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Income Tax Appellate Tribunal, “ B ” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
आदेश / O R D E R
PER PRADIP KUMAR KEDIA - AM: The captioned appeal filed at the instance of the Assessee is against the order of the Commissioner of Income Tax(Appeals)-XVI, Ahmedabad [CIT(A) in short] dated 13/10/2014 in the matter of assessment order under s.143(3) of the Income Tax Act, 1961
ITA No.3433/Ahd/2014 Corrtech Energy Ltd. vs. DCIT Asst.Year – 2010-11 - 2 - (hereinafter referred to as "the Act") dated 25/03/2013 for the Assessment Year (AY) 2010-11.
The grounds of appeal raised by the Assessee read as under:-
The learned CIT(A) has erred in confirming the addition of Rs.86,765/- on account of late remittance of employees contribution to P.P. relying upon the decision of the Hon'ble Gujarat High Court in the appellant's own case wherein the decision of Gujarat State Road Transport Corporation [2014] 41 taxmann.com 100 (Guj.) has been relied upon. It is submitted with due respect to the above decision that subsequently the Hon'ble Karnataka High Court in the case of Essae Teraoka (P.) Ltd. vs. DOT [2014] 43 taxmann.com 33 (Karnataka) has taken a view in favor of the assessee while disagreeing with the decision of the Hon'ble Gujarat High Court. That apart, since the SLP filed against the said decision before the Hon'ble Supreme Court having been admitted, the issue in dispute being addition of Rs.86,765/- be decided accordingly.
The appellant states that the Id. CIT(A) has erred in not appreciating the fact that the amount of Rs.86,765/- being employees' contribution for the month of April, 2009 having been paid by the appellant before the due date for filing the return of income, no disallowance is warranted based on the decision of various other High Courts as well as the Hon'ble Apex Court in CIT v. Atom Extrusions Ltd. [2009]319ITR 306. 3. The Id. CIT(A) has erred in law as well as on facts in confirming the addition on account of disallowance of Rs.7,81,321/- made by the AO while applying the provisions of Section 14A of the IT. Act, 1961 read with Rule 8D of the I.T. Rules, 1962 without proper consideration and appreciation of
ITA No.3433/Ahd/2014 Corrtech Energy Ltd. vs. DCIT Asst.Year – 2010-11 - 3 - facts and settled legal position that section 14A cannot be applied unless there is proximate cause for disallowance as held by the Hon'ble Supreme Court in the case of CIT vs. Walfort Share & Stock Brokers (P.) Ltd. 326 ITR 1 (SO. The impugned addition of Rs.7,81,321/- thus ought to have been deleted.
The Id. C1T(A) has further erred in not appreciating and/or ignoring the fact that identical issue i.e. disallowance u/s.!4A of the Act has been decided in favor of the appellant in its own case for previous year i.e. A.Y.2009-10 by the Hon'ble ITAT, Ahmedabad Bench as well as Hon'ble Gujarat High Court. Thus, the AO as well as the Id. CIT(A) were duty bound to follow the said decision of the jurisdictional court of law and delete the impugned addition of Rs.7,81,321/-.
The Id. CU(A) has further erred in not appreciating and/or ignoring the fact that the investments have neither been made during the year nor the same have been made out of borrowed funds apart from the very basic fact that no exempt income whatsoever has been earned or claimed by the appellant during the year and hence the question of applicability of the provisions of Section 14A does not arise at all. Accordingly, the impugned addition of Rs.7,81,321/- even otherwise requires to be deleted.
The Id. CIT(A) has also erred in relying upon the CBDT Circular dated 11/02/2014 without properly considering the decision of the Hon'ble ITAT, Chennai Bench in the case of M. Bhaskaran in ITA No. 1717/Mds/2013 dated 31/07/2014, wherein interalia, identical issue has been decided in favor of the assessee after considering the CBDT Circular dated 11/02/2014 relied upon by the Id. OT(A).”
ITA No.3433/Ahd/2014 Corrtech Energy Ltd. vs. DCIT Asst.Year – 2010-11 - 4 - 3. The assessee has fairly stated that Ground No.1 is covered against the assessee in view of the decision of the Jurisdictional High Court in the case of Gujarat State Road Transport Corporation (2014) 41 taxmann.com 100 (Guj.). However, SLP filed against the said decision has been admitted by the Hon’ble Supreme Court. In view of the decision of the Hon’ble Gujarat High Court, Ground No.1 of the assessee’s appeal is dismissed.
Ground No.2 concerns disallowance under s.14A read with Rule 8D of the Income Tax Rules, 1962. In the course of the assessment proceedings, the Assessing Officer (AO) noticed that assessee has made certain investments to the tune of Rs.275.80 lakhs, the dividend income wherefrom is exempt from tax. The AO accordingly proceeded to make disallowance of Rs.7,81,321/- by applying statutory formula provided in Rule 8D of the I.T.Rules.
In first appeal, the CIT(A) also confirmed the action of the AO. Aggrieved by the order of the CIT(A), the assessee has referred the matter to the Tribunal.
With the assistance of the Ld.AR for the assessee, we notice that during the year under consideration, the assessee has not claimed any exempt income earned from the aforesaid investments. We find force in
ITA No.3433/Ahd/2014 Corrtech Energy Ltd. vs. DCIT Asst.Year – 2010-11 - 5 - the contention of the assessee that in the absence of any exempt income, section 14A of the Act is not applicable. There being no exempt income, we do not find any proximate cause for disallowance of deemed expenditure incurred in relation to some non-existent income. Identical issue has come up in assessee’s own case before the Hon’ble Jurisdictional High Court in CIT vs. Corrtech Energy (P.) Ltd. (2014) 45 taxmann.com 116 (Guj.) relevant to AY 2009-10 where the issue was decided in favour of assessee. Therefore, respectfully following the decision of the Hon’ble Gujarat High Court in assessee’s own case, Ground No.2 is allowed.
In the result, appeal of the Assessee is partly allowed. This Order pronounced in Open Court on 30/ 10 /2017
Sd/- Sd/- (महावीर �साद) (�द�प कुमार के�डया) �या�यक सद�य लेखा सद�य ( PRADIP KUMAR KEDIA ) ( MAHAVIR PRASAD ) JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 30/ 10 /2017
ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS
ITA No.3433/Ahd/2014 Corrtech Energy Ltd. vs. DCIT Asst.Year – 2010-11 - 6 -
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-XVI, Ahmedabad �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad
Date of dictation .. 30.10.17 (dictation-pad 6-pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …30.10.17 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S……. 30.10.17 7. Date on which the file goes to the Bench Clerk………………… 30.10.17 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………