ACIT, Circle-16(1), Hyd, Hyderabad V. Nekkanti Sea Foods Ltd, Hyderabad, Hyderabad

ITA 1609/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6098 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 13-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 29-11-2016
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Earning of tax free income
• Section: 142(1); 14A; 115JB

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO. 1609/HYD/2016 ASSESSMENT YEAR: 2012-13 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE- 16(1) HYDERABAD VS. M/S NEKKANTI SEA FOODS, LTD, HYDERABAD PAN AAACN4664J (APPELLANT) (RESPONDENT) REVENUE BY : SHRI V. SREEKAR ASSESSEE BY : S HRI V. RAGHAVENDRA RAO DATE OF HEARING : 13 - 03 - 2017 DATE OF PRONOUNCEMENT : 13 - 03 - 2017 ORDER PER G. MANJUNATHA, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-4, HYDERABAD DATED 08-09-20 16 AND IT PERTAINS TO THE ASSESSMENT YEAR 2012-13. THE RE VENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THE LD. CIT(A), ERRED IN DELETING THE DISALLOWA NCE MADE U/S 14A BY HOLDING THAT ASSESSE DID NOT EARN ANY EX EMPT INCOME. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSIN G OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND, WHICH MAY BE NECESSARY. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE IS A LIMITED COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURING/PROCESSING OF FROZEN MARINE PRODUCTS, FILED 2 ITA NO. 1609/HYD/2016 M/S NEKKANTI SEA FOODS, HYD. ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-1 3 ON 22-09-2012 DECLARING TOTAL INCOME OF RS. 20,83,44,6 00/- UNDER NORMAL PROVISION AND RS. 20,62,01,636/- UNDER THE PROVISION OF SEC. 115JB OF THE IT ACT. THE CASE WA S SELECTED FOR SCRUTINY AND ACCORDINGLY, NOTICES U/S 142(1) AND 143(2) OF THE IT ACT WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSES SE APPEARED FROM TIME TO TIME AND FURNISHED INFORMATIO N CALLED FOR. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E A.O NOTICED THAT THE ASSESSE HAS MADE INVESTMENT IN SHA RES OF RS. 15,52,78,809/-. THE A.O FURTHER OBSERVED THAT THE ASSESSEE CLAIMED INTEREST AMOUNT OF RS. 2,23,80,452 /-. THE INCOME FROM SHARES BEING DIVIDEND INCOME WHICH IS EXEMPT FROM TAX U/S 10(38) OF THE IT ACT, A SHOW C AUSE NOTICE WAS ISSUED AND ASKED TO EXPLAIN AS TO WHY DISALLOWANCE U/S 14A R.W.R 8D SHOULD NOT BE MADE. I N RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSE HAS SUBMITTED THAT DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR IT HAD NOT EARNED ANY EXEMPT INCOME IN THE NATURE OF DIVIDEND FROM SHARES AND HENCE THE PROVISIONS OF SEC. 14A R.W.R 8D HAS NO APPLICATION. THE ASSESSEE FURTHER SUBMITTED THAT SEC. 14A OF THE IT ACT, IS APPLICABLE ONLY WHEN THERE IS EXEMPT INCOME WHICH D OES NOT FORM PART OF TOTAL INCOME UNDER THIS ACT. SINC E, THERE IS NO EXEMPT INCOME IN THE NATURE OF DIVIDEND FROM SHARES, DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES FORM PART OF TOTAL INCOME DOES NO T ARISE. 