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Income Tax Appellate Tribunal, DELHI BENCHES: ‘F’, NEW DELHI
Before: SHRI G.D.AGRAWAL & SMT. BEENA A PILLAI
PER BEENA A PILLAI, JUDICIAL MEMBER
The present appeal has been filed by assessee against order dated 30/03/16 passed by Ld.CIT(A)-4, New Delhi for assessment year 2010-11 on the following grounds of appeal:
ITA 3019/Del/16 Assessment Year 2010-11 Hughes Network System India Ltd. “1. That the CIT(A) erred on facts and in law in confirming action of the assessing officer (AO) in holding expenditure to the extent of Rs.49,31,397 was incurred for earning exempt dividend income from investment in shares, invoking provisions of s.14A of the Income Tax Act, 1961 (the Act) r.w.Rule 8D of Income Tax Rules, 1961 (the Rules). 1.1. That the CIT(A) erred on facts and in law in holding that since the appellant did not make any suo moto disallowance u/s 14A of the Act, the AO had no option but to apply Rule 8D of the Rules to compute disallowance under the said section. 1.2. That the CIT(A) erred on facts and in law in not appreciating that the appellant has not earned any exempt income during the relevant year and in absence of any exempt income, no disallowance can be made under the said section 14A of the Act. 1.3. That the CIT(A) erred on facts and in law in not appreciating that the expenditure incurred by the appellant on interest and finance charges is for business operations of the appellant and does not relate to investment made during the year. 1.4. Without prejudice, that the CIT(A) erred on facts and in law in not appreciating that expenditure incurred by the appellant having direct relation to earning of exempt income can be disallowed u/s 14A of the Act. 1.5. Without prejudice, that the CIT(A) erred on facts and in law in not appreciating the disallowance u/s 14A of the Act is computed by considering the aggregate value of fixed assets and net current assets instead of aggregate of fixed assets and gross current assets. The appellant craves leave to add, alter, amend or vary from the above grounds of appeal at or before the time of hearing.”
Brief facts of the case are as under: Assessee filed its return of income declaring income of Rs.1,52,153/-on 12/10/10. The case was selected for scrutiny and notice under section 143(2) was issued in response to which authorised representatives of the assessee appeared from time to time and filed all requisite details which were placed on record and the case was discussed with Ld. AO.
ITA 3019/Del/16 Assessment Year 2010-11 Hughes Network System India Ltd. 2.1. Ld. AO during the assessment proceedings observed that assessee is wholly owned subsidiary of Hughes Network Systems, USA, engaged in business of trading of VSAT and providing other telecom related services. Ld. AO observed that assessee has made an investment in shares amounting to Rs.17,71,18,050/-during the year under consideration and that assessee has not disallowed any amount under section 14A being expenses pertaining to Tax free income. Accordingly Ld. AO called upon assessee to explain, as to why any such disallowance may not be computed as per Rule 8D of IT Rules, 1962. It is observed by Ld. AO in the reply dated 12/02/14 filed by assessee that no dividend has been received for the year under consideration. However Ld. AO by relied upon the decision of ITAT special bench in the case of M/s Cheminvest Ltd vs. ITO, Ward 3(3), New Delhi vide order dt. 5.8.2009, computed the disallowance at Rs. 49, 31, 397/-. 2.2. Aggrieved by the order of Ld. AO assessee preferred appeal before Ld. CIT (A) to confirm the said disallowance under section 14 A read with Rule 8D. 2.3. Aggrieved by the order of Ld. CIT (A) assessee is in appeal before us now.
At the outset Ld.AR submitted that the issue stands squarely covered by assessee’s own case for assessment year 2008-09 in Vide order dated 02nd January, 2017, on similar facts. Ld. AR referred to para 3 of the order which observed as under:
ITA 3019/Del/16 Assessment Year 2010-11 Hughes Network System India Ltd. “3. At the time of hearing before us, the learned counsel for the assessee pointed out that there is no exempt income during the year under consideration. Therefore, in view of the decision of Hon'ble Jurisdictional High Court in the case of Cheminvest Limited Vs. CIT - [2015] 378 ITR 33 (Delhi), no disallowance u/s 14A can be made.
4. Learned DR, on the other hand, relied upon the orders of authorities below.
We have carefully considered the arguments of both the sides and perused the material placed before us. We find this issue to be covered in favour of the assessee by the decision of Hon'ble jurisdictional High Court in the case of Cheminvest Limited (supra) and CIT-IV Vs. Holcim India P.Ltd. in & 299/2014, order dated 5th September, 2014, wherein Hon'ble jurisdictional High Court has held that if there is no exempt income, then no disallowance u/s 14A of the Act can be made. Admittedly, in the case of the assessee, there is no exempt income. Therefore, respectfully following the above decisions of Hon'ble Jurisdictional High Court, we delete the disallowance made u/s 14A of the Act.”
In the present facts of the case also it is an admitted position that there is no exempt income that has been earned by the assessee during the relevant financial year for the assessment year under consideration which is very much evident from the computation adopted by Ld. AO reproduced at page 7 of assessment order. We are therefore inclined to follow the decision of this Tribunal in assessee’s own case for assessment year 2008-09,
ITA 3019/Del/16 Assessment Year 2010-11 Hughes Network System India Ltd. the relevant extract of which has been reproduced above. Respectfully following the same we are of the considered opinion that the disallowance made under section 14A read with rule 8D deserves to be deleted. 5. In the result appeal filed by the assessee stands allowed. Order pronounced in the open court on 19/12/2017.
Sd/- Sd/- (G.D.AGRAWAL) (BEENA A PILLAI) President Judicial Member Dated 19th December, 2017. *mv Copy of the Order forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR 6. Guard File