Magarpatta Township Development & Construction Co. Ltd, Pune V. Deputy Commissioner of Income tax, Pune

ITA 1266/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6569 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 19-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 1 2 42 /P U N/201 7 / ASSESSMENT YEAR : 20 1 3 - 1 4 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE . / APPELLANT VS. M/S. KSH INTERNATIONAL PVT. LTD., GAT NO.11/3, 11/4, VILL - BIRDEWADI, CHAKAN, TAL - KHED, PUNE 4105 01 . / RESPONDENT PAN:AA ACB1897K / APPELLANT BY : SHRI PRASHANT GADEKAR / RESPONDENT BY : SHRI A.N. K O THARY . / ITA NO. 1266 /P U N/201 7 / ASSESSMENT YEAR : 2012 - 13 MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION CO. LTD., 13, MEGASPACE, SHOLAPUR BAZAR ROAD, OFF EAST STREET, CAMP, PUNE - 411001 . / APPELLANT PAN: AABCM2461K VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 3, PUNE . / RESPONDENT / APPELLANT BY : SHRI D.R. BAR V E / RESPONDENT BY : SHRI PANKAJ GARG ITA NO. 1 2 42 /P U N/20 1 7 & ORS M/S. KSH INTERNATIONAL PVT. LTD. & ORS 2 . / ITA NO. 1240 /P U N/201 7 / ASSESSMENT YEAR : 2012 - 13 M/S. NYATI BUILDERS PVT. LTD., NYATI COMMERCE HO USE, KALYANI NAGAR, YERAWADA, PUNE - 411006 . / APPELLANT PAN: AAACN6418N VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 2, PUNE . / RESPONDENT / APPELLANT BY : SHRI KRISHNA GUJARATHI / RESPONDENT BY : SHRI PANKAJ GARG / DATE OF HEARING : 1 7 . 0 7 .201 9 / DATE OF PRONOUNCEMENT: 01 . 0 8 .201 9 / ORDER PER SUSHMA CHOWLA, J M : OUT OF T H IS BUNCH OF APPEAL S, ONE APPEAL FILED BY REVENUE AN D OTHER TWO APPEALS FILED BY DIFFERENT ASSESSEE ARE AGAINST RESPECTIVE ORDER S OF CIT (A) , PUNE , RELATING TO ASSESSMENT YEAR S 2013 - 14 AND 20 1 2 - 1 3 AGAINST RESPECTIVE ORDER S PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE APPEAL IN ITA NO.1242/PUN/2017 IS AN APPEAL FILED BY REVENUE AND THE OTHER TWO APPEALS ARE FILED BY DIFFERENT ASSESSEE AGAINST DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT. THOUGH THE APPEALS RELATE TO DIFFERENT ASSESSEE BUT THE ISSUE RAISED IN ALL THES E APPEALS IS IDENTICAL, HENCE WE ITA NO. 1 2 42 /P U N/20 1 7 & ORS M/S. KSH INTERNATIONAL PVT. LTD. & ORS 3 PROCEED TO DECIDE ALL THE APPEALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ISSUE RAISED IN THIS BUNCH OF APPEALS IS WHETHER IN CASE THERE IS NO EXEMPT INCOME IN THE HANDS OF ASSESSEE, DOES IT WARRANT ANY DISALLOWANCE UNDER SECTION 14A OF THE ACT OR NOT? 4. FIRST, WE TAKE UP THE APPEAL OF REVENUE IN THE CASE OF M/S. KSH INTERNATIONAL PVT. LTD. , WHEREIN THE FOLLOWING GROUND OF APPEAL HAS BEEN RAISED: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE U/S 14A WHEN THE VIDE CBDT CIRCULAR NO.5/2014, DATED 11.02.2014 HAS CLARIFIED THAT RULE 8D READ WITH SECTION 14A OF THE ACT PROVIDES FOR DISALLOWANCE OF THE EXPE NDITURE EVEN WHERE TAXPAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME. 5. THE CASE OF REVENUE IN THE FACTS OF ASSESSEE WAS THAT THE ASSESSEE HAD MADE HUGE INVESTMENTS IN EQUITY SHARES AND PREFERENCE SHARES IN ITS SISTER CONCERNS AND ALSO IN OT HER PUBLIC LIMITED COMPANIES. IT WAS FURTHER NOTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD DE BITED SUBSTANTIAL INTEREST EXPENSES AND HENCE, SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AS TO WHY ANY DISAL LOWANCE SHOULD NOT BE MADE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES). THE CASE OF ASSESSEE WAS THAT NO DISALLOWANCE UNDER SECTION 14A OF THE ACT COULD BE MADE WHERE THE EXEMPT INCOME EARNED BY ASSE SSEE WAS NIL. THIS PLEA OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER AND VIDE PARA 4.1 OF ASSESSMENT ORDER, HE HOLDS THAT WHERE THE ASSESSEE HAD MADE INVESTMENTS IN ASSETS, INCOME OF WHICH WOULD NOT FORM PART OF TOTAL INCOME AND WHERE THERE WAS HUGE LIABILITY OF INTEREST EXPENSES, ITA NO. 1 2 42 /P U N/20 1 7 & ORS M/S. KSH INTERNATIONAL PVT. LTD. & ORS 4 THEN MANDATORY PROVISIONS OF RULE 8D OF THE RULES ARE TO BE APPLIED. HE WORKED OUT THE DISALLOWANCE AT 75,15,975/ - . 