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Income Tax Appellate Tribunal, “D” BENCH: KOLKATA
Per Shri A.T.Varkey, JM
1. The appeal filed by the revenue is against the order of Ld. CIT(A)-7, Kolkata dated 29.09.2016 for AY 2013-14.
The sole ground of appeal
of revenue is against the order of Ld. CIT(A) in deleting the disallowance of Rs.2,17,43,507/- as per sec. 14A of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) read with rule 8D of the Income-tax Rules, 1962 (hereinafter referred to as the “Rules”).
3. Briefly stated facts are that the assessee is a cooperative bank filed its e-return for AY 2013-14 on 27.09.2013 declaring total income of Rs.2,49,03,480/-. During the course of scrutiny proceedings, the AO observed that during the period under consideration the assessee has, in the Balance Sheet, certain investments which have not yielded any income to the assessee. In other words, in computing the total income for the year under consideration, there is no income shown to have been earned by the assessee from certain investments though the assessee has claimed interest expenditure in the Profit & Loss Account. According to AO, some part of the interest expenditure must be attributable to Mugeberia Central Co-operative Bank Ltd.., AY- 2013-14 these exempt investments. The assessee has not shown or claimed any expenditure corresponding to these exempt investments. Therefore, according to AO, the provisions of section 14A of the Act are invoked in this case. When asked as to why the provisions of section 14A should not be made be applicable, it is the contention of the assessee that since there is no exempt income included in computing the total income, there will not be any scope for applicability of provisions of section 14A. However, the AO relying on Circular No. 5 / 2014 dated 11th February, 2014 issued by the Central Board of Direct Taxes was of the opinion that even though the tax payer has not earned any exempt income during a particular year, the Rule 8D r.w.s. section 14A of the Act provides for disallowance of expenses. Thereafter, the AO as per section 14A of the Act read with rule 8D of the Rules calculated the disallowance at Rs.2,17,43,507/- and added the same to the total income of the assessee. On appeal, the Ld. CIT(A) deleted the addition. Aggrieved, revenue is in appeal before us.
We have heard rival submissions and gone through the order of Ld. CIT(A). The assessee is in the business of running a cooperative bank. In its return of income, the assessee returned total income of Rs.2,49,03,480/-. The AO during scrutiny observed that the assessee has in its balance sheet, certain investments which have not yielded any income to the assessee. According to him, while computing the total income, since no income has been shown to have been earned by the assessee from investments, and at the same time when the assessee has claimed interest expenditure in the P&L Account, then according to AO, some part of the interest expenditure must be attributable to the exempt investment. Thus according to AO, since the assessee has not shown or claimed any expenditure corresponding to these exempt investments, he applied sec. 14A of the Act read with Rule 8D of the Rules to compute disallowance of Rs.2,17,43,507/-. On appeal, the Ld. CIT(A) took note of the fact that assessee has not earned any exempt income/dividend and gave relief to the assessee. We note that assessee has not earned any exempt income/dividend this year, therefore, there was no question of making any disallowance invoking sec. 14A of the Act read with Rule 8 of Rules. For that we rely on the decision of Hon’ble Punjab & Haryana High Court in CIT Vs. Hero Cycles Ltd. (2010) 323 ITR 518 wherein it was held
Mugeberia Central Co-operative Bank Ltd.., AY- 2013-14 that sec. 14A of the Act cannot be invoked when no exempt income was earned by the assessee. Therefore, we concur with the decision of ld. CIT(A) and dismiss the revenue’s appeal. 5. In the result, appeal of revenue is dismissed. Order is pronounced in the open court on 28.03.2018 Sd/- Sd/- (M. Balaganesh) (Aby. T. Varkey) Accountant Member Judicial Member Dated : 28th March, 2018 Jd.(Sr.P.S.) Copy of the order forwarded to:
Appellant – ACIT, Circle-27(1), Haldia 2 Respondent – Mugeberia Central Co-op. Bank Ltd., Mugeberia, Dist. Purba Medinipur, Pin-721425. 3. The CIT(A) Kolkata.