GVK Power & Infrastructure Limited, Rajahmundry V. The Assistant Commissioner of Income Tax, Circle-2(1), Rajahmundry

CO 56/VIZ/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 5102 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-02-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 22-08-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Revised return
• Section: 14A; 115JB; 143(1); 143(2)

Judgement Text

आयकरअपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM (through web-based video conferencing platform) श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./I.T.A.No.47 & 48/Viz/2021 (ननधधारण वर्ा / A.Y. : 2011-12 & 2012-13) Asst.Commissioner of Income Tax Circle-2(1) Rajamahendravaram Vs. M/s G.V.K.Power & Infrastructure Ltd. Jegurupadu, Kadiyam Mandal East Godavari Dist. [PAN : AAACJ5599A] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) Cross Objection No.55 & 56/Viz/2021 (Arising out of I.T.A.No.47 & 48/Viz/2021) (ननधधारण वर्ा / A.Y. : 2011-12 & 2012-13) M/s G.V.K.Power & Infrastructure Ltd. Jegurupadu, Kadiyam Mandal East Godavari Dist. [PAN : AAACJ5599A] Vs. Asst.Commissioner of Income Tax Circle-2(1) Rajamahendravaram अपीलधथी की ओर से/ Appellant by : Shri G.V.N.Hari, AR प्रत्यधथी की ओर से / Respondent by : Shri M.N.Murthy Naik, CIT, DR सुनवधई की तधरीख / Date of Hearing : 31.01.2022 घोर्णध की तधरीख/Date of Pronouncement : 25 .02.2022 आदेश /O R D E R Per Shri Duvvuru RL Reddy, Judicial Member : These appeals are filed by the revenue against the orders of Commissioner of Income Tax (Appeals) [CIT(A)]-2, Guntur dated 2 I.T.A. No.47 & 48/Viz/2021 and CO No.55 & 56/Viz/2021, A.Y.2011-12 & 2012-13 M/s G.V.K.Power & Infrastructure Ltd. 28.02.2020 for the Assessment Year (A.Y.) 2011-12 and 2012-13. Cross objections are filed by the assessee in support of the orders of the Ld.CIT(A). Since the grounds raised in these appeals are common, these appeals are clubbed, heard together and a common order is being passed for the sake of convenience as under. The only grievance of the revenue is that the Ld.CIT(A) allowed the additional ground raised by the assessee even though revised return of income was not filed by the assessee, thereby restricting the disallowance to Rs.5,52,505/- u/s 14A of the Income Tax Act, 1961 (in short ‘Act’). 2. Briefly stated facts are that the assessee is a company, filed it’s return of income, declaring total income of Rs.10,62,74,570/- for the A.Y.2011-12/- and Rs.23,60,02,470/- for the A.Y.2012-13. The return was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny under CASS. In response to the notice issued u/s 143(2) and 142(1) of the Act, the representative of the assessee furnished the information and explained the case. The assessment was completed on 10.02.2014, 23.03.2015 and the total income was assessed at Rs.10,50,90,857/- and Rs.24,57,02,960/- for the A.Y.2011-12 and 2012- 13 respectively after making additions and disallowances. 3 I.T.A. No.47 & 48/Viz/2021 and CO No.55 & 56/Viz/2021, A.Y.2011-12 & 2012-13 M/s G.V.K.Power & Infrastructure Ltd. 3. On being aggrieved, the assessee preferred an appeal before the Ld.CIT(A) by raising six grounds along with one additional ground which is as follows : “On the facts and in the circumstances of the case and in law, the disallowance under section 14A of the Act should be restricted to Rs.5,52,505/- both under normal provisions and under section 115JB of the Act.” After considering the submissions of the Ld.Counsel for the assessee and the case laws relied upon by the assessee, the Ld.CIT(A) allowed the assessee’s appeal partly. 4. On being aggrieved by the order passed by the Ld.CIT(A), the revenue preferred appeal before the ITAT by raising the following grounds : 1. The order of the Ld. CIT(A) is erroneous both on facts and in law. 2. When an assessee cannot make a fresh claim of allowance without filing a revised return of income, whether the same assessee can claim such allowance before the Appellate authority / (CIT(A)/ITAT) in respect of an appeal pending on issues which are not related to the fresh claim of allowance. In other words, whether the assessee can make a claim of an allowance in appellate proceedings when the cause of action for such appeal is not the claim of allowance freshly made by the assessee. 3. Whether the appellate authority is correct in law in granting an allowance/deduction which was not disallowed by the AO. 4 I.T.A. No.47 & 48/Viz/2021 and CO No.55 & 56/Viz/2021, A.Y.2011-12 & 2012-13 M/s G.V.K.Power & Infrastructure Ltd. 4. Whether the appellate authority/CIT(A) is correct in law in granting an allowance which was not claimed by the assessee in Return of Income. 5. The appellant craves leave to add or delete or amend or substitute any ground of appeal before and / or at the time of hearing of appeal. 