HANSA VISION INDIA PRIVATE LIMITED,CHENNAI vs. DCIT, CHENNAI

2.5 We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In this case, the assessee has investments to the extent of ₹.63,50,57,077/- which are exempt income yielding investments. By applying section 14A r.w. Rule 8D, the Assessing Officer determined the expenditure attributable to earning of exempt income under section 14A of the Act r.w. Rule 8D of ₹.31,75,285/- and disallowed. Admittedly, the assessee has not earned any exempt income during the assessment year under consideration. The contention of the assessee is that when there is no exempt income earned, there is no question of expenditure required to be disallowed in view of the decision in the case of Redington India Ltd. v. ACIT (supra). We have perused the case law, wherein, the Hon’ble Jurisdictional High Court, after considering the fact that the assessee has not earned any exempt income for the relevant period, held that in the absence of exempt income earned, no disallowance can be made towards expenses relatable to said exempt income under section 14A of the Act.

2.7 The case law relied on by the ld. DR in the case of Maxopp Investments Ltd. v. CIT (supra) has no application to the facts of the present case for the reason that, in that case, the assessee has earned exempt dividend income and not disallowed any expenditure attributable to earning of the exempt income and therefore, the Hon’ble Supreme Court has sustained the disallowance made under section 14A of the Act.

2.8 In view of the above facts and binding decision of the Hon’ble Jurisdictional High Court in the case of Redington India Ltd. v. ACIT (supra), the disallowance made by the Assessing Officer under section 14A of the Act is deleted.

2.9 So far as disallowance under section 14A of the Act while computing the book profit under section 115JB of the Act is concerned, in the recent judgement in the case of Sobha Developers Ltd. v. DCIT (supra), wherein, the Hon’ble Karnataka High Court has held that the disallowance made under section 14A of the Act could not be added to book profits of the assessee under section 115JB of the Act. The substantial question of law raised before the Hon’ble Karnataka High Court is reproduced as under: “Whether the tribunal is justified in law in holding that the indirect expenditure disallowed under Section 14A read with rule 8D(iii) of Rs.24,64,632/- in computing the total income under normal provisions of the Act, is to be added to the net profit in computation of book profit for MAT purposes under Section 115JB and thereby importing the provision of Section 14A read with rule 8D into the MAT provisions on the facts and circumstances of the case?” 2.10 After considering the arguments of the both sides, the Hon’ble Karnataka High Court has observed and held as under: “6. We have considered the submissions made on both sides and have perused the record. Before proceeding further, it is apposite to take note of relevant extract of Section 115JB of the Act, which reads as under: 115JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2012, is less than eighteen and one-half per cent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of eighteen and one-half per cent. (f) the amount or amounts of expenditure relatable to any income to which section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply; or (i) the amount or amounts set aside as provision for diminution in the value of any asset, if any amount referred to in clauses (a) to (i) is debited to the statement of profit and loss or if any amount referred to in clause (j) is not credited to the statement of profit and loss, and as reduced by,- (i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April, 1997 otherwise than by way of a debit to the statement of profit and loss), if any such amount is credited to the statement of profit and loss: (5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section.

insofar as it pertains to the findings recorded against the assessee is hereby quashed.” 2.11 The ld. DR could not controvert the above decision of the Hon’ble Karnataka High Court or filed any other higher Court’s decision having modified or reverted or any decision favouring the Revenue. Respectfully following the above decision in the case of Sobha Developers Ltd. v. DCIT (supra), the disallowance made under section 14A of the Act while computing book profits under section 115JB of the Act is dismissed.

The assessee has claimed an amount of ₹.10,85,501/- towards 3.1 expenses incurred on building and justified that the company during the financial year 2005-06 had incurred a sum of around ₹.97 lakhs towards temporary structure on the buildings held by the assessee company. The assessee company had, in fact, leased out the building after the renovation. The lease is for a period of 9 years from the assessment year 2006-07 to 2014-15. Before the Assessing Officer, the assessee has submitted that as per section 32 of the Act, the assessee is entitled to 100% depreciation of expenditure incurred towards temporary structures. The assessee company on a prudent basis had claimed the expenditure on the lease building not in one assessment year, but, over a period of lease. After considering the submissions of the assessee, the Assessing Officer has observed that the income received on building given on lease is taxable under the head “income from house property” and any expenses incurred thereto are not business expenditure. Further, the expense incurred on temporary partition is a revenue expense eligible for depreciation in the respective year if the asset is put to use for business. The amount has been incurred towards temporary structure during the previous year. No deferred revenue expenditure claim is allowable unless specifically provided under the Act. Hence, the Assessing Officer rejected the claim of depreciation on the expenditure of ₹.10,85,501/- and brought to tax. On appeal, the ld. CIT(A) confirmed the addition.

3.2 We have heard the rival contentions. Similar disallowance of expenditure of ₹.18,85,501/- was also made by the Assessing Officer in the assessment years 2012-13 and 2013-14 against which, on appeal, the ld. CIT(A) has held that the entire amount of expenditure on putting up partitions is not allowable under the scheme of the Act and confirmed the disallowance of ₹.10,85,501/- made by the Assessing Officer. By following the above decision of the ld. CIT(A) in earlier assessment years, the ld. CIT(A) has confirmed the disallowance under the assessment year under consideration. Before the Tribunal, the assessee has not brought on record as to whether the assessee has preferred any appeal against the above disallowance made in the assessment years 2012-13 and 2013-14. When once the assessee has accepted the disallowance in earlier assessment years, similar disallowance made on identical facts in subsequent assessment year cannot be challenged. Accordingly, the ground raised by the assessee is dismissed.