KOHINOOR PLANET CONSTRUCTION PRIVATE LIMITED ,MUMBAI vs. ACIT-CC-6(3)(2),MUMBAI , MUMBAI

These captioned appeals filed by the assessee are directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-12, Mumbai (for short „Ld. CIT(A)‟) dated 24.07.2019 which inturn arises from the respective Assessment Orders passed u/s. 143(3)

As common issues are involved in the captioned appeals, the same are being taken up and disposed off by way of a consolidated order.

We shall first take up the appeal filed by the assessee for A.Y. 2010-11. The assessee has assailed the impugned order on the following standalone ground of appeal which is as under: - “The Ld.CIT(A) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in making disallowance of ₹.1,42,50,500/- under section 14A of the income Tax Act where no exempt income was earned by the assessee company. The action is unjustified and unwarranted.”

The Assessing Officer giving effect to the order passed by the Tribunal, vide his order u/s. 143(3) r.w.s. 254 of the Act, dated 31.03.2019, worked out the disallowance u/s. 14A at ₹.2,08,93,476/- and assessed the income of the assessee under the normal provisions at ₹.7,27,23,875/-. Apart from that, the book profits of the assessee u/s.115JB of the Act was determined at ₹.95,14,28,595/-.

Aggrieved, the assessee assailed the assessment order passed by the Assessing Officer u/s. 143(3) r.w.s. 254 of the Act, dated 31.03.2019 before the Ld.CIT(A). Observing that the assessee had sufficient own funds to justify the investments in the exempt income yielding assets, the Ld.CIT(A) vacated the disallowance of ₹.58,06,026/- made by the Assessing Officer u/s. 14A r.w. Rule 8D(2)(ii). Also, taking cognizance of the fact that the Assessing Officer had wrongly considered the amount

At the outset, it was submitted by the Learned Authorized Representative (for short „A.R‟) for the assessee, that as the assessee during the year in question had not earned any exempt income thus, no disallowance u/s. 14A was liable to be made in the hands of the assessee. In order to buttress his aforesaid claim, the Ld. A.R relied on the judgements of the Hon'ble Bombay High Court in the case of PCIT-6 v. Kohinoor Project (P.) Ltd., [2020] 121 taxmann.com 177

It was further averred by the Ld. A.R that as held by the Hon'ble High Court, in absence of any exempt income having been received or receivable by the assessee during the year in question no disallowance u/s. 14A be called for. It was the claim of the Ld. A.R that section 14A would not apply if no exempt income was received or was receivable during the relevant previous year. On the basis of the aforesaid averments it was the claim of the Ld.A.R that as no exempt income was received or was receivable by the assessee during the year in question, therefore no disallowance u/s. 14A was called for in its case. In order to dispel any doubt that no exempt income was received or was receivable by the assessee during the relevant previous year i.e. A.Y. 2010-11, Ld.A.R took us through the computation of income, copy of the return of income of the assessee and its audited accounts for the year in question.

We have heard the authorized representatives of both the parties and perused the orders of the lower authorities and the material available on record, and also considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. As observed by us, hereinabove, it is the claim of the Ld.A.R that no exempt income was received or was receivable by the assessee during the year in question i.e. A.Y. 2010-11. Ld.D.R had candidly admitted the aforesaid claim of the assessee. It is in the backdrop of the aforesaid fact that no exempt income was received or was receivable by the assessee during the year in question, that we shall herein deal with the issue in hand. It is the claim of the Ld.A.R, and rightly so, that in the absence of any exempt income, no disallowance u/s. 14A is liable to be made in the hands of the assessee. We find that the Hon'ble Bombay High Court in the case of PCIT-6 v. Kohinoor Project (P.) Ltd., (supra) in unequivocal terms had concluded that section 14A would not apply if no exempt income was received or was receivable by the assessee during the relevant previous years. For the sake of clarity,

Also, a similar view had been taken by the Hon'ble High Court in the case of PCIT v. Red Chillies Entertainment (P.) Ltd., (supra). Accordingly, in the backdrop of the fact that the no exempt income was received or was receivable by the assessee during the year in question i.e. A.Y. 2010-11, we agree with the claim of the Ld.A.R that no 8 ITA.Nos. 6342, 6343 & 6344/MUM/2019 (A.Y: 2010-11, 2011-12 & 2012-13) M/s. Kohinoor Planet Constructions Pvt. Ltd., disallowance u/s. 14A was called for in the hands of the assessee. Accordingly, in terms of our aforesaid observation we herein set-aside the order of the Ld.CIT(A) and vacate the disallowance of ₹.1,42,50,500/- made by the Assessing Officer u/s. 14A of the Act. Accordingly, Ground No. 1 is allowed.

Resultantly, appeal filed by the assessee for A.Y. 2010-11 is allowed in terms of our aforesaid observations.

As the facts and the issue involved in the aforementioned appeals i.e. A.Y. 2011-12, ITA.No. 6343/Mum/2019 and A.Y. 2012-13, ITA.No. 6344/Mum/2019 remains the same, as were there before us in the assessee‟s appeal for A.Y. 2010-11, ITA.No. 6342/Mum/2019, therefore, our order therein passed while disposing off the assessee‟s appeal for A.Y.2010-11 shall apply mutatis-mutandis for the purpose of disposing off the aforementioned appeals for A.Y. 2011-12 and A.Y. 2012-13.

Accordingly, appeals filed by the assessee for the A.Y. 2010-11, ITA.No. 6342/Mum/2019, A.Y. 2011-12, ITA.No. 6343/Mum/2019 and A.Y. 2012-13, ITA.No. 6344/Mum/2019 are allowed.