GLORIOUS HOLDINGS PVT. LTD.,MUMBAI vs. I.T.O.,WARD-2(3), KOLKATA

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ITA 175/KOL/2020Status: DisposedITAT Kolkata14 February 2020AY 2012-133 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that no disallowance under Section 14A can be made if the assessee has not earned any exempt income in the relevant year. Following judicial pronouncements, the disallowance was deleted.

What were the facts?

The assessee, a non-banking financial institution, made substantial investments in shares but did not offer any disallowance under Section 14A, claiming no exempt income was earned. The AO disallowed Rs. 18,07,807/- under Section 14A read with Rule 8D, which was confirmed by the CIT(A).

What were the issues?

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

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, KOLKATA BENCH ‘[A(SMC

Before: Shri P.M. Jagtap(KZ) & Shri S.S. Godara, JM]

Date of concluding the hearing : February 14, 2020 Date of pronouncing the order : February 14, 2020 ORDER PER P.M. JAGTAP, VICE-PRESIDENT (KZ)

This appeal filed by the assessee is directed against the order of ld. CIT(A) – 1, Kolkata dated 28.11.2019 and the solitary issue involved therein relates to the disallowance of Rs. 18,75,900/- made by the AO and confirmed by the ld. CIT(A) u/s 14A of the Income Tax Act, 1961, r.w.r. 8D of the Income Tax Rules 1962.

2.

The assessee in the present case is a non-banking financial institution. The return of income for the year under consideration was filed by it on 26.03.2013 declaring a total income of Rs. 68,091/-. Although substantial investment was made by the assessee company

Assessment Year: 2012-13 M/s. Glorious Holdings Pvt. Ltd. in the shares of other companies, no disallowance u/s 14A on account of expenses incurred in relation to the said investment was offered by the assessee u/s 14A of the Act on the ground that it had not earned any exempt income in the form of dividend during the year under consideration. The AO did not accept this stand of the assessee and made a disallowance of Rs. 18,07,807/- u/s 14A by applying Rule 8D of the Income Tax Rules, 1962. On appeal, the ld. CIT(A) confirmed the said disallowance made by the AO. Aggrieved by the order of the ld. CIT(A), the assessee has preferred this appeal before the Tribunal.

3.

We have heard the arguments of both the sides and also perused the relevant material available on record. As agreed by the learned representatives of both the sides, the issue involved in the present case is squarely covered in favour of the assessee by the various judicial pronouncements. In one of such decisions rendered in the case of PCIT vs IL & FS Energy Development Company Ltd. 84 taxmann.com 186, Hon’ble Delhi High Court held that no disallowance u/s 14A can be made if the assessee has not earned any exempt income in the relevant year. Hon’ble Calcutta High Court has also held in the case of CIT vs Ashika Global Securities Ltd. (ITAT 100 of 2014) that in the absence of any exempt income actually earned by the assessee during the relevant year, there was no question of making any disallowance u/s 14A r.w.r. 8D. Respectfully following the ratio of judicial pronouncements, we delete the disallowance made by the AO and confirmed by the ld. CIT(A) u/s 14A r.w.r. 8D and allow this appeal of the assessee.

Assessment Year: 2012-13 M/s. Glorious Holdings Pvt. Ltd.

4.

In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 14th February, 2020.

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