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Income Tax Appellate Tribunal, BANGALORE BENCH ‘ A ’
Before: SHRI JASON P BOAZ & SHRI LALIET KUMAR
Per Shri Jason P Boaz, A.M. : This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-1, Bangalore dt.7.4.2017 for the Assessment Year 2012-13. 2. Briefly stated, the facts relevant for disposal of this appeal are as under :-
2.1 The assessee, a company engaged in business of construction, development and sale of housing projects, filed its return of income for Assessment Year 2012-13 on 20.09.2012 declaring loss of (-) Rs.1,85,66,432. The case was selected for scrutiny and the assessment was completed under Section 143(3) of the Income Tax Act, 1961 (in short 'the Act') wherein the assessee's loss was determined at (-) Rs.1,69,30,260 in view of a disallowance of Rs.16,36,169 under Section 14 r.w. Rule 8D. On appeal, the learned CIT (Appeals) – I, Bangalore upheld the aforesaid disallowance under Section 14A r.w. Rule 8D made by the Assessing Officer and thereby dismissed the assessee's appeal. 3.0 Aggrieved by the order of CIT (Appeals) – I, Bangalore dt.7.4.2017 for Assessment Year 2012-13, the assessee has filed this appeal before the Tribunal wherein it has raised the following grounds :-
4.0 Ground No.3 - Disallowance u/s.14A r.w. Rule 8D.
4.1 At the outset, the learned Authorised Representative for the assessee submitted that in Ground No.3 (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
Rs.16,36,169 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.
4.2 Per contra, the learned Departmental Representative for revenue supported the orders of the authorities below.
4.3.1 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 Assessing Officer 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 make disallowance of Rs.16,36,169 thereunder. On appeal, the learned CIT (Appeals) upheld the disallowance made by the Assessing Officer.
4.3.2 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
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.” 4.3.3 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 No.3 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 No.3 of the assessee's appeal is allowed.
Since the assessee's grievance has been addressed on the short point raised vide Ground No.3, the other grounds at S.Nos.1, 2 and 4 to 9 are now academic in nature and are not being adjudicated at this juncture.
In the result, the assessee's appeal for Assessment Year 2012-13 is allowed as indicated above.
Order pronounced in the open court on the 9th day of Feb., 2018.