DCIT CEN CIR 5(4), MUMBAI vs. EMERALD REALTORS P.LTD, MUMBAI

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ITA 2392/MUM/2018Status: DisposedITAT Mumbai26 November 2019AY 2013-143 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that since the assessee had not earned any exempt income, the disallowance under Section 14A was not justified. The deletion of disallowance by the CIT(A) was upheld.

What were the facts?

The Revenue appealed against the deletion of disallowance made under Section 14A read with Rule 8D. The assessee had not earned any exempt income during the assessment years in question.

What were the issues?

Whether disallowance under Section 14A is permissible when no exempt income has been earned by the assessee.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “E”, BENCH

Before: SHRI M.BALAGANESH, AM & SHRI RAM LAL NEGI, JM

For Respondent: Shri Amit Pratap Singh
Hearing: 26/11/2019Pronounced: 26/11/2019

आदेश / O R D E R PER M. BALAGANESH (A.M): These appeals in 2393/Mum/2018 for A.Y.2013-14 & 2014-15 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-53, Mumbai in appeal No.CIT(A)-53/IT-90/ACCC- 5(4)/2016-17 & CIT(A)-53/IT-331/DCCC-5(4)/2016-17 respectively dated 16/02/2018 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/03/2016 & 26/11/2016 respectively by the ld. Dy. Commissioner

1.

2393/Mum/2018 M/s. Emerald Realtors Pvt. Ltd. of Income Tax & Asst. Commissioner of Income Tax, Central Circle – 5(4), Mumbai (hereinafter referred to as ld. AO).

2.

The only identical issue to be decided in both the years is as to whether the ld CIT(A) was justified in deleting the disallowance made u/s.14A of the Act r.w.rule 8D of the rules when the assessee had not received any exempt income.

3.

None appeared on behalf of the assessee. We have heard the ld. DR. It is not in dispute that assessee had not earned or received any exempt income during the years under consideration. We find that this issue is now covered in favour of the assessee by the decision of Hon’ble Delhi High Court in the case of Joint Investments Pvt. Ltd., vs. CIT reported in 372 ITR 694 (Del). The relevant operative portion of the said judgement is as under:- “9. In the present case, the AO has not firstly disclosed why the appellant/assessee's claim for attributing Rs.2,97,440/- as a disallowance under Section 14A had to be rejected. Taikisha says that the jurisdiction to proceed further and determine amounts is derived after examination of the accounts and rejection if any of the assessee's claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the AO - an aspect which is completely unnoticed by the CIT (A) and the ITAT. The third, and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs.48,90,000/-, the disallowance ultimately directed works out to nearly 110% of that sum, i.e., Rs.52,56,197/-. By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income". This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case.”

2393/Mum/2018 M/s. Emerald Realtors Pvt. Ltd.

4.

Respectfully following the aforesaid decision, we hold that the ld. CIT(A) was right in granting relief to the assessee. Accordingly, the grounds raised by the revenue are dismissed.

5.

In the result, appeals of revenue are dismissed.

Order pronounced in the open court on this 26/11/2019

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