M/S. Mod Commodeal Pvt. Ltd., Kolkata V. A.C.I.T., Circle - 3(1), Kolkata, Kolkata

ITA 137/KOL/2023

AI Insights

The case involves M/s. Mod Commodeal Pvt. Limited, which appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, confirming a disallowance made under section 14A of the Income Tax Act by the Assistant Commissioner of Income Tax, Circle-3(1), Kolkata. The disallowance was initially made despite the assessee not earning any dividend income during the year, based on the anticipation of earning tax-free income in future years. The Tribunal, referencing a recent judgment from the Delhi High Court, overturned this decision, leading to the allowance of the assessee's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129006 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-04-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 22-02-2023
• Other Referred Cases: Pr. Commissioner of Income Tax \\u2013vs.- M/s. Era Infrastructure Limited in ITA No. 204 of 2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

ITA No. 137/KOL/2023 Assessment Year: 2016-2017 M/s. Mod Commodeal Pvt. Limited 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘SMC’ BENCH, KOLKATA Before Dr. Manish Borad, Accountant Member & Shri Sonjoy Sarma, Judicial Member I.T.A. No. 137/KOL/2023 Assessment Year: 2016-2017 M/s. Mod Commodeal Pvt. Limited,............Appellant 32/7, Sahapur Colony, Kolkata-700053 [PAN: AABCM8970B] -Vs.- Assistant Commissioner of Income Tax,....Respondent Circle-3(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 Appearances by: Shri Amit Choudhary, A.R., appeared on behalf of the assessee Shri Vijay Kumar, Addl. CIT, appeared on behalf of the Revenue Date of concluding the hearing : April 11, 2023 Date of pronouncing the order : June 14 th , 2023 O R D E R Per Dr. Manish Borad, Accountant Member:- This appeal at the instance of assessee for assessment year 2016-17 is directed against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 30.01.2023, which is arising out of the order under section 143(3) of ITA No. 137/KOL/2023 Assessment Year: 2016-2017 M/s. Mod Commodeal Pvt. Limited 2 the Income Tax Act on 19.12.2018 framed by ld. ACIT, Circle-3(1), Kolkata. 2. The sole grievance of the assessee is that both the lower authorities erred in confirming the disallowance under section 14A of the Act considering the fact that the assessee has not earned any dividend income during the year. The fact, that the assessee has not earned any dividend income, stands uncontroverted by the ld. D.R. 3. Brief facts of the case are that the assessee-company was engaged in the business of trading of oxygen gas during the year and filed its return of income for the assessment year 2016-17 on 04.01.2017 declaring total income at Rs.7,06,442/- under normal provision. The case was selected for manual scrutiny vide CBDT Instruction No. 05/2017 dated 07.07.2017. The case was selected for scrutiny assessment and a search and seizure operation was conducted under section 132(1) by the Directorate of Income Tax (Investigation), Gauhati in Adhunik Cement Group on 11.03.2016. On the basis of the return and copy of accounts and materials collected during the course of assessment proceedings, the total income of the assessee was determined at Rs.5,83,709/- inter alia making the disallowance of a sum of Rs.5,83,709/- under section 14A read with Rule 8D of the Income Tax Act. Being aggrieved, the assessee went in appeal before the ld. CIT(Appeals). The ld. CIT(Appeals) upheld the order ITA No. 137/KOL/2023 Assessment Year: 2016-2017 M/s. Mod Commodeal Pvt. Limited 3 of the ld. Assessing Officer. Being not satisfied, the assessee is in appeal before the Tribunal. 4. We have heard the rival contentions and gone through the material placed before us. The disallowance has been made under section 14A read with Rule 8D of the Income Tax Act. A perusal of the assessment order would suggest that the ld. Assessing Officer has recorded a finding that assessee has no exempt income during this year, but he disallowed the expenditure on the ground that on the investment in business, in future the assessee will earn tax-free income, thus the ld. Assessing Officer was of the opinion that the expenditure attributable to tax-free anticipated income deserves to be disallowed under section 14A read with Rule 8D of the Income Tax Act. He has observed that though in this year, the assessee has no tax-free income but in future years it will earn some income. Hence he calculated the disallowance. 5. On due consideration of the above facts and circumstances, we are of the view that this view of the ld. Assessing Officer is contrary to the judgment of the Hon’ble Delhi High Court in the case of Pr. Commissioner of Income Tax –vs.- M/s. Era Infrastructure Limited in ITA No. 204 of 2022. This decision has come on 20 th July, 2022. The Hon’ble Delhi High Court has considered the latest amendment brought in section 14A by way of Finance Act, 2022 and thereafter held that if an assessee ITA No. 137/KOL/2023 Assessment Year: 2016-2017 M/s. Mod Commodeal Pvt. Limited 4 has no tax-free income, then no expenditure would be disallowed to it. Following this judgment, we allow this ground of appeal for the assessment year and delete the disallowance. 6. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 14 th June, 2023. Sd/- Sd/- (Sonjoy Sarma) (Manish Borad) Judicial Member Accountant Member Kolkata, the 14 th day of June, 2023 Copies to :(1) M/s. Mod Commodeal Pvt. Limited, 32/7, Sahapur Colony, Kolkata-700053 (2) Assistant Commissioner of Income Tax, Circle-3(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 (3) CIT(Appeals), National Faceless Appeal Centre (NFAC), Delhi; (4) Commissioner of Income Tax- ; (5) The Departmental Representative (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.