ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-7(1)(1), BANGALORE vs. M/S UB INFRASTRUCTURE PROJECTS LIMITED, BANGALORE

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ITA 2813/BANG/2018Status: DisposedITAT Bangalore19 February 2021AY 2013-144 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 the assessee did not earn any exempted income during the relevant assessment year, no disallowance under Section 14A of the Income Tax Act is sustainable. The CIT(A)'s deletion of the disallowance was upheld.

What were the facts?

The Assessing Officer disallowed Rs. 1,61,34,320 under Section 14A. The assessee argued that no disallowance could be made as no exempted income was earned during the assessment year.

What were the issues?

Whether disallowance under Section 14A is permissible when no exempted 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

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, BANGALORE BENCHES “B”, BANGALORE

Before: Shri Chandra Poojari, AM & Shri George George K, JM

For Respondent: DR Assessee by : Smt.Girija G.P., Advocate
Hearing: 19.02.2021

O R D E R

Per George George K, JM

1.

This appeal at the instance of the Revenue is directed against CIT(A)’s order dated 01.08.2018. The relevant assessment year is 2013-2014.

2.

The solitary issue that is raised is whether the CIT(A) has erred in deleting the disallowance made by the Assessing Officer u/s 14A of the I.T.Act.

3.

The brief facts of the case are as follow: The Assessing Officer had made disallowance u/s 14A of the I.T.Act amounting to Rs.1,61,34,320, as per the discussion at para 5 of the assessment order.

4.

Aggrieved by the order of assessment dated 30.03.2016 passed u/s 143(3) of the I.T.Act, the assessee preferred an appeal to the first appellate authority. The CIT(A) held that . M/s.UB Infrastructure Projects Ltd. since no exempted income was earned during the relevant assessment year, no disallowance can be made u/s 14A of the i.T.Act. In holding so, the CIT(A) followed the order of the Tribunal in assessee’s own case for assessment year 2012- 2013 and the judgment of the Hon’ble Delhi High Court in the case of Cheminvest Ltd reported in 378 ITR 33.

5.

Aggrieved by the order of the CIT(A), the Revenue has filed this appeal before the Tribunal. The learned Departmental Representative relied on the findings of the Assessing Officer and the grounds raised. The learned Counsel for the assessee submitted that the issue in question is squarely covered by the order of the Tribunal in assessee’s own case for assessment year 2010-2011 in (order dated 31.03.2017) and for assessment year 2012-2013 in ITA No.2098/Bang/2016 (order dated 22.12.2017).

6.

We have heard rival submissions and perused the material on record. Admittedly in this case, no exempted income was earned during the relevant assessment year. The A.O. while making the disallowance u/s 14A of the I.T.Act, had relied on the Special Bench order of the Tribunal in Cheminvest Ltd. v. ITO reported in 121 ITD 318. The said order of the Tribunal was reversed by the Hon’ble Delhi High Court on 02.09.2015.The judgment of the Hon’ble Delhi High Court is reported in 378 ITR 33, wherein the Hon’ble Delhi High Court had clearly held that unless exempted income earned during the relevant assessment year, there cannot be any disallowance u/s 14A of the I.T.Act. The above judgment of the Hon’ble Delhi High Court has been followed by the Tribunal in assessee’s own

. M/s.UB Infrastructure Projects Ltd. case for assessment year 2010-2011 in 2016 (order dated 31.03.2017). The relevant finding of the Tribunal in assessee’s own case for assessment year 2010- 2011 reads as follow:-

“5. Having carefully examined the orders of lower authorities in the light of rival submissions and the judgments referred to by the parties, we find that undisputedly the assessee does not have any exempted income, therefore disallowance u/s. 14A of the Act cannot be made. We have also examined the judgment of the Hon’ble Delhi High Court in which Their Lordships have categorically held that where the assessee had not earned any taxable income in the relevant assessment year in question, then the corresponding expenditure could not be worked out for disallowance. Thus, no disallowance u/s. 14A of the Act can be made in the year in which no exempt income had been earned or received by the assessee. The view taken by the Hon’ble Delhi High Court has been consistently followed by the Tribunal in a series of cases. In the light of these facts, we are of the view that disallowance u/s. 14A is not sustainable. We accordingly set aside the order of CIT(Appeals) and delete the disallowance made u/s. 14A of the Act.”

6.1 In view of the above order of the Tribunal and the judgment of the Hon’ble Delhi High Court (supra) since no exempted income is earned during the relevant assessment year, no disallowance u/s 14A of the I.T.Act could be resorted to. Since the facts pertaining to the relevant assessment year are similar to the assessment year 2010-2011, the order of the Tribunal in assessee’s own case for assessment year 2010- 2011 squarely applies to the impugned assessment year as well. Accordingly, we hold that the CIT(A) is justified in deleting the disallowance made by the A.O. u/s 14A of the I.T.Act. It is ordered accordingly.

. M/s.UB Infrastructure Projects Ltd. 7. In the result, the appeal filed by the Revenue dismissed.

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