PIONEER RADIO TRAINING SERVICES PVT. LTD.,NEW DELHI vs. ITO, NEW DELHI

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ITA 6344/DEL/2014Status: DisposedITAT Delhi30 November 2015AY 2011-125 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 Section 14A applies only when there is an actual receipt of income that does not form part of the total income. Since the assessee earned no dividend income, no disallowance under Section 14A could be made.

What were the facts?

The assessee had significant investments in shares but declared nil dividend income for the assessment year. The Assessing Officer (AO) disallowed expenses under Section 14A, which was upheld by the CIT(A).

What were the issues?

Whether disallowance under Section 14A is permissible when no exempt income is earned during the relevant previous year.

Which sections of the Income-tax Act were involved?

Section 14A,Section 244A,Section 234D

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-2’, NEW DELHI

Before: Sh. N. K. Saini

Hearing: 29.09.2015Pronounced: 30.11.2015

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘SMC-2’, NEW DELHI Before Sh. N. K. Saini, Accountant Member Asstt. Year : 2011-12 Pioneer Radio Training Services Vs Income Tax Officer, Pvt. Ltd., 4th Floor, Dakha House, Ward-14(2), 18/17, WEA, Karol Bagh, New Delhi New Delhi-110005 (APPELLANT) (RESPONDENT) PAN No. AADCP7802K Assessee by : Sh. O. P. Sapra, Adv. Revenue by : Sh. T. Vasantan, DR Date of Hearing : 29.09.2015 Date of Pronouncement : 30.11.2015 ORDER

This is an appeal by the assessee against the order dated 01.08.2014 of ld. CIT(A)-XVII, Delhi.

2.

Following grounds have been raised in this appeal:

“1. That the disallowance of Rs. 17,77,733/- out of expenses as made by the AO u/s 14A of the I.T. Act and sustained by the Ld. CIT(A) is arbitrary, unjust, illegal and at any rate, without prejudice, very excessive. Various observations made by the authorities below in their respective orders are either incorrect or legally untenable. The submissions as made supported by 2 Pioneer Radio Training Services Pvt. Ltd. documentary evidence and the case laws have either been ignored or had not been properly appreciated. 2. That the withdrawal of interest u/s 244A amounting to Rs. 45,326/- and levy of interest u/s 234D at Rs. 56,671/- are illegal and were not called for. 3. That without prejudice to Ground No. 2 above, the interest as levied u/s 234D is very excessive. 4. That the appellant reserves its right to add, amend/modify the grounds of appeal

.”

3. Vide Ground No. 1 the grievance of the assessee relates to the sustenance of disallowance of Rs. 17,77,733/- made by the AO, out of the expenses, u/s 14A of the Income Tax Act, 1961 (hereinafter referred to as the Act).

4.

Facts of the case in brief are that the assessee filed the return of income on 28.09.2011 declaring Nil income which was processed u/s 143(1) of the Act. Later on, the case was selected for scrutiny. During the course of assessment proceedings the AO noticed that the balance sheet of the assessee revealed that the assessee had shown investments in shares of Rs. 35,55,46,602/- as on 31.03.2011 as well as on 31.03.2010, income from such assets did not or should not form part of total income. He also observed that the assessee had not attributed any expenditure relating to such investment, income from which is exempt from tax. The contention of the assessee was that no disallowance could have been 3 Pioneer Radio Training Services Pvt. Ltd. made since no dividend income was earned during the previous year. The said contention of the assessee was not accepted by the AO by observing that in order to disallow the expenditure it was not necessary that the exempt income was earned. The AO disallowed a sum of Rs. 17,77,733/- by invoking the provisions of Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962.

5.

Being aggrieved the assessee carried the matter to the ld. CIT(A) who sustained the disallowance by observing that the AO had given a clear working of the disallowance u/s 14A of the Act read with Rule 8D of the Income Tax Rules, 1962.

6.

Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that this issue is squarely covered in favour of the assessee by the judgment of the Hon’ble Jurisdictional High Court in the case of CIT Vs Holcim India P. Ltd. in & 299/2014 order dated 05.09.2014 and order dated 02.09.2015 in the case of Cheminvest Ltd. Vs CIT in ITA No. 749/2014 (copy of the said orders were furnished which are placed on record).

7.

In his rival submissions the ld. DR strongly supported the order of the authorities below.

4 Pioneer Radio Training Services Pvt. Ltd. 8. I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee did not earn any dividend income during the year under consideration. On a similar issue their lordships of the Hon’ble Jurisdictional High Court in the case of Cheminvest Ltd. Vs CIT (supra) held as under:

In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression ‘does not form part of the total income’ in Section 14A of the Act envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year.

9.

So, respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court we are of the confirmed view that no disallowance u/s 14A of the Act can be made in the present case since no exempt income is received or receivable during the relevant previous year by the assessee. Accordingly, the impugned disallowance made by the AO and sustained by the ld. CIT(A) is deleted.

10.

As regards to the Ground Nos. 2 & 3 it was the common contentions of both the parties that it is consequential in nature. We order accordingly.

5 Pioneer Radio Training Services Pvt. Ltd. 11. In the result, the appeal of the assessee is allowed. (Order Pronounced in the Court on 30/11/2015)

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