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Income Tax Appellate Tribunal, BANGALORE BENCH ‘ A ’
Before: SHRI N.V. VASUDEVAN & SHRI JASON P BOAZ
Per Shri Jason P Boaz, A.M. : This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-5, Bangalore dt.2.5.2018 for the Assessment Years 2013-14.
Briefly stated, the facts of the case are as under :-
2.1 The assessee, a company engaged in business as property developers, filed its return of income for Assessment Year 2013-14 on 24.9.2013 declaring NIL income. The case was selected for scrutiny in the year under consideration and the assessment was completed under Section 143(3) of the Income Tax Act, 1961 (in short 'the Act') vide order dt.15.3.2016; wherein the assessee's loss was determined at Rs.6,00,36,601, in view of disallowance of Rs.6,11,21,496 under Section 14A of the Act r.w. Rule 8D(2) of the IT Rules, 1962 (in short ‘the Rules’).
On appeal, the CIT (Appeals)-5, Bangalore dismissed the assessee's appeal vide the order dt.2.5.2018.
Aggrieved by the order of CIT (Appeals)-5, Bangalore dt.2.5.2018 for Assessment Year 2013-14, the assessee has preferred this appeal before the Tribunal wherein it has raised the following grounds :-
4. Ground 1 & 5 being general in nature, no adjudication is called for thereon.
5.0 Ground Nos.2 & 6 - Disallowance u/s.14A r.w. Rule 8D.
5.1 At the outset, the learned Authorised Representative for the assessee submitted that in Ground Nos.2 & 6 (supra), the assessee contends that since it had earned no exempt income in the year under consideration, no disallowance can be made under Section 14A r.w. Rule 8D. In support of its contention on this short point, that the disallowance of Rs.6,11,21,496 under Section 14A r.w. Rule 8D be deleted in the absence of earning of any exempt income by the assessee in this year, reliance was placed on the following judicial pronouncements :-
(i) Cheminvest Ltd. Vs. CIT (2015) 61 taxmann.com 118 (Delhi H.C) and (ii) Alliance Infrastructure Projects Pvt. Ltd. Vs. DCIT in & 1043 /Bang/2013 dt.12.9.2014.
5.2 Per contra, the learned Departmental Representative for revenue supported the orders of the authorities below.
5.3.1 We have heard the rival contentions, perused and carefully considered the material on record; including the judicial pronouncements cited. It is not disputed that in the year under consideration the assessee has not earned any exempt income and therefore the contention of the assessee was that no disallowance under Section 14A r.w. Rule 8D was called for. The CIT (Appeals) however was of the view that disallowance under Section 14A r.w. Rule 8D can be made even if there is no exempt income and proceeded to uphold disallowance of Rs.6,11,21,496 thereunder.
5.3.2 We are of the view that, in the factual matrix of the case on hand where the assessee has not earned any exempt income in the year under consideration, no disallowance can be made under Section 14A r.w. Rule 8D. In coming to this view, we drew support from the decision of the Hon'ble High Court of Delhi in the case of Cheminvest Ltd. Vs. CIT (supra), wherein at para 23 thereof, the Hon'ble Court has held that when no exempt income is earned in the year under consideration, then no disallowance under Section 14A r.w. Rule 8D can be made. Para 23 of the judgment reads as under :-
“23. In the context of the facts enumerated herein before the Court answers the question framed by holding that the expression ‘does not form part of total income’ in Section 14A of the Act envisages that there should be an actual receipt of income which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year.”
5.3.3 In similar factual circumstances as in the case on hand, where the assessee had not earned exempt income in the year under consideration, the Hon'ble Madras High Court in the case of CIT Vs. Chettinad Logistics (P) Ltd. (2017) 80 taxman.com 221 (Madras) held that no disallowance could be made under Section 14A r.w. Rule 8D where the assessee had not earned exempt income in the year under consideration. In coming to this finding, the Hon'ble Court, inter alia, referred to the decision of the Hon'ble High Court of Delhi in the case of Cheminvest Ltd. Vs. CIT (supra). Therefore, on this short point raised in Ground Nos.2 & 6 of this appeal, we, respectfully following the decisions of the Hon'ble High Court of Delhi in the case of Cheminvest Ltd. Vs. CIT (supra) and of the Hon'ble Madras High Court in the case of Chettinad Logistics (P) Ltd. (supra), delete the disallowance made by the Assessing Officer under Section 14A r.w. Rule 8D. Consequently, Ground Nos.2 & 6 of the assessee's appeal are allowed.
Since the assessee's grievance has been addressed on the short point raised vide Ground Nos.2 & 6, the other grounds at S.Nos.1 and 3 to 5 are now rendered academic in nature and are therefore not being adjudicated at this juncture.
In the result, the assessee's appeal for Assessment Year 2013-14 is allowed as indicated above.
Order pronounced in the open court on the 27th day of Nov.,2018.