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Income Tax Appellate Tribunal, CHANDIGARH BENCH “B”, CHANDIGARH
आदेश/Order
PER DR. B.R.R. KUMAR, A.M:
The present appeal has been filed by the Revenue against the order of
the Ld. CIT(A)-1, Ludhiana dt. 23/03/2018.
In the present appeal Revenue has raised the following grounds:
Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in law and on facts in deleting the addition made on account of disallowance under section 14A of the Income Tax Act, 1961 ?
Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in law and on facts in deleting the addition made on account of disallowance of interest under section 36(1)(iii) of the Income Tax Act, 1961 on capital advances ?
That the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored.
Brief facts of the case are that the assessee is a resident company
engaged in the manufacturing and sale of Auto components and engine parts.
For the year under consideration i.e. A.Y.2017-18, the assessee has not
claimed any exempt income. However the Assessing Officer having observed
that the assessee had made investments to the tune of Rs. 136,87,41,450/- in the
equity of domestic group companies and that no separate account was being
maintained by the assessee invoked the provisions of section 14A read with Rule
8D, the AO computed the disallowance at Rs. 1,11,87,413/- and added back
the same to the returned income.
The Ld. CIT(A) deleted the addition by holding as under:
It is an admitted fact that no exempt income was received/earned by the company during the year under consideration. Though the CBDT's circular dated 11th of February, 2014 [No. 5/2014; F No. 225/182/2013-ITA.II ] has clarified that Rule 8D read with section 14 A shall be applicable for disallowance of the expenditure even where tax payer in a particular year has not earned any exempt income, there are many decisions of various High courts holding contrary view. The jurisdictional High Court of Punjab and Haryana in the case of CIT, Faridabad Vs. Lakhani Marketing lnc[2014] 49 taxmann.com 257, vide order dated 2nd of April, 2014 has categorically held that unless and until there is a receipt of exempted income for the concerned assessment years, section 14A cannot be invoked. In doing so, the Hon'ble High Court made a reference to two earlier decisions of the same High Court: CIT Vs. Hero Cycles Ltd[2010] 323 ITR 518 and CIT Vs. Winsome Industries Ltd.[2009] 319 ITR 204, to hold that section 14 A cannot be invoked when no exempt income was earned. Subsequently, on 5thof September, 2014, the Hon'ble Delhi High Court followed the aforesaid decision of the Punjab and Haryana High Court in the case of CIT Vs. Holcim India (P.) Ltd.[2015] 57 taxmann.com 28.
Since the decision of the Ld. CIT(A) is based on the decisions of the
Hon’ble Jurisdictional High Court which is squarely applicable to the facts of the
instant case, we hereby confirm the decision accorded by the Ld. CIT(A).
Regarding the ground no. 2 of the addition made on account of
disallowance of interest under section 36(1)(iii), the facts on record reveal that
the assessee has advanced for purchase of land etc. an amount of Rs. 11.77
Crores against the availability of Rs. 470 Crores of interest free own funds.
Keeping in view the judgments of jurisdictional High Court in the case of Bright
Enterprises Pvt. Ltd. in ITA No. 224/2013 dt. 24/07/2015, CIT Vs. Kapsons Associates
Investments Pvt. Ltd. 381 ITR 204 (P&H) and the order passed by this Tribunal in
the assessees own case for the A.Y. 2010-11 in ITA No. 1093/CHD/2014, it is
hereby held that no disallowance of interest under section 36(1)(iii) is called for
in the case of the assessee. The order of the Ld. CIT(A) is hereby confirmed.
As a result, appeal of the Revenue is dismissed.
Order pronounced in the Open Court. Sd/- Sd/- संजय गग� डा. बी.आर.आर, कुमार, (SANJAY GARG ) ( DR. B.R.R. KUMAR) �या�यक सद�य/ Judicial Member लेखा सद�य/ Accountant Member AG Date: 18/12/2018
आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :
अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File