DCIT, CC-I, CHANDIGARH vs. M/S D.D. GLOBAL CAPITAL PVT. LTD., NEW DELHI

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ITA 1610/CHANDI/2017Status: DisposedITAT Chandigarh11 July 2018AY 2012-132 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that no disallowance under Section 14A can be made in the absence of earning any exempt income, relying on High Court and Supreme Court judgments. The circular relied upon by the Revenue was also found to be nullified.

What were the facts?

The Assessing Officer disallowed Rs. 40,31,271/- under Section 14A for expenditure related to investments, even though the assessee earned no exempt income. The CIT(A) deleted this addition.

What were the issues?

Whether disallowance under Section 14A is permissible when no exempt income has been earned by the assessee in the relevant assessment year.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, DIVISION BENCH’A’, CHANDIGARH

Before: SMT. DIVA SINGH & DR. B.R.R. KUMAR

For Appellant: Shri. Kamal Kishore
For Respondent: Shri. Kultej Singh Bains
Hearing: 10/07/2018Pronounced: 11/07/2018

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH’A’, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA No.1610/Chd/2017 Assessment Year: 2012-13

The DCIT, Vs. M/s D.D. Global Capital Pvt.Ltd. CC-I, Chandigarh New Delhi PAN No. AEHPG3169F (Appellant) (Respondent) Assessee By : Shri. Kamal Kishore Revenue By : Shri. Kultej Singh Bains

Date of hearing : 10/07/2018 Date of Pronouncement : 11/07/2018

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) dt. 29/09/2017.

2.

The only effective ground raised by the Revenue in the present appeal reads as under:

“ Whether on the fact and circumstances of the case the Ld. CIT(A) had erred in deleting the addition of Rs. 40,31,271/- on account of disallowance made under section 14A of the Income Tax Act, 1961 despite the fact that Rule 8D read with section 14A of the Act provides for disallowance of expenditure even where taxpayer in a particular year has not earned any exempt income.”

3.

The Assessing Officer has disallowed an amount of Rs. 40,31,271/- on account of disallowance under section 14A as the assessee has invested Rs. 29,96,34,120/- as per the balance sheet. On perusal of the record, we find that the assessee has not earned any exempt income. The Assessing Officer has resorted to the matching principles as enunciated in the case of Taparia Tools Ltd. Vs. JCIT 260 ITR 102 wherein it was held as under:

“Under this matching concept, revenue and income earned during an accounting period irrespective of actual cash in-flow, is required to be compared with expenses incurred during the same period, irrespective of actual out-flow of cash. In this case, the assessee is following the mercantile system of accounting. This matching concept is very relevant to compute taxable income.”

4.

Before us, the Ld. DR has not given any reason to re-compute the disallowance except relying on the Circular No. 5 of CBDT 2014 wherein it was directed to the field officers to disallow amount under section 14A even if the assessee has derived no exempt income. The applicability of Circular has been nullified by the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Lakhani Marketing (P&H High Court) and the judgment of Hon’ble Supreme Court in the case of Maxopp Investment Ltd. Vs. CIT dt. 16/03/2018 held that no disallowance can be made in the absence of earning of any exempt income. Hence keeping in view the judgments cited above, we hereby delete the addition made under section 14A.

5.

As a result the appeal of the Revenue is hereby dismissed.

Order pronounced in the open Court. Sd/- Sd/- (DIVA SINGH) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated : 11/07/2018 AG Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) The DR 5.

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