the case of Chettinad Logistics (P.) Ltd., supra, we dismiss this appeal of the Revenue for the assessment year 2013-14.

After hearing rival contentions and going through the facts of the case, we noted that the CIT(A) erred in holding that only 2% of income deriving from investments is to be disallowed other than to 729/Chny/2020 6 investments in SPVs under Rule 8D(2)(iii). We set aside this finding and remand the matter back to the AO for deciding afresh but he will consider the investments which are giving rise to exempt income only, for the purpose of computation of disallowance of average value of investments. Hence, for these two assessment years, the matter is restored back to the file of the AO with the above directions.

In the result, the appeal filed by the Revenue in & 729/CHNY/2020 are allowed for statistical purposes.