6. For these and other grounds that may be urged at the time of appeal hearing, it is prayed that these above additions made on relevant disallowances be restored. In the revenue’s appeal, the main grievance of the revenue is that, the Ld.CIT(A) allowed the additional ground raised by the assessee, even though revised return of income was not filed. 5. Before us, the Ld.DR submitted that the Ld.CIT(A) wrongly admitted and allowed the additional ground raised by the assessee by simply following the decision of this Tribunal in assessee’s own case in the A.Y.2013-14 and 2014-15 without considering the fact that the appellate authority has no power to consider the issue which was not raised before the AO. Therefore, he pleaded for setting aside the orders passed by the Ld.CIT(A) and confirm the orders of the AO. 6. On the other hand, the Ld.Counsel for the assessee has submitted that the Ld.CIT(A) followed the decision of this Tribunal in the assessee’s own case and also considered the decision of Apex court and various high 5 I.T.A. No.47 & 48/Viz/2021 and CO No.55 & 56/Viz/2021, A.Y.2011-12 & 2012-13 M/s G.V.K.Power & Infrastructure Ltd. courts. He further submitted that the law has now settled that when there is no exempt income, disallowance u/s 14A r.w.r. 8D is not warranted. Admittedly, in this case, there is no exempt income, therefore, there is no need of any disallowance u/s 14A. He further submits that so far as additional ground is concerned, the Ld.CIT(A) followed the ratio laid down by the Hon’ble Supreme Court in the case of Goetz India Ltd. vs. CIT reported in 284 ITR 323, wherein it was held that appellate authorities are not barred to entertain the additional claim of the assessee during the appellate proceedings. Therefore, the Ld.CIT(A) rightly considered this issue and passed the orders. Hence, the orders passed by the Ld.CIT(A) to be confirmed. 7. We have heard both the parties, perused the material placed on record and the case laws filed by the assessee and revenue. Now, the only issue involved in these appeals is whether the Ld.CIT(A) is correct in restricting the disallowance u/s 14A for Rs.5,52,505/- under normal provisions and under section 115JB of the Act. Before the Ld.CIT(A), it was the submission of the assessee that the assessee disallowed a sum of Rs.14,63,01,503/- u/s 14A of the Act both under the regular provisions and computation of both as per section 115JB of the Act. It was the further submission of the assessee that the amount Rs.14,21,11,203/- is 6 I.T.A. No.47 & 48/Viz/2021 and CO No.55 & 56/Viz/2021, A.Y.2011-12 & 2012-13 M/s G.V.K.Power & Infrastructure Ltd. the interest on loans availed and the said amount was utilised for giving advances to subsidiaries / associates, hence the provisions of section 14A are not applicable. Further, a sum of Rs.36,37,795/- was the loan processing fee in respect of these loans, hence this ground is also outside the scope of disallowance u/s 14A leaving only a sum of Rs.5,52,505/- being the demat account maintenance charges. It was the further submission that the claim is legal in nature and the omission to raise this issue at the time of filing the return of income was due to inadvertence. It was the submission of the assessee that the disallowance can be at the most only for a sum of Rs.5,52,505/- and the balance amount added back by the assessee in the computation of income is contrary to the provisions of Act. 8. After considering the above said submissions, the Ld.CIT(A) admitted the additional ground raised by the assessee, even though revised return was not filed by the assessee, by relying on the decision of Hon’ble Supreme Court in the case of Goetz India Ltd. Vs. CIT, reported in 284 ITR 323, wherein, it was held that it is settled issue that the assessee is required to pay tax on true and correct income. Though the AO is not permitted to entertain the additional claim of the assessee without revised return of income, the appellate authorities are not barred to 7 I.T.A. No.47 & 48/Viz/2021 and CO No.55 & 56/Viz/2021, A.Y.2011-12 & 2012-13 M/s G.V.K.Power & Infrastructure Ltd. entertain the additional claim of the assessee during the appellate proceedings. On merits, the Ld.CIT(A) relied on the decision of Hon’ble Madras High Court in the case of Redington (India) Ltd. vs. Addl.CIT reported in 77 taxman.com 257 (MDS), wherein it was held that if the assessee has not received dividend income, section 14A r.w.r.8D of the Act cannot be made applicable in the absence of exempt income and also the Ld.CIT(A) relied on the decision of SC in the case of Pr.CIT Vs. Oil Industries Development Board reported in 103 taxman.com 325 (SC), the apex court has dismissed the revenue’s appeal against the High Court’s decision, wherein, it was held that in the absence of any exempt income disallowance u/s 14A of any amount was not permissible. After considering the decisions cited by the assessee, the Ld.CIT(A) restricted the disallowance u/s 14A r.w.r 8D at Rs.5,52,505/- though the assessee made disallowance of Rs.14,63,01,503/- u/s 14A, considering the fact that the assessee has not received any exempt income. Accordingly, the Ld.CIT(A) admitted the additional ground raised by the assessee, even though the revised return of income was not filed. 