PONY INFRASTRUCTURE AND CONTRACTORS LIMITED,MUMBAI vs. INCOME TAX OFFICER WARD-13(1)(4), MUMBAI

The issue in the present appeal is, whether in absence of any exempt income earned during the year, disallowance u/s 14A r.w.r. 8D of the Act can be made?

The brief facts of the case are that assessee filed its return of income on 22.11.14 declaring total income at Rs. 6,48,660/- as per normal provision of Income Tax. The return was processed u/s 143(1). Subsequently, the case was selected for scrutiny under CASS and accordingly, notices u/s 143(2) and 142(1) were issued and served on the assessee. In response, AR of the assessee filed the relevant information as called for. After considering the submission of assessee, AO passed assessment order u/s 143(3) of the Act determining the total income at Rs. 39,29,340/- by making disallowances u/s 14A r.w.r. 8D of the Act.

Aggrieved by the above order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties, partly allowed the appeal filed by the assessee.

Now before us, the assessee has preferred the appeal against the order of Ld. CIT(A).

At the outset, Ld. AR appearing on behalf of the assessee submitted during this year, assessee has not earned any exempt income, hence no disallowance u/s 14A r.w.r 8D can be made. Further he submitted the issue is squarely covered by the order of Hon’ble Delhi High Court in the case of Cheminvest Ltd. Vrs. CIT (ITA No. 749/2014) and Hon’ble High Court of Judicature at Bombay in the case of PCIT vrs. Ballarpur Industries Ltd. (ITA No. 51 of 2016), wherein the Hon’ble High Courts have passed orders on identical ground in favour of the assessee.

On the other hand, Ld. DR supported the orders passed by the revenue authorities.

We have heard counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that the identical ground raised in the present appeal has already been decided by the Pony Infrastructure & Contractors Ltd.

We also draw strength from the decision of Hon’ble High Court of Judicature at Bombay in the case of PCIT vrs. Ballarpur Industries Ltd. (ITA No. 51 of 2016), wherein it was held as under:- On hearing the learned Counsel for the Department and on a perusal of the impugned orders, it appears that both the Authorities have recorded a clear finding of fact that there was no exempt income earned by the assessee. While holding so, the Authorities relied on the judgment of the Delhi High Court in Income Tax Appeal No. 749/2014 {CHEMINVEST LIMITED vs. COMMISSIONER OF INCOME TAX (2015) 378 ITR 0033 (Delhi)}, which holds that the expression “does not form part of the total income” in Section 14A of the Pony Infrastructure & Contractors Ltd.

Therefore, respectfully following the aforesaid decisions which is applicable mutatis mutandis in the present case, we are inclined to accept the submission of Ld. AR. Accordingly, we allow the grounds raised by the assessee by deleting the disallowance made u/s 14A r.w.r. 8D of the Act.