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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI RAMIT KOCHAR
सुनवाई क� तार�ख/Date of hearing : 19.12.2019 घोषणा क� तार�ख /Date of Pronouncement : 03.01.2020 आदेश /O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: These appeals of the assessee are directed against the common order passed by the Commissioner of Income Tax (Appeals)-11, Chennai dated 08.07.2019 and pertains to the assessment years 2013- 14 & 2014-15. Therefore, we heard both the appeals together and disposing off by this common order.
Shri M. Viswanathan, the Ld. Representative for the assessee submitted that the assessee claimed interest expenditure incurred on the loan raised and utilized for purchase of land. A similar issue came before this Tribunal for the assessment years 2010-11 and 2012-13. This Tribunal found that the project was not yet commenced its operation therefore the assessee cannot claim the expenditure. In view of the decision of this Tribunal for the assessment years 2010-11 and 2012-13 in 2085 & 2086/Chny/2016 dated 27.06.2018, the grounds of appeal may be decided against the assessee. Coming to the disallowance made U/s.14A of the Income Tax Act, 1961 (in short ‘the Act’), the Ld. Representative for the assessee submitted that there was no dividend income earned by the assessee during these years under consideration. Therefore, in view of the judgment of the Madras High Court in the case of M/s. Redington (India) Ltd., Vs. Addl.CIT (2017) 392 ITR 633, there cannot be any disallowance U/s.14A of the Act.
4. We heard Shri Pavithran Kumar, the Ld. Departmental Representative also. According to the Ld.DR, interest expenditure was disallowed in the earlier assessment years also and this Tribunal by an 3 & 142/Chny/2019 order dated 27.06.2018 confirmed the similar disallowance. Coming to disallowance made by the Assessing Officer U/s.14A of the Act, the Ld.DR very fairly submitted that there was no exempt income earned by the assessee. Therefore in view of the judgment of the Madras High Court in M/s. Redington (India) Pvt. Ltd, supra, there cannot be any disallowance of expenditure.
5. We have considered the rival submissions on either side and perused the material available on record. With regard to disallowance of interest expenditure, it is not in dispute that the business operation of the assessee for construction of NH5 was not commenced and it is only in a preparatory stage. For the assessment years 2010-11, 2011-12 and 2012-13, an identical issue came before this Tribunal. This Tribunal found that since the business has not commenced, the assessee cannot claim the expenditure U/s.37 of the Act. Since, the facts are similar to that of the assessment years 2010-11, 2011-12 and 2012-13, this Tribunal is of the considered opinion that the claim of expenditure towards interest cannot be allowed as revenue expenditure. Therefore the order of both the authorities below is confirmed.
5.1 Now coming to disallowance made by the Assessing Officer U/s.14A of the Act. Admittedly the assessee had not earned any exempt income in the year under consideration. The Madras High Court in the 4 & 142/Chny/2019 case of M/s. Redington (India) Ltd., discussed this issue elaborately and found that unless there was an exempted income, there cannot be any disallowance U/s.14A of the Act. In view of the judgment of the Madras High Court in M/s. Redington (India) Ltd., this Tribunal is of the considered opinion that there cannot be any disallowance. The judgment referred by the CIT(A) is not relevant to the facts of the present case. The judgment of Madras High Court is binding on all authorities in the State of Tamil Nadu and Pondicherry including this Tribunal. Therefore this disallowance made by the Assessing Officer U/s.14A of the Act is deleted.
In the result, both the appeals filed by the assessee are partly allowed.
Order pronounced in the court on 3rd January, 2020 at Chennai.