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Income Tax Appellate Tribunal, “D” BENCH : KOLKATA
Before: Hon’ble Shri M.Balaganesh, AM & Hon’ble Shri S.S.Viswanethra Ravi, JM]
ORDER Per M.Balaganesh, AM
This appeal by the revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-20, Kolkata [in short the ld CIT(A)] in Appeal No.1044/CIT(A)- 20/CC-1(1)/15-16 dated 25.07.2016 against the order passed by the ACIT, CC-1(1), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 29.07.2015 for the Assessment Year 2013-14.
The only solitary issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in deleting the disallowance made u/s 14A of the Act, in the facts and circumstances of the case. The revenue raised the following grounds of appeal:
1. That on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 7,00,28,029/- made u/s 14A read with M/s Adhunik Metaliks Ltd. A.Yr. 2013-14 Rule 80(iii) by holding that since no exempt income was earned, no disallowance u/s 14A was called for.
2. That on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred by deleting the addition made u/s 14A which was done in accordance with the provision of Section 14 and Rule 80 read with CBDT Circular No-5 dated 11.02.2014.
3. That on the facts and the circumstances of the case and in law, the Ld. CIT(A)has erred in deleting the addition of Rs. 7,00,28,029/- to Book Profit of account of expenditure related to exempt income, without considering the fact that such adjustment to Book Profit is allowable in terms of Expl.1(f) to Section 115JB.
4. That on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred by placing reliance on case laws which are not squarely applicable to the instant case, particular that of Apollo Tyres [255 ITR 273(SC)]
5. That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or hearing of this appeal.
3. The brief facts of this issue is that the assessee is a company engaged in manufacturing and selling of sponge iron, pig iron & billets, wire rods and mining iron ores. The return of income for the assessment year 2013-14 was filed by the assessee company on 30.11.2013 disclosing loss of Rs. 90,27,44,494/- under normal provision of the Act and book loss of Rs. 22,31,71,341/- u/s 115JB of the Act. The ld. AO observed that the assessee had made huge investments in shares units of mutual funds and bonds which are reflected in his balance sheet. The assessee did not receive any exempt income in the form of dividend during the year. The ld. AO applied the provision of Section 14A of the Act read with rule 8D of the Rules and worked out the disallowance of Rs. 7,00,28,029/- under second and third limb of Rule 8D(2) of the Rules and added the same both under normal provisions of the Act as well as in the computation u/s 115JB of the Act. The Ld. CIT(A) appreciated the contentions of the assessee that no exempt income has been derived by the assessee and hence, there 2
M/s Adhunik Metaliks Ltd. A.Yr. 2013-14 cannot be any disallowance u/s 14A of the Act read with Rule 8D of the Rules. Accordingly, he deleted the same both under normal provisions of the Act as well as in the computation of books profits u/s 115JB of the Act. Aggrieved, the revenue is in appeal before us.
We have heard the rival submissions. It is not in dispute that the assessee has not derived any exempt income in the form of dividend during the year. The provisions of section 14A of the Act could be put in motion only when there is exempt income and if certain expenses were debited by the assessee in its profit and loss account for the purpose of earning such income. This is very clear from the wordings of the said section. In the instant case, admittedly, the assessee has not derived any exempt income. Hence, the provisions of section 14A of the Act cannot be invoked at all in the instant case. Reliance in this regard is placed on following decisions of various High Courts: i) CIT vs. Chettinad Logistics (P) Ltd. reported in [2017] 80 taxmann.com 221(Mad HC); ii) CIT vs. Holcim India Pvt. Ltd. in (Del HC); iii) Cheminvest Ltd. vs. CIT reported in 378 ITR 33 (Del C); iv) CIT vs. Lakhani Marketing Ltd. in I.T.A. No. 970/Kol/2008 dated 02.04.2014(P&H HC); v) CIT vs. Corntech Energy Pvt. Ltd. reported in 223 taxmann.com 133 (Guj HC); vi) CIT vs. Shivam Motors Pvt. Ltd. in I.T.A. No. 88 of 2014 (All) vii) PCIT vs. IL & FS Energy Development company Ltd. reported in [2017] 399 ITR 483 (Del).
Respectfully following the aforesaid judicial precedents we hold that no disallowance u/s 14A of the Act read with Rule 8D of the Rules could be made applicable and the 3
M/s Adhunik Metaliks Ltd. A.Yr. 2013-14 Ld. CIT(A) had rightly deleted the said disallowance both under normal provisions as well as in the computation of book profits u/s 115JB of the Act, accordingly, grounds raised by the revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the Court on 04.04.2018