Dy. Commissioner of Income Tax, Circle-1(2), Hyderabad V. Caspian Impact Investments Private Limited, Hyderabad

ITA 1462/Hyd/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2650 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-08-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 16-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M NARMADA
• Assessee Lawyers: NIKHIL KANODIA
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 1462/HYD/2017 ASSESSMENT YEAR: 2013 - 14 DCIT, CIRCLE - 1(2), HYDERABAD. VS. CASPIAN IMPACT INVESTMENT PRIVATE LIMITED, 8 - 2 - 596/5/B/1, 3 RD FLOOR, ROAD NO.10, BANJARA HILLS, HYDERABAD 500 034. PAN: AADCS 4132 K (APPELLANT) (RESPONDENT) REVENUE BY: SMT. M. NARMADA, DR ASSESSEE BY: SRI NIKHIL KANODIA, AR DATE OF HEARING: 14.08.2018 DATE OF PRONOUNCEMENT: 17 .08.2018 ORDER PER INTURI RAMA RAO, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 15.11.2016 OF CIT (A) - 8, HYDERABAD FOR THE A.Y. 2013 - 14. REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. LD. CIT(A) ERRED ON BOTH FACTS AND LAW OF THE CASE. 2. LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT ANY INVESTMENT WHICH IS YIELDING OR LIKELY TO YI ELD EXEMPT INCOME FALLS WITHIN THE AMBIT OF SECTION 14A AND EXPENDITURE IN RELATION TO SUCH INVESTMENTS HAS TO BE COMPUTED AS PER THE FORMULA IN RULE 8D AND THERE IS NO EXEMPTION IN CASE WHERE NO EXEMPT INCOME IS EARNED OR NOT. 3. LD. CIT(A) ERRED WHILE TA KING SUCH A VIEW OF THE MATTER, LD. CIT(A) FAILED TO CONSIDER CIRCULAR NO./2014 DATED 11.02.2014 ISSUED BY THE CBDT WHEREIN IT IS CLARIFIED THAT RULE 8D READ WITH SECTION 14A OF THE ACT PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE TAXPAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME. 2 3 . BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY DULY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF PROVIDING FINANCIAL SERVICES TO THE R EGISTERED NON - BANKING FINANCIAL COMPANIES (NBFCS). THE RETURN OF INCOME FOR THE A.Y. 2013 - 14 WAS FILED ON 28.09.2013 DECLARING A TOTAL LOSS OF RS. 13,02,78,792/ - . AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER VI DE ORDER DATED 16.12.2015 PASSED U/S 143(3) OF THE ACT AT A TOTAL INCOME OF RS. 2,59,44,793/ - . WHILE DOING SO, ASSESSING OFFICER MADE DISALLOWANCE OF RS. 2,88,27,078/ - U/S 14A READ WITH RULE 8D AS AGAINST THE EXEMPT INCOME OF RS. 24,55,248/ - . BEING AGGRI EVED BY THE ABOVE DISALLOWANCES, AN APPEAL WAS FILED BEFORE THE CIT(A), WHO VIDE THE IMPUGNED ORDER DIRECTED THE A.O. TO RESTRICT THE AMOUNT OF DISALLOWANCE MADE U/S 14A TO THE EXTENT OF EXEMPT INCOME. CIT(A) ALSO DIRECTED THE A.O. TO CONSIDER ONLY INVEST MENTS WHICH YIELDED THE EXEMPT INCOME FOR THE PURPOSE OF DISALLOWANCE U/S 14A READ WITH RULE 8D(III) OF THE ACT AND FOR COMPUTING THE AVERAGE VALUE OF INVESTMENT. 4. LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE ORDER PASSED BY THE ASSESSING OFFICER AND SUBMITTED THAT THE PROVISIONS OF SECTION 14A CAN BE TRIGGERED IRRESPECTIVE OF THE FACT THAT WHETHER THERE IS EXEMPT INCOME OR NOT IN THE LIGHT OF THE BOARD CIRCULAR NO.5/2014 DATED 11.02.2014. 5. ON THE OTHER HAND, LEARNED AR PLACED RELIANCE ON THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. RENAISSANCE HOLDINGS & DEVELOPERS PVT LTD., (ITA NO.848/BANG/2018, DT 06.07.2018) WHICH IS RELEVANT FOR THE PROPOSITION THAT THE AMOUNT OF DISALLOWANCE CANNOT EXCEED EXEMPT I NCOME. HE FURTHER SUBMITTED THAT FOR THE PURPOSE OF COMPUTING THE AVERAGE VALUE OF INVESTMENTS FOR 3 COMPUTING THE AMOUNT OF DISALLOWANCE UNDER RULE 8D, THE ONLY INVESTMENTS WHICH YIELDED EXEMPT INCOME ALONE BE CONSIDERED. 6. WE HAVE HEARD THE RIVAL SUBMIS SIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE INVOLVED IN THE PRESENT APPEAL IS THE QUANTUM OF THE AMOUNT OF DISALLOWANCE U/S 14A. THERE IS NO DISPUTE ABOUT THE APPLICABILITY OF THE PROVISIONS OF SECTION 14A. NOW THE LAW IS QUITE SETTLED THAT THE DISALLOWANCE U/S 14A CANNOT EXCEED EXEMPT INCOME. IN SUPPORT OF THIS VIEW RELIANCE CAN BE PLACED ON THE ITAT , HYDERABAD SPECIAL BENCH IN THE CASE OF ACIT VS. M/S. PROGRESSIVE CONSTRUCTIONS PVT LTD (ITA NO.1845/HYD/2014, DT. 14.02.2017) SIMILARLY IN T HE LIGHT OF THE DECISION OF THE DELHI SPECIAL BENCH DECISION IN THE CASE OF ACIT VS. VIREET INVESTMENTS PVT LTD (ITA NO. 502/DEL/2012, DT 16.06.2017), THE VALUE OF INVESTMENT WHICH YIELDED EXEMPT INCOME ALONE BE CONSIDERED FOR THE PURPOSE OF COMPUTING THE AVERAGE VALUE OF THE INVESTMENTS FOR THE PURPOSE OF QUANTIFYING THE AMOUNT OF DISALLOWANCE U/S 14A. WE FIND THAT THE ORDER OF THE CIT(A) IS IN CONSONANCE WITH THE RATIOS LAID DOWN BY THE SPECIAL BENCHES AND THEREFORE, WE DO NOT FIND ANY REA SON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 17 TH AUGUST, 2018 . SD/ - SD/ - (P. MADHAVI DEVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 17 TH AUGUST, 2018 OKK 4 COPY TO: - 1) CASPIAN IMPACT INVESTMENT PVT LTD., 8 - 2 - 596/5/B/1, 3 RD FLOOR, ROAD NO.10, BANJARA HILLS, HYDERABAD - 500034. 2) DCIT, CIRCLE - 1(2), B - BLOCK, 7 TH FLOOR, I.T. TOWERS, A.C. GUARDS, MASAB TANK, HYDERABAD. 3) THE CIT(A) - 8 , HYDERABAD 4) THE PR. CIT - 8 , HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE