JOINT COMMISSIONER OF INCOME-TAX, (OSD), CIRCLE -1, SOLAPUR vs. M/S. LOKMANGAL SUGAR ETHENOL AND CO-GENERATION INDUSTRIES LTD, SOLAPUR

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ITA 1035/PUN/2018Status: DisposedITAT Pune30 June 2022AY 2013-145 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

For AY 2013-14, the disallowance under Section 14A was rejected as no exempt income was earned. For AY 2014-15, the Section 14A disallowance was restricted to the extent of exempt income earned. The Section 36(1)(va) disallowance was deleted as the employee contributions were paid before the due date of filing the return.

What were the facts?

The appeals concerned disallowances under Section 14A read with Rule 8D for AY 2013-14 and 2014-15, and a disallowance under Section 36(1)(va) for AY 2014-15. The assessee also filed cross objections.

What were the issues?

Whether disallowance under Section 14A is applicable when no exempt income is earned, and if it can be restricted to the exempt income. Also, whether disallowance under Section 36(1)(va) is valid for employee contributions paid before the return filing due date.

Which sections of the Income-tax Act were involved?

Section 14A,Section 36(1)(va),Section 2(24)(x),Section 43B

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Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, ‘A’ BENCH, PUNE

For Appellant: Shri Krishna V. Gujarathi
For Respondent: Shri S.P. Walimbe

ORDER PER S.S. GODARA, JM : These Revenue’s twin appeals in and 1036/PUN/2018 and assessee’s as many cross objections C.O. Nos. 07 & 08/PUN/2022 therein for A.Y. 2013-14 and 2014-15 arise from the CIT(A)-9, Pune’s separate orders, both dated 23-03-2018, passed in case No. PN/CIT(A)-7/Cir.1/10406/2016- 17/126 and No. PN/CIT(A)-7/Cir.1/10776/2016-17, respectively involving proceedings u/s 143(3) of the Income-tax Act, 1961, in short “the Act”.

Heard both the parties. Case files perused.

2.

The Revenue’s identical sole substantive ground in former A.Y. 2013-14 and former grievance in latter assessment year 2014-15’s appeal seek to revise section 14A r.w. rule 8D disallowance(s) of Rs. 3,17,01,372/- and Rs. 2,44,30,742/-; casewise, respectively.

2 & 1036/PUN/2018 and C.O No. 07 & 08/PUN/2022 Lokmangal Sugar Ethenol A.Y. 2013-14 & 2014-15 3. It emerges at the outset that there is hardly any need at all for us to derive deeper in the relevant factual matrix regarding the instant section 14A r.w. rule 8D disallowance in principle. The Revenue fails to rebut the clinching fact that the assessee has not derived any exempt income in former A.Y. 2013- 14. Case laws PCIT Vs. Ballarpur Industries Ltd. Tax Appeal No. 51/2016 (Bom), PCIT Vs. Kohinoor Projects Ltd. (2020) 121 taxman.com 177 (Bom) holds that section 14A r.w. rule 8D applies only in “relation to” an assessee’s exempt income than having any independent exigibility. We thus reject Revenue’s sole substantial ground as well as main appeal ITA No. 1035/PUN/2019 for this precise reason alone.

4.

Coming to the issue of sec. 14A r/w rule 8D disallowance in latter assessment year i.e. 2014-15 involving Revenue’s appeal both the parties conceded very fairly that the assessee had indeed derived exempt income of Rs. 12000/- in the relevant previous year. Faced with this situation, we follow Joint Investments Pvt. Ltd. Vs. CIT (2015) 372 ITR 694 (Del) to restrict the impugned disallowance to the extent of exempt income only. The Assessing Officer shall frame his consequential computation on very lines accordingly. The Revenue’s former substantive ground in its second appeal i.e. ITA No. 1036/PUN/2018 is partly allowed to the limited extent.

5.

The Revenue’s latter substantive ground in is that the CIT(A) had erred in law and on facts in reversing sec. 36(1)(va) r.w.s. 2(24)(x) disallowance/addition of Rs. 6,03,820/- pertaining to assessee’s employees’ contribution to ESI/PF which had not been paid before the due date under the relevant statute. Suffice to say, it transpires during the course of hearing that the legislature has amended both sections 36(v)(va) and 43B of the Act by inserting Explanation 2 and 5 therein, respectively vide Finance Act

3 & 1036/PUN/2018 and C.O No. 07 & 08/PUN/2022 Lokmangal Sugar Ethenol A.Y. 2013-14 & 2014-15 2021 that they apply in case of employees’ and employer’s respectively. The same has been made applicable w.e.f. 1-4-2021 only whereas we are in assessment year 2014-15. That being the case, we take note of the foregoing legislature developments to conclude that the CIT(A) has rightly deleted the impugned sec. 36(1)(va) disallowance of employees provident fund which had been paid before the due date of filing the return. The Revenue fails in its latter substantive grievance. Its latter appeal ITA No. 1036/PUN/2018 is partly allowed.

6.

Coming to assessee’s Cross Objection being C.O No. 07 and 08/PUN/202022, in the Revenue’s foregoing twin appeals, learned Counsel stated very fairly that they are only supportive to the CIT(A)’s findings which are not pressed. Rejected accordingly.

7.

No other grounds have been raised before us.

8.

To sum up, Revenue’s former appeal is partly allowed whereas assessee’s cross objections thereto CO Nos. 07 and 08/PUN/2022 stand dismissed as not pressed in above terms. A copy of this common order be placed in the respective case files.

Order pronounced in the open Court on this 30th day of June 2022.

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