6 . THE CIT(A) ACCEPTED THE PLEA OF ASSESSEE THAT WHERE IT HAD NOT EARNED ANY EXEMPT INCOME DURING THE YEAR, THEN NO DISALLOWANCE UNDER SECTION 14A OF THE ACT IS TO BE MADE. RELIANCE WAS PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT (2015) 378 ITR 33 (DEL) AND ALSO ON VARIOUS OTHER DECISIONS, WHICH WERE RELIED UPON BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE. 7 . THE REVENUE IS IN APPEAL AGAINST AFORESAID FINDING OF CIT(A). 8 . THE LE ARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US HAS POINTED OUT THAT IN A LATER DECISION, THE HONBLE DELHI HIGH COURT I.E. IN PR.CIT VS. OIL INDUSTRIES DEVELOPMENT BOARD IN ITA 197/2018 VIDE JUDGMENT DATED 16.02.2018 APPLIED THE PROPOSITION LAI D DOWN IN CHEMINVEST LTD. VS. CIT (SUPRA), WHEREIN IT WAS RULED THAT IN THE ABSENCE OF ANY EXEMPT INCOME, DISALLOWANCE UNDER SECTION 14A OF THE ACT WAS NOT PERMISSIBLE AND THE APPEAL OF REVENUE WAS DISMISSED. THE REVENUE FILED SPECIAL LEAVE PETITION BEFOR E THE HON'BLE SUPREME COURT AND VIDE JUDGMENT DATED 08.02.2019 IN ITEM NO.33 COURT NO.11 SECTION XIV , IN SPECIAL LEAVE PETITION (CIVIL) DIARY NOS.2755/2019, IT WAS HELD THAT IN VIEW OF THE DECISION OF THIS COURT IN COMMISSIONER OF INCOME TAX 5, MUMBAI VS. ESSAR TELEHOLDINGS LTD. THROUGH ITS MANAGER (2018) 3 SCC 253, WE SEE NO REASON TO ENTERTAIN THIS SPECIAL LEAVE PETITION UNDER ARTICLE 136 OF THE CONSTITUTION OF INDIA. THE SAID SPECIAL LEAVE PETITION ADMITTEDLY, WAS ARISING OUT OF IMPUGNED FINAL JUDGMENT AND ORDER DATED 16.02.2018 IN ITA NO.197/2018 PASSED BY THE HONBLE DELHI HIGH COURT. ITA NO. 1 2 42 /P U N/20 1 7 & ORS M/S. KSH INTERNATIONAL PVT. LTD. & ORS 5 9 . IN VIEW OF CATEGORICAL FINDING OF THE HONBLE DELHI HIGH COURT, WHICH HAS FURTHER BEEN UPHELD BY THE HON'BLE SUPREME COURT BY DISMISSAL OF SPECIAL LEAVE PETITION, WE HOLD THAT IN THE ABSENCE OF EARNING OF ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION, THERE IS NO MERIT IN MAKING ANY DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES. THE GROUND O F APPEAL RAISED BY REVENUE IS THUS, DISMISSED. 10. IN ITA NOS.1266/PUN/2017 AND 1240/PUN/2017 THE ASSESSEE IS IN APPEAL AGAINST ORDERS OF AUTHORITIES BELOW IN MAKING THE AFORESAID DISALLOWANCE UNDER SECTION 14A OF THE ACT AND THE ASSESSEE HAS CHALLENGED T HE ORDERS OF AUTHORITIES BELOW THAT IN THE ABSENCE OF ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION, NO DISALLOWANCE IS WARRANTED UNDER SECTION 14A OF THE ACT R EAD WITH RULE 8D OF THE RULES. 11. THE ISSUE RAISED IN ITA NOS.1266/PUN/2017 AND 1240/P UN/2017 IS SIMILAR TO THE ISSUE RAISED IN ITA NO.1242/PUN/2017 AND OUR DECISION IN ITA NO.1242/PUN/2017 SHALL APPLY MUTATIS MUTANDIS TO ITA NOS.1266/PUN/2017 AND 1240/PUN/2017 . 12 . IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED AND APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 1 ST DAY OF AUGUST , 201 9 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 1 ST AUGUST , 201 9 . GCVSR ITA NO. 1 2 42 /P U N/20 1 7 & ORS M/S. KSH INTERNATIONAL PVT. LTD. & ORS 6 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 1 3 / C IT(A) - 7/ CIT(A) - 2 , PUNE ; 4. THE P CIT - 5 / PCIT - 6 / PCIT - 2 , PUNE ; 5. 6. , , / DR B , ITAT, PUNE ; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE