DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYDERABAD vs. CASPIAN IMPACT INVESTMENTS PRIVATE LIMITED, HYDERABAD

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ITA 291/HYD/2019Status: DisposedITAT Hyderabad06 January 2022AY 2015-163 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 order, stating that Section 14A read with Rule 8D applies only when an assessee has earned exempt income. As the assessee had no exempt income in the relevant year, the disallowance was correctly deleted.

What were the facts?

The Revenue appealed the deletion of a disallowance made under Section 14A and Rule 8D concerning portfolio management fees. The assessee argued that since no exempt income was earned in the relevant year, the disallowance was not applicable.

What were the issues?

Whether disallowance under Section 14A and Rule 8D is applicable when the assessee has not earned any exempt income. Whether portfolio management fees paid on investments yielding no exempt income are disallowable.

Which sections of the Income-tax Act were involved?

Section 14A,Section 115JB

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A” : HYDERABAD

Before: SHRI S.S.GODARA & SHRI LAXMI PRASAD SAHU

O R D E R PER S.S.GODARA, J.M. : This Revenue’s appeal for AY.2015-16 arises from the CIT(A)-1, Hyderabad’s order dated 21-12-2018 passed in case No.0127/2017-18/DCIT, Circle 1(2)/CIT(A)-1/Hyd/2018-19, in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused.

2.

The Revenue has raised the following substantive grounds in the instant appeal: “1.CIT(A) erred in deleting the disallowance made u/s.14A to the extent of Rs.2,29,49,164/- while computing the income under the normal provisions. 2.CIT(Appeals) erred in ignoring the fact that said amount of ‘portfolio management fee’ paid by the assessee is direct expenditure incurred on the investments, income from which is exempt and therefore has to be disallowed under Rule 8D(i). 3.CIT(A) erred in deleting the disallowance made of the said sum while computing the book profits, which is contrary to clause (f) of explanation 1 to Sec 115JB. 4.Any other ground that be urged at the time of hearing.”

3.

At the outset, learned authorised representative submitted that since there is no dividend income earned in the relevant previous year the CIT(A)’s order deleting the impugned Section 14A disallowance r.w. rule 8D disallowance may be upheld. In this connection, he relied on the following case law: i. CIT Vs. Chettinad Logistics Pvt. Ltd., [80 taxmann.com 221] (Madras); ii. CIT Vs. Corrtech Energy Pvt. Ltd., [223 Taxman 130] (Guj); iii. Cheminvest Ltd., Vs. CIT (2015) [378 ITR 33] (Del) Their lordships hold that Section 14A read with Rule 8D applies only in relation to an assessee’s exempt income and not otherwise. It is an admitted fact that the assessee has not derived any exempt income in the relevant previous year. We therefore sustain the order of CIT(A) under challenge for this precise reason alone.

4.

This Revenue’s appeal is dismissed in above terms.

Order pronounced in the open court on 6th January, 2022

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