9. After considering the submissions of Ld.AR and Ld.DR and also the material available on record, in the present case, the assessee has made disallowance of Rs.14,63,01,503/- u/s 14A r.r.8D even though the 8 I.T.A. No.47 & 48/Viz/2021 and CO No.55 & 56/Viz/2021, A.Y.2011-12 & 2012-13 M/s G.V.K.Power & Infrastructure Ltd. assessee has not received any exempt income. We are of the view that it is also settled principle that the assessee is required to pay tax on true and correct income. The main contention of the Ld.Counsel for the assessee is that due to oversight the assessee made disallowance. The disallowance itself is contrary to law in the absence of exempt income. We found force in the argument of the assessee that in the absence of exempt income, the provisions of 14A r.w.r 8D is not applicable. Therefore, in the present case, the assessee had wrongly made disallowance u/s 14A without any exempt income. Considering the above facts and circumstances and the case laws relied upon by the assessee, the Ld.CIT(A) partly allowed the additional ground raised by the assessee restricting the amount of disallowance at Rs.5,52,505/-, though the assessee made disallowance of Rs.14,63,01,503/- u/s 14A r.w.8D. We are of the considered opinion that the Ld.CIT(A) has considered all the aspects and passed detailed speaking order by following the decision of the Apex court and various high courts. Now it is settled issue that if the assessee has not received dividend income, section 14A r.w.r.8D of the Act cannot be made applicable in the absence of exempt income. Therefore, we do not find any infirmity in the order passed by the 9 I.T.A. No.47 & 48/Viz/2021 and CO No.55 & 56/Viz/2021, A.Y.2011-12 & 2012-13 M/s G.V.K.Power & Infrastructure Ltd. Ld.CIT(A). Hence, we are inclined to uphold the order of the Ld.CIT(A) and dismiss the ground No.1 to 4 raised by the revenue. 10. Ground No.5 in ITA No.48/Viz/2021 is related to disallowance of expenditure amounting to Rs.49,10,545/- which is preliminary and capital in nature. As per the contention of the revenue, on this aspect, the Ld.CIT(A) has considered the nature of expenditure and passed order which is as follows :- “Thus as could be seen from the above, majority of the expenses are for pre-bid studies of Road Projects and investment maintenance charges. It is on record that the appellant is engaged in the business of bidding for various infrastructure projects and if successful to form companies (SPVs) to undertake the projects. Thus the expenditure is incurred by the appellant only in the course of carrying on its business. Investment maintenance charges of Rs.13,56,630/- paid to Pinakini Share & Stock Brokers Ltd. was already disallowed by the Appellant itself in its computation of income. Therefore, the Assessing Officer is not justified in disallowing the expenditure of Rs.49,10,545/-.” On this aspect, it was the submission of the Ld.DR that the AO disallowed a sum of Rs.49,10,545/- stating that such expenses are not revenue in nature and it is in capital fold. 11. On the other hand, the Ld.Counsel for the assessee has submitted that majority of the expenses are for pre-bid studies of road projects and investment maintenance charges was already disallowed by the assessee in its computation of income. He further submitted that the Ld.CIT(A) 10 I.T.A. No.47 & 48/Viz/2021 and CO No.55 & 56/Viz/2021, A.Y.2011-12 & 2012-13 M/s G.V.K.Power & Infrastructure Ltd. considered all these aspects and rightly allowed the ground raised by the assessee. We are of the view that the Ld.CIT(A) rightly considered the nature of expenditure, therefore needs no interference. Accordingly, the ground raised by the revenue is dismissed. 12. Cross objections filed by the assessee are supportive in nature. Since the appeal of the revenue is dismissed, the cross objections filed by the assessee becomes infructuous, hence dismissed. 13. In the result, all the appeals filed by the revenue as well as the cross objections filed by the assessee are dismissed. Order pronounced in the open court on 25 th February, 2022. Sd/- Sd/- (एस बालाकृ ष्णन) (द ु व्वूरु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER Dated : 25.02.2022 L.Rama, SPS 11 I.T.A. No.47 & 48/Viz/2021 and CO No.55 & 56/Viz/2021, A.Y.2011-12 & 2012-13 M/s G.V.K.Power & Infrastructure Ltd. आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee– M/s G.V.K.Power & Infrastructure Ltd.. Jegurupadu, Kadiyam Mandal, East Godavari Dist. 2. रधजस्व/The Revenue – Asst.Commissioner of Income Tax, Circle-2(1) Rajamahendravaram 3. The Pr.Commissioner of Income Tax, Rajamahendravaram 4. The Commissioner of Income Tax (Appeals)-2, Guntur 5. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम/DR,ITAT, Visakhapatnam 6.गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam