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Income Tax Appellate Tribunal, DELHI BENCH ‘C’ NEW DELHI
Before: SHRI N.K.BILLAIYA & SHRI SUDHANSHU SRIVASTAVA
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : This appeal has been preferred by the department against order dated 17.02.2015 passed by the Ld. CIT (Appeals)-7, New Delhi for the assessment year 2009-10 and the sole issue under challenge is the action of the ld. Commissioner of Income Tax(A) in deleting the addition of Rs. 4,26,31,548/- on account of disallowance made by the Assessing Officer u/s 14A of the Income Tax Act, 1961 (hereinafter called 'the Act').
Brief facts of the case are that the return of income was filed declaring loss of Rs. 10,41,75,995/-. Subsequently, the case was selected for scrutiny and the assessment was completed at a loss of Rs. 4,65,04,702/- after making a disallowance of Rs. 4,26,31,548/- u/s 14A of the Act, addition of share capital and share application money u/s 68 of the Act amounting to Rs. 1,50,00,000/-on account of ROC fee paid for increase in authorised capital and also a disallowance of Rs. 39,745/- relating to unverifiable expenses.
2.1 Aggrieved, the assessee approached the ld. Commissioner of Income Tax(A) who partly allowed the assessee’s appeal by deleting the disallowance made u/s 14A of the Act on the ground that the assessee did not have any exempt income during the year under consideration. However, the ld. Commissioner of Income Tax(A) upheld the addition of Rs. 1,50,00,000/- u/s 68 of the Act.
2.2 Aggrieved by the order of the ld. Commissioner of Income Tax(A), the department has now approached the ITAT and is challenging the deletion of addition on account of disallowance u/s 14A of the Act.
None was present on behalf of the assessee respondent when the appeal was called out for hearing nor was any application for adjournment received on behalf of the assessee respondent. It is also seen from the records that the notice sent for the hearing by the Registry of the ITAT has been received back unserved from the postal department with the noting that the premises have remained closed since long. Therefore, looking into the facts and circumstances, we proceed to hear the departmental appeal ex parte qua the assessee respondent.
3.1 Ld. Sr. DR submitted that the disallowance had been correctly computed by the Assessing Officer in terms of provisions of Rule 8D r/w section 14A of the Act. It was further submitted that as per section 14A(2) of the Act, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income, the Assessing Officer is authorised to determine the amount incurred in relation to such income in accordance with Rule 8D of the Income Tax Rules. It was submitted that the objective of section 14A is to tax all expenses directly or indirectly attributable to earning of exempt income.
The ld. Sr. DR placed extensive reliance on the judgment of the Hon’ble Punjab & Haryana High Court in the case of Punjab Tractors Ltd. reported in (2017) TOIL-3-53-P&H. Reliance was also placed on Circular No. 5 of 2004. It was submitted that the deletion made by the ld. Commissioner of Income Tax(A) be reversed.
3.2 We have heard the ld. Sr. DR and have also gone through the impugned order. It is seen that the ld. Commissioner of Income Tax(A) has given a categorical finding that the assessee did not have any exempt/dividend income during the year under consideration and, therefore, no disallowance u/s 14A could have been made. The ld. Commissioner of Income Tax(A) has placed reliance on the judgement of the Hon’ble Delhi High Court which is the jurisdictional High Court of the assessee in the case of CIT Vs Holcim India Pvt. Ltd. in & 299/2014 dated 5th September, 2014 wherein it has been held that if there is no exempt income, then no disallowance can be made u/s 14A of the Act. We agree with the observations of the ld. Commissioner of Income Tax(A) that the language of sub-section 14A(1) is clear that relation has to be seen between the exempt income and expenditure incurred in relation to it. Although the ld. Sr. DR has argued vehemently against the action of the ld. Commissioner of Income Tax(A) in deleting the disallowance, she could not negate the categorical finding recorded by the ld. Commissioner of Income Tax(A) that during the year under consideration, the assessee had not earned any exempt income.
Therefore, respectfully following the judgment of the Hon’ble Delhi High Court in the case of Commissioner of Income Tax(A)
Vs Holcim India Pvt. Ltd. (supra), and in view of the undisputed fact that the assessee did not earn any exempt income during the year under consideration, we find no reason to interfere with the findings of the ld. Commissioner of Income Tax(A) on the issue and we dismiss the ground raised by the department.
In the result, the appeal of the department stands dismissed.
Order pronounced in the open court on 11th September, 2018.