CHHATTISGARH SPONGE MANUFACTURING CONSORTIUM COALFIELDS PRIVATE LIMITED,RAIPUR vs. INCOME TAX OFFICER, WARD 1(3), RAIPUR

The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals)-I, Raipur, dated 18.09.2018, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income- tax Act, 1961 (in short ‘the Act’) dated 07.12.2017 for assessment year 2015-16. Before us the assessee has assailed the impugned order on the following grounds of appeal:

Succinctly stated, the assessee company which is engaged in the business of mining of coal had e-filed its return of income for the assessment year 2015-16 on 29.09.2015, declaring an income of Rs.31,01,660/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act.

Assessment was, thereafter, framed by the A.O vide his order passed u/s. 143(3) dated 07.12.2017 wherein after making disallowance u/s.14A

Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success.

The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.

We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. AR in order to drive home his contentions. Admittedly, as is discernible from the assessment order, the assessee company during the year under consideration had though made investment in exempt income yielding shares but had not received any exempt dividend income during the year under consideration. On the basis of the aforesaid facts, it was submitted by the Ld. Authorized Representative (for short ‘AR’) that now when the assessee company had not received any exempt dividend income during the year under consideration, therefore, no disallowance u/s.14A of the Act could have been validly made in its hands. Accordingly, on the basis of his aforesaid contentions, it was submitted by the Ld. AR that the disallowance u/s.14A

Per contra, the Ld. Departmental Representative (for short ‘DR’) relied on the orders of the lower authorities.

After having given a thoughtful consideration to the contentions advanced by the Ld. Authorized Representative of both the parties, we find substantial force in the claim of the Ld. AR that now when the assessee company had admittedly not received any exempt income during the year under consideration, therefore, no disallowance u/s.14A of the Act was called for in its hand. Our aforesaid view is fortified by the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Chettinad Logistics Pvt. Ltd. (2018) 257 Taxmann 2 (SC) and also of the Hon’ble High Court of Delhi in the case of Cheminvest Limited Vs. CIT, (2015) 378 ITR 33 (Delhi). Backed by the aforesaid judicial pronouncements, it was submitted by the Ld. AR that as per the settled position of law no disallowance u/s.14A in absence of any exempt income could have been made in the hands of the assessee. In the backdrop of the facts involved in the case before us r/w. the aforesaid settled position of law we find substance in the claim of the Ld. AR that now when the assessee company had not received any exempt dividend income during the year under consideration, therefore, no disallowance u/s.14A of the Act was warranted in its case. We, thus, in 5 C.G. Sponge Manufacturing Consortium Coalfields Pvt. Ltd. Vs. ITO-1(3) Rs.8,00,790/- made by the A.O.

In the result, appeal of the assessee is allowed in terms of our aforesaid observations. Order pronounced in open court on 31st day of May, 2022.