BINDU MADHAV,KOCHI V. THE ACIT , NON CORPORATE CIRCLE 1(1), KOCHI

ITA 203/COCH/2023

AI Insights

The case revolves around an appeal by Bindu Madhav against the order of the Commissioner of Income-tax (Appeals), which upheld the disallowance of interest expenditure by the Assessing Officer under Section 14A of the Income Tax Act. The disallowance was based on the assumption that the assessee's investment in shares of Bhima Gold and Gems (Thodupuzha) Pvt. Ltd., valued at Rs.16,00,00,000, would lead to earning exempt income in the future. However, the assessee contended, and it was acknowledged in the assessment order, that no exempt income was actually received during the year. The Tribunal, referencing a Supreme Court decision, concluded that without any exempt income, the disallowance under Section 14A was not applicable.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 38461 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Other Referred Cases: Cheminvest Ltd. v. ITO, South Indian Bank Ltd. v CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL
• Assessee Lawyers: R. KRISHNAN
• Keywords: Earning of tax free income; Rule 8D

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri Inturi Rama Rao, Accountant Member & Shri Prakash Chand Yadav, Judicial Member ITA No.203/Coch/2023 : Asst.Year 2013-2014 Bindu Madhav XL/165, Raj Vihar Thottakkat Road Ernakulam – 682 011. PAN : ACYPB6927F. v. The Assistant Commissioner of Income-tax, Non-Corporate Circle – 1(1) Kochi. (Appellant) (Respondent) Appellant by :Sri.R.Krishnan, CA Respondent by : Smt.Leena Lal, Sr.AR Date of Hearing : 02.12.2024 Date of Pronouncement : 19.02.2025 O R D E R Per Prakash Chand Yadav, JM : The present appeal filed by the assessee is arising from the order of the Commissioner of Income-tax (Appeals) and it relates to assessment years2013-2014, having DIN & Order No.ITBA/NFAC/S/250/2022-23/1048976604(1) dated 20.01.2023 2. The brief facts of the case are that the assessee is an individual and proprietor of Bhima Silver, return of income on 30.09.2013 declaring a total income of Rs.1,49,58,748. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had made investment in 50,000 shares of Bhima Gold and Gems (Thodupuzha) Pvt. Ltd. valued at Rs.16,00,00,000. The AO further noted that the assessee ITA No.203/Coch/2023. Bindu Madhav. 2 had neither received any exempt income nor has debited any expenditure in relation to exempt income in the profit and loss account. The AO was of the opinion that the investment will lead to the assessee earning exempt income in future, which attracts disallowance u/s.14A. Accordingly, the AO disallowed the entire interest of Rs.3,74,302 by invoking the provisions of sec.14A of the Act. 3. Aggrieved with the order of the AO, the assessee preferred an appeal before the learned CIT(A). The ld.CIT(A) upheld the view taken by the AO by observing that since the assessee has made investment in unlisted equity shares to earn profit, hence, there is no infirmity in the action of the AO in computing the disallowance as per rule 8D of the I.T. Rules. 4. Aggrieved with the order of the ld.CIT(A), the assessee has come up in appeal before the Tribunal. Before us, it was contended by the assessee that there is no exempt income. This contention is coming out from the order of the AO also, as evident from para 2.4 of the assessment order, wherein the AO has followed the judgment of the Special Bench in the case of Cheminvest Ltd. v. ITO (2009) 121 ID 318 (Delhi) (SB). This judgment has already been overruled by the Hon’ble Delhi High Court vide judgment dated 2nd September, 2015 (ITA No.749 of 2014). Now the Hon’ble Supreme Court in the case of South Indian Bank Ltd. v CIT reported in AIRONLINE 2021 SC 706 has categorically held that wherein there is no exempt income then the provisions of sec.14A read with Rule 8D cannot be invoked. Therefore, respectfully following the judgment of the ITA No.203/Coch/2023. Bindu Madhav. 3 Hon’ble Supreme Court (supra), we allow the appeal of the assessee. 5. In the result, the appeal filed by the assessee is allowed. Order pronounced on this 19th day of February, 2025. Sd/- (Inturi Rama Rao) Sd/- (Prakash Chand Yadav) ACCOUNTANT MEMBER JUDICIAL MEMBER Cochin; Dated : 19th February, 2025. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT, Cochin. 4. The DR, ITAT, Cochin. 5. Guard File. Asst.Registrar/ITAT, Cochin "