M/s. NSL Sugars Limited, Bangalore V. Deputy Commissioner Of Income Tax, Circle-5(1)(1), Bangalore

ITA 120/BANG/2023

AI Insights

The case involves M/s.NSL Sugars Limited, which appealed against the order of the Commissioner of Income-tax (Appeals) [CIT(A)] confirming a disallowance under section 14A of the Income Tax Act. The disallowance was initially made by the A.O. in a rectification order under section 154, amounting to Rs.6,22,04,600, for the assessment year 2012-2013. The assessee argued that no exempt income was received during the relevant year, and thus, no disallowance under section 14A was warranted. The Tribunal noted that the legal position is clear that if no exempt income is received, no disallowance under section 14A can be made, referencing several judicial precedents. However, due to the amendment in section 14A by the Finance Act, 2022, which is prospective and applicable from the assessment year 2022-2023 onwards, the Tribunal decided to remand the issue back to the A.O. for verification of the facts.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 115237 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-04-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 26-02-2023
• Other Referred Cases: Pr.CIT v. IL and FS Energy Development Co. Ltd., Cheminvest Ltd. v. CIT, Redington (India) Ltd. v. Addl.CIT, Pr.CIT v. Novell Software Development (India) Pvt. Ltd., Pr.CIT v. Era Infrastructure (India) Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “C”, BANGALORE Before Shri Chandra Poojari, AM & Shri George George K, JM ITA No.120/Bang/2023 : Asst.Year 2012-2013 M/s.NSL Sugars Limited No.60/1, 2 nd Cross Residency Road Bengaluru – 560 025. PAN : AAGCS0938Q. v. The Deputy Commissioner of Income-tax, Circle 5(1)(1) Bangalore. (Appellant) (Respondent) Appellant by : Sri.T.Gandhi, CA Respondent by : Ms.Neera Malhotra, CIT-DR Date of Hearing : 18.04.2023 Date of Pronouncement : 19.04.2023 O R D E R Per George George K, JM : This appeal at the instance of the assessee is directed against CIT(A)’s order dated 27.01.2023 passed u/s 250 of the I.T.Act. The relevant assessment year is 2012-2013. 2. The solitary issue raised is whether the CIT(A) is justified in confirming disallowance u/s 14A of the I.T.Act. 3. The brief facts of the case are as follows: The assessee is a company engaged in the business of manufacture of sugar. For the assessment year 2012-2013, the return of income was filed on 28.09.2012 by declaring a loss of Rs.51,74,48,709. The assessment was completed u/s 143(3) of the I.T.Act on 31.03.2015. Subsequently, an order u/s 154 of the I.T.Act was passed on 28.03.2019 by making ITA No.120/Bang/2023. M/s.NSL Sugars Limited. 2 disallowance u/s 14A of the I.T.Act amounting to Rs.6,22,04,600. 4. Aggrieved by the order passed u/s 154 of the I.T.Act, the assessee filed appeal before the first appellate authority. The CIT(A) vide the impugned order dated 27.01.2023, rejected all the contentions raised and dismissed the appeal of the assessee. 5. Aggrieved by the order of the CIT(A), the assessee has filed the present appeal before the Tribunal. The learned AR submitted that the assessee has not received any exempt income during the relevant assessment year. Consequently, there is no disallowance warranted u/s 14A of the I.T.Act. The learned AR submitted that the issue in question is squarely covered by the orders of the Tribunal in assessee’s own case for assessment years 2010-2011 and 2011-2012 in ITA Nos.597/Bang/2019 and 598/Bang/2019 (order dated 31.07.2019) and also for the assessment year 2016-2017 in IT(TP)A No.262/Bang/2021 (order dated 08.04.2022). 6. The learned Departmental Representative supported the orders of the A.O. and the CIT(A). 7. We have heard rival submissions and perused the material on record. The learned AR had contended that the assessee is not in receipt of any exempt income during the relevant assessment year and, hence, the disallowance u/s 14A of the I.T.Act is not warranted. It is settled law for the ITA No.120/Bang/2023. M/s.NSL Sugars Limited. 3 relevant assessment year that when the assessee is not in receipt of any exempt income, no disallowance u/s 14A of the I.T.Act is warranted. In this context, we rely on the following judicial pronouncements:- (i) Pr.CIT v. IL and FS Energy Development Co. Ltd. (2017) 399 ITR 483 (Delhi) (ii) Cheminvest Ltd. v. CIT (2015) 378 ITR 33 (Delhi) (iii) Redington (India) Ltd. v. Addl.CIT (2017) 392 ITR 633 (Mad.) (iv) Pr.CIT v. Novell Software Development (India) Pvt. Ltd. (2021) 434 ITR 154 (Karn.) 8. It is to be mentioned that Finance Act, 2022 had amended section 14A of the I.T.Act, whereby it is stated that irrespective whether the assessee is not in receipt of exempt income, disallowance u/s 14A of the I.T.Act can be made. However, the Hon’ble Delhi High Court in the case of Pr.CIT v. Era Infrastructure (India) Ltd reported in (2022) 448 ITR 674 (Delhi) had held that the amendment is prospective and applies for and from assessment year 2022-2023 onwards. Since we are concerned with assessment year 2012-2013, the aforesaid amendment brought out by Finance Act, 2022 will not have application for the relevant assessment year. 9. However, on the facts on record, it is not clear whether the assessee had earned any exempt income during the relevant assessment year. Therefore, we deem it appropriate to restore the issue to the files of the A.O. and we accordingly do so. The A.O. is directed to examine whether the assessee ITA No.120/Bang/2023. M/s.NSL Sugars Limited. 4 has earned any exempt income for the relevant assessment year. In the event it is found that the assessee has not earned any exempt income, no disallowance u/s 14A of the I.T.Act shall be made by the A.O. It is ordered accordingly. 10. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on this 19 th day of April, 2023. Sd/- (Chandra Poojari) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 19 th April, 2023. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A)-NFAC Delhi 4. The Pr.CIT, Bengaluru. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore