SHRI PRAMOD V MUNDRA,NAGPUR vs. INCOME TAX OFFICER WARD -1(1), NAGPUR

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ITA 12/NAG/2019Status: DisposedITAT Nagpur07 November 2022AY 2013-144 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that Section 14A of the Income Tax Act cannot be invoked in the absence of any exempt income earned by the assessee. Therefore, the addition made by the Assessing Officer was deleted.

What were the facts?

The assessee filed a return of income, and the Assessing Officer made an addition of Rs. 15,69,653/- under Section 14A, disallowing expenditure related to exempt income. The CIT(A) confirmed this disallowance.

What were the issues?

Whether disallowance under Section 14A is permissible when the assessee has not earned any exempt income.

Which sections of the Income-tax Act were involved?

Section 14A,Section 143(3)

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Cases cited in this judgment(6)Show list

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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR – VIRTUAL COURT

Before: SHRI INTURI RAMA RAO

For Respondent: Shri G. J. Ninawe
Hearing: 26.09.2022Pronounced: 07.11.2022

ORDER

PER INTURI RAMA RAO, AM:

1.

This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)-1, Nagpur [‘the CIT(A)’] dated 28.11.2018 for the assessment year 2013-14.

2.

The appellant raised the following grounds of appeal :- “1] Learned C.I.T.(A) erred in confirming the disallowance made by A.O. U/s.l4A amounting to Rs. 15,69,653/-. 2] Learned C.I.T.(A) erred in not properly considering assessee’s various submissions and relevant documents filed at the time of hearing. 3] Learned C.I.T.(A) erred in not properly applying her mind and only rely on what the A.O. say. 4] Assessee crave to urge additional grounds at the time of hearing if necessary.”

3. Briefly, the facts of the case are as under :

The appellant is an individual deriving income under the head “Income from business and profession” and also under the head of “salary” as a director of the company. The return of income for the assessment year 2013-14 was filed on 30.09.2013 declaring total income of Rs.7,54,600/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-1(1), Nagpur (‘the Assessing Officer’) vide order dated 29.01.2016 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.23,37,310/-. While doing so, the Assessing Officer made addition of Rs.15,69,653/- u/s 14A rejecting the contention of the appellant that no addition can be made u/s 14A in the absence of any exempt income.

4.

Being aggrieved by the above disallowance, an appeal was filed before the ld. CIT(A), who vide impugned order confirmed the action of the Assessing Officer.

5.

Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.

6.

When the matter was called on for hearing, none appeared on behalf of the appellant-assessee despite due service of notice of hearing. Therefore, we proceed to decide the issue in appeal ex- parte after hearing the ld. Sr. DR.

7.

I heard the ld. Sr. DR and perused the material on record. Admittedly, in the present case, the appellant had not earned any exempt income. It is now settled position of law that in the absence of any exempt income, resort to the provisions of section 14A cannot be made. The various High Courts in catena of decisions held the same view and reference can be made to the following decisions :- (i) Redington (India) Ltd. vs. Addl. CIT, 392 ITR 633 (Mad); (ii) CIT vs. Celebrity Fashion Ltd., 428 ITR 470 (Mad); (iii) CIT vs. Chettinad Logistics Pvt. Ltd., 80 taxmann.com 221 (Mad) (Against which the SLP filed by the Department was dismissed by the Hon’ble Supreme Court in the case of CIT vs. Chettinad Logistics P. Ltd., 95 taxmann.com 250 (SC); (iv) CIT vs. Continuum Wind Energy (India) Pvt. Ltd., 430 ITR 52 (Mad); (v) PCIT vs. Kohinoor Project Pvt. Ltd., 425 ITR 700 (Bom.); (vi) Cheminvest Ltd. vs. CIT, 378 ITR 33 (Delhi); (vii) MAN Infraprojects Ltd. (ITA No.259 of 2017 dated 09.04.2019) (Bom.).

8.

The Jurisdictional High Court in the case of PCIT vs. Kohinoor Project Pvt. Ltd. (supra) placing reliance on the decision of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT (supra) and its own decision in the case of MAN Infraprojects Ltd. (supra) held as follows :- “8. Section 14A of the Act deals with expenditure incurred in relation to income not includible in total income. As per sub-section (1) of section 14A, for the purpose of computing the total income, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income. In Cheminvest Ltd. (supra) Delhi High Court examined the expression "does not form part of the total income" as appearing in sub-section (1) of section 14A of the Act. Delhi High Court held that the said expression envisages that there should be an actual receipt of income which is not includible in the total income during the relevant

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