M/s.Sri Vijayadurga Investments and Agencies Pvt. Ltd., Bangalore V. Deputy Commissioner of Income-Tax, Bangalore

ITA 1553/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5456 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 26-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K BIJU JT BENGALURU
• Assessee Lawyers: R E BALASUBRAMANIAM
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ITA NO.1553/BANG/2016 ASSESSMENT YEAR : 2012-13 M/S. SRI VIJAYADURGA INVESTMENTS AND AGENCIES PVT. LTD., # 13/A, NAVRATHNA APARTMENTS, 17 TH CROSS, MALLESHWARAM, BENGALURU 560 055. PAN: AACCS 0207L VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7(1)(2), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI R.E. BALASUBRAMANIAM, CA RESPONDENT BY : SHRI M.K. BIJU, JT.CIT(DR)(ITAT-3), BENGALURU. DATE OF HEARING : 20.04.2017 DATE OF PRONOUNCEMENT : 28.04.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(APPEALS) INTER ALIA ON THE FOLLOWING GROUNDS:- THE APPELLANT OBJECTS TO THE ORDER OF THE LD. CIT ( A) ON THE FOLLOWING GROUNDS: ITA NO.1553/BANG/2016 PAGE 2 OF 4 1. THE IMPUGNED ORDER IS OPPOSED TO THE FACTS OF L AW IN SO FAR AS IT IS PRE-JUDICIAL TO THE INTEREST OF THE APPELL ANT. 2. THE LD. CIT(A) ERRED IN UPHOLDING THE DISALLOWA NCE MADE IN ACCORDANCE WITH RULE 8D INASMUCH AS THE APPLICAT ION OF RULE 8D IS NOT MANDATORY AND CANNOT BE INVOKED MERELY BY REJECTING THE CLAIM OF THE ASSESSEE U/S 14A(2) OF THE INCOME TAX ACT, 1961. 3. THE LD. CIT (A) ERRED IN NOT CONSIDERING THE FA CT THAT THE APPELLANT HAD NOT EARNED ANY EXEMPT INCOME DURING T HE YEAR AND AMOUNT OF DISALLOWANCE COMPUTED U/R 8D R.W.S 14A OF THE INCOME TAX ACT, 1961 CANNOT EXCEED THE AMOUNT OF IN COME ITSELF. 4. THE LD. CIT (A) ERRED IN NOT CONSIDERING THE FA CT THAT THE APPELLANT HELD THESE INVESTMENTS TO HAVE A STRATEGI C CONTROL IN THE GROUP COMPANIES AND NOT TO EARN ANY EXEMPT INCOME O UT OF IT AND AS SUCH PROVISIONS OF RULE 8D ARE NOT APPLICABLE. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE ADDUCE D IN TIME TO TIME, IT IS REQUESTED THAT THE HON'BLE ITAT MAY BE PLEASED TO EXAMINE THE CASE IN THE LIGHT OF JUSTICE AND GRANT THE RELIEF SOUGHT FOR. 2. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS CONTENDED THAT IN THE IMPUGNED ASSESSMENT YEAR, ASS ESSEE HAS NOT EARNED ANY EXEMPTED INCOME, THEREFORE NO DISALLOWAN CE U/S. 14A IS PERMISSIBLE. HE HAS INVITED OUR ATTENTION TO THE P ROFIT & LOSS ACCOUNT AND THE DETAILS OF OTHER INCOME IN SUPPORT OF HIS CONTE NTION THAT HE HAS NOT EARNED ANY EXEMPTED INCOME DURING THE IMPUGNED ASSE SSMENT YEAR. THE LD. COUNSEL FOR THE ASSESSEE FURTHER PLACED RELIANC E UPON THE ORDER OF TRIBUNAL AND VARIOUS ORDERS OF THE HIGH COURT IN WH ICH IT HAS BEEN HELD THAT IN THE ABSENCE OF ANY EXEMPTED INCOME, THE PROVISIO NS OF SECTION 14A ITA NO.1553/BANG/2016 PAGE 3 OF 4 CANNOT BE INVOKED. COPY OF THE ORDER OF TRIBUNAL I N THE CASE OF ALLIANCE INFRASTRUCTURE PROJECTS PVT. LTD. V. DCIT, ITA NOS. 220 & 1043/BANG/2013 IN ITA NO.220 & 1043/BANG/2013 IS PLACED ON RECORD AT PAGES 39 TO 52 OF THE COMPILATION. 3. THE LD. DR, ON THE OTHER HAND, HAS PLACED RELIAN CE UPON THE ORDER OF CIT(APPEALS). 4. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND FROM THE RECORD AND P ROFIT & LOSS ACCOUNT THAT THE ASSESSEE DID NOT EARN ANY EXEMPTED INCOME DURIN G THE YEAR. THEREFORE, IN THE ABSENCE OF ANY EXEMPTED INCOME, P ROVISIONS OF SECTION 14A OF THE ACT CANNOT BE INVOKED. RELIANCE WAS PLA CED UPON THE ORDER OF TRIBUNAL IN THE CASE OF ALLIANCE INFRASTRUCTURE PROJECTS PVT. LTD. V. DCIT (SUPRA) AND ALLBANK FINANCE LTD. IN ITA NO.465/KOL/2013 IN WHICH IT HAS BEEN HELD IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNC EMENTS OF VARIOUS HIGH COURTS THAT IN THE ABSENCE OF ANY EXEMPTED INCOME, PROVISIONS OF SECTION 14A OF THE ACT CANNOT BE INVOKED. THEREFORE, IN TH E LIGHT OF THIS LEGAL POSITION, WE ARE OF THE VIEW THAT IN THE INSTANT CA SE, THE AO HAS WRONGLY INVOKED THE PROVISIONS OF SECTION 14A FOR MAKING TH E DISALLOWANCE. ACCORDINGLY WE SET ASIDE THE ORDER OF CIT(APPEALS) AND DELETE THE ADDITION MADE IN THIS REGARD. ITA NO.1553/BANG/2016 PAGE 4 OF 4 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF APRIL, 2017. SD/- SD/- ( S. JAYARAMAN ) (SUNIL KUMAR YA DAV ) ACCOUNTANT MEMBER JUDIC IAL MEMBER BANGALORE, DATED, THE 28 TH APRIL, 2017. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.