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

आयकर अपीलीय अिधकरण, ’बी’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI �ी वी दुगा� राव �ाियक सद� एवं �ी जी. मंजुनाथा, लेखा सद� के सम� Before Shri V. Durga Rao, Judicial Member & Shri G. Manjunatha, Accountant Member आयकर अपील सं./I.T.A. No. 3443/Chny/2019 िनधा�रण वष�/Assessment Year:2014-15 M/s. Hansa Vision India P. Ltd., The Deputy Commissioner of No. 19, Wheatcroft Road, Vs. Income Tax, Nungambakkam, Chennai 600 034. Corporate Circle 2(2), [PAN:AABCT3770E] Chennai. (अपीलाथ�/Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Shri S. Sridhar, Advocate ��थ� की ओर से/Respondent by : Shri G. Johnson, Addl. CIT सुनवाई की तारीख/ Date of hearing : 06.04.2022 घोषणा की तारीख /Date of Pronouncement : 05.05.2022 आदेश /O R D E R PER V. DURGA RAO,, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 6, Chennai, dated 29.11.2019 relevant to the assessment year 2014-15.

2.2 Ground No. 2 to 6 relates to confirmation of disallowance made under section 14A r.w. Rule 8D. Facts leading to the ground are that

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the assessee has shown ₹.63,50,57,077/- as investment which are exempt income yielding investments. However, the assessee has not attributed any portion of expenditure debited to the profit and loss account towards earning of exempt income. After recording satisfaction and considering the submissions of the assessee, 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/-, disallowed and brought to tax. On appeal, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer.

2.3 On being aggrieved, the assessee is in appeal before the Tribunal and the ld. Counsel for the assessee has submitted that the assessee has not earned any exempt income in the assessment year under appeal and therefore, the Assessing Officer cannot make any disallowance under section 14A of the Act in view of the decision of the Hon’ble Jurisdictional High Court in the case Redington India Limited v. ACIT [2017] 77 Taxmann.com 257 (Mad) and prayed for deleting the addition made under section 14A of the Act. It was further submitted that no disallowance under section 14A of the Act could be made while computing book profits under section 115JB of the Act in view of the

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decision in the case of Sobha Developers Ltd. v. DCIT 434 ITR 266 (Kar).

2.4 On the other hand, the ld. DR strongly support the order of the ld. CIT(A) and relied upon the decision of the Hon’ble Supreme Court in the case of Maxopp Investments Ltd. v. CIT 402 ITR 406.

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,

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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

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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,-

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(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. 7. Thus from perusal of the relevant extract of Section 115JB, it is evident that Sub-Section (1) of Section 115JB provides the mode of computation of the total income of the assessee and tax payable on the assessee under Section 115JB of the Act. Sub-Section (5) of Section 115JB provides that 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. Therefore, any expenditure relatable to earning of income exempt under Section 10(2A) and Section 10(35) of the Act is disallowed under Section 14A of the Act and is added back to book profit under clause (f) of Section 115JB of the Act, the same would amount to doing violence with the statutory provision viz., Sub-Section (1) and (5) of Section 115JB of the Act. It is also pertinent to mention here that the amounts mentioned in clauses (a) to (i) of explanation to Section 115JB(2) are debited to the statement of profit and loss account, then only the provisions of Section 115JB would apply. The disallowance under Section 14A of the Act is a notional disallowance and therefore, by taking recourse to Section 14A of the Act, the amount cannot be added back to book profit under clause (f) of Section 115JB of the Act. It is also pertinent to mention here that similar view, which has been taken by this court in Gokaldas Images (P) Ltd. supra was also taken by High Court of Bombay in 'THE COMMISSIONER OF INCOME TAX-8 VS. M/S BENGAL FINANCE & INVESTMENTS PVT. LTD.', I.T.A.NO.337/2013. It is pertinent to note that in Rolta India Ltd., the Supreme Court was dealing with the issue of chargeability of interest under Section 234B and 234C of the ct on failure to pay advance tax in respect of tax payable under Section 115JA/ 115JB of the Act and therefore, the aforesaid decision has no impact on the issue involved in this appeal. Similarly, in MAXOPP Investment Ltd., supra the Supreme Court has dealt with Section 14A of the Act and has not dealt with Section 115JB of the Act. Therefore, the aforesaid decision also does not apply to the fact situation of the case. In view of preceding analysis, the substantial questions of law framed by a bench of this court are answered in favour of the assessee and against the revenue. In the result, the order passed by the tribunal dated 09.01.2015

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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,

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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,

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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.

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accordingly, we remit the matter back to the file of the Assessing Officer for de novo consideration after affording an opportunity of being heard to the assessee. The ground raised by the assessee is allowed for statistical purposes.

Sd/- Sd/- (G. MANJUNATHA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 05.05.2022 Vm/- आदेश की �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant, 2.��थ�/ Respondent, 3. आयकर आयु� (अपील)/CIT(A), 4. आयकर आयु�/CIT, 5. िवभागीय �ितिनिध/DR & 6. गाड� फाईल/GF.