NANDA EXIM PVT LTD,CHENNAI vs. ACIT, CORP WARD -4(2), CHENNAI

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ITA 408/CHNY/2019Status: DisposedITAT Chennai08 August 2019AY 2015-164 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that disallowance under Section 14A is not permissible when there is no exempt income earned. The Tribunal relied on the Supreme Court's decision in CIT v. Chettinad Logistics (P.) Ltd., which dismissed the revenue's appeal on merits.

What were the facts?

The assessee claimed that no dividend income was earned during the year, hence no expenditure should be disallowed. The revenue argued for disallowance under Section 14A, citing various Supreme Court judgments.

What were the issues?

Whether expenditure can be disallowed under Section 14A of the Income-tax Act when the assessee has not earned any dividend income.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI INTURI RAMA RAO

For Respondent: Shri S. Bharath, CIT
Hearing: 31.07.2019Pronounced: 08.08.2019

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

1.

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -8, Chennai, dated 18.12.2018 and pertains to assessment year 2015-16.

2.

Shri D. Anand, the Ld.counsel for the assessee, submitted that admittedly there was no dividend income during the year under consideration. Therefore, according to the Ld. counsel, there cannot be any disallowance of expenditure in view of the judgment of Madras High Court in CIT v. Chettinad Logistics (P.) Ltd. (2017)

80 taxmann.com 221. This judgment of the Madras High Court was confirmed by the Apex Court in 257 Taxman 2.

3.

On the contrary, Shri S. Bharath, the Ld. Departmental Representative, submitted that in view of the judgment of Apex Court in CIT v. Walfort Share & Stock Brokers (P) Ltd. (2010) 326 ITR 1, and also the judgment of Godrej & Boyce Manufacturing Co.

Ltd. v. DCIT (2017) 394 ITR 449, even if there was no dividend income, the expenditure has to be disallowed under Section 14A of the Income-tax Act, 1961 (in short 'the Act'). Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the order of the Assessing Officer.

4.

We have considered the rival submissions on either side and perused the relevant material available on record. The Madras High Court in the case of Chettinad Logistics (P.) Ltd. (Supra), after following its own earlier order in Redington (India) Ltd. v. Addl. CIT (2017) 392 ITR 633, has found that there cannot be any disallowance when there was no exempt income. The Madras High Court has also taken into consideration the judgment of Apex Court in Walfort Share & Stock Brokers (P) Ltd. (supra).

5.

We have carefully gone through the judgment of Apex Court in Godrej & Boyce Manufacturing Co. Ltd. (supra). The Apex Court found that the Revenue has to establish the nexus between the expenditure disallowed and earning of dividend income in question.

The Apex Court also found that what the law postulates is the requirement of a satisfaction of the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. As far as the absence of dividend income is concerned, the Apex Court dismissed the appeal of the Revenue against the judgment of Madras High Court in Chettinad Logistics (P.) Ltd. (supra) on merit also. Therefore, this Tribunal is of the considered opinion that the judgment of Apex Court in Chettinad Logistics (P.) Ltd. dismissing the appeal of the Revenue on merit also may be applicable to the facts of the case.

Therefore, this Tribunal is unable to uphold the orders of the lower authorities in the absence of any dividend income. Accordingly, the orders of both the authorities below are set aside and the disallowance made by the Assessing Officer is deleted.

6.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the court on 8th August, 2019 at Chennai.

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