KARAMTARA STEEL PRIVATE LIMITED (MERGED WITH KARAMTARA ENGINEERING PRIVATE LIMITATE),MUMBAI vs. DY. COMMISSIONER OF INCOME TAX WARD 10(1)(2), MUMBAI

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ITA 4288/MUM/2017Status: DisposedITAT Mumbai04 July 2018AY 2012-133 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the assessee did not receive any exempt income during the year, no disallowance under Section 14A was warranted. This decision followed the ratio of the Delhi High Court in Cheminvest Ltd. vs. CIT.

What were the facts?

The assessee claimed a disallowance of Rs. 9,61,795/- under Section 14A of the Income Tax Act, 1961, by applying Rule 8D(2)(iii). The assessee had invested in shares of its subsidiary but received no exempt income during the year.

What were the issues?

Whether disallowance under Section 14A is permissible when no exempt income is actually received by the assessee.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI

Before: SHRI G.S.PANNU & SHRI PAWAN SINGH

For Appellant: Shri M.K.Patel
For Respondent: Shri M.C.Omi Nigshen
Hearing: 04/07/2018Pronounced: 04/07/2018

ORDER PER G.S.PANNU,A.M:

The captioned appeal filed by the assessee pertaining to assessment year 2012-13 is directed against an order passed by CIT(A)- 17, Mumbai dated 02/03/2017, which in turn arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 20/03/2015.

2.

In this appeal the solitary issue revolves around a disallowance of Rs.9,61,795/- made by the income tax authorities under section 14A of the Act by applying Rule 8D(2)(iii) of the Rules.

3.

At the time of hearing, the Ld. Representative for the assessee made a singular argument to the effect that since assessee has not received any exempt income during the year under consideration, no disallowance under section 14A of the Act was called for in view of the judgment of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT, 378 ITR 33 (Del). It has been pointed out that the only investment made by the assessee was in the shares of its subsidiary company and during the year no dividend income was received. In order to complete the factual matrix, it has also been pointed out that w.e.f. 01/04/2012 the assessee company as well as its subsidiary investee company have merged with one Karamtara Engg. Pvt. Ltd. and, therefore, in this view of the matter the investment in question would never generate any income. Be that as it may, it clearly emerges from the discussion in para 5.7 of the assessment order that during the year under consideration no exempt income has been received and, therefore, the ratio of the judgment of the Hon’ble Delhi High Court in the case of Cheminvest Ltd.(supra) is clearly attracted.

4.

The Ld. Departmental Representative has not controverted the factual matrix and has merely relied upon the orders of the authorities below.

5.

We have carefully considered the rival submissions. Following the ratio of the Hon’ble Delhi High Court in the case of Cheminvest Ltd.(supra) and in the absence of any actual receipt of exempt income during the year under consideration, no expenditure is liable to be disallowed under section 14A of the Act. In view of the above, the order of the CIT(A) is set aside and the Assessing Officer is directed to delete the addition of Rs. Rs.9,61,795/- made under section 14A of the Act.

6.

In the result, the appeal of the assessee is allowed as above.

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