3 ITA NO. 1609/HYD/2016 M/S NEKKANTI SEA FOODS, HYD. THE A.O AFTER CONSIDERING THE EXPLANATIONS OF THE A SSESSE HELD THAT THE ASSESSEE HAS SHOWN INVESTMENT IN THE SHARES, THE INCOME FROM WHICH WAS EXEMPT FROM TAX U/S 10(38 ) OF THE IT ACT AND HENCE, THE ASSESSE WAS LIABLE FOR DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO THE EXEMPT INCOME AS REQUIRED BY THE PROVISION OF SEC. 14A OF THE ACT, ACCORDINGLY WORKED OUT DISALLOWANCES U/S 1 4A R.W.R 8D AND MADE ADDITION OF RS. 44,84,659/- 3. AGGRIEVED BY THE ASSESSMENT ORDER THE ASSESSE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSE FURTHER CONTENDED THAT WHERE THER E IS NO EXEMPT INCOME IN THE FORM OF DIVIDEND FROM THE SHAR ES, IT HAS BEEN JUDICIALLY HELD THAT THE PROVISION 14A R.W .R 8D HAS NO APPLICATION. THE ASSESSE REFERRING TO THE D ECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINV EST LTD., VS. COMMISSIONER OF INCOME TAX [2015] 378 ITR 33(DEL), SUBMITTED THAT IF THERE IS NO EXEMPT INCOM E WHICH FORMS PART OF THE TOTAL INCOME UNDER THIS ACT, DISA LLOWANCE U/S 14A OF THE IT ACT CANNOT BE MADE. THE CIT (A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE AND ALSO RELIED UP ON THE DECISION OF THE ITAT, HYDERABAD IN THE CA SE OF PRATHISTA INDUSTRIES LTD., VS. DCIT-16(3), IN ITA NO. 1302/HYD/2015 DATED 29-04-2016, DELETED ADDITION MA DE BY THE A.O TOWARDS DISALLOWANCE U/S 14A OF THE IT A CT. AGGRIEVED BY THE CIT(A) ORDER THE REVENUE IS IN APP EAL BEFORE US. 4 ITA NO. 1609/HYD/2016 M/S NEKKANTI SEA FOODS, HYD. 4. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEAR ING SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE ITAT, HYDERABAD B BENCH IN THE CASE OF PRATHISTA INDUSTRIES LTD., VS. DCIT- 16(3), IN ITA NO. 1302/HYD/2015 DATED 29-04-2016, WHEREIN THE ITAT UNDER SIMILAR CIRCUMSTANCES HELD THAT WHEN THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME, THERE CA N BE NO DISALLOWANCE U/S 14A OF THE IT ACT. THE LD. AR FURTHER SUBMITTED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD., VS. COMMISSIONER OF INCOME TAX [20 15] 378 ITR 33(DEL) WAS HELD THAT SEC. 14A OF THE IT AC T WILL NOT BE APPLICABLE, WHERE NO EXEMPT INCOME IS RECEIVED/RECEIVABLE DURING THE RELEVANT ASSESSMENT YEAR. THE CIT(A) AFTER CONSIDERING THE RELEVANT FACTS AND BY FOLLOWING THE DECISION OF CO-ORDINATE BENCH, HAS RI GHTLY DELETED ADDITIONS TOWARDS DISALLOWANCE MADE U/S 14A OF THE IT ACT AND HIS ORDER SHOULD BE UPHELD. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDER OF TH E A.O 5. WE HEARD BOTH THE PARTIES AND PERUSED THE MATERI AL AVAILABLE ON RECORD. THE A.O INVOKED SEC. 14A R.W. R 8D AND DISALLOWED EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UND ER THIS ACT. ACCORDING TO THE A.O, THE ASSESSE IS LIABLE F OR DISALLOWANCE U/S 14A OF THE IT ACT, THE MOMENT THER E IS A INVESTMENT IN SHARES, WHETHER OR NOT EARNED EXEMPT INCOME IN THE FORM OF DIVIDEND WHICH IS RECEIVED OR RECEIVABLE DURING THE RELEVANT ASSESSMENT YEAR. THE CONTENTION OF THE ASSESSE THAT SEC. 14A R.W.R 8D HA S NO 5 ITA NO. 1609/HYD/2016 M/S NEKKANTI SEA FOODS, HYD. APPLICATION, WHEN THERE IS NO EXEMPT INCOME WHICH F ORMS PART OF TOTAL INCOME UNDER THIS ACT. WE FIND THAT SEC. 14A OF THE IT ACT PROVIDES FOR DISALLOWANCE OF EXPENDIT URE INCURRED IN RELATION TO EXEMPT INCOME, WHICH DOES N OT FORM PART OF THE TOTAL INCOME. IF THERE IS NO EXEMPT IN COME RECEIVED OR RECEIVABLE DURING THE RELEVANT ASSESSME NT YEAR, THERE SHALL NOT BE ANY DISALLOWANCE U/S 14A OF THE IT ACT. WE FURTHER OBSERVED THAT THE CO-ORDINATE BENCH OF T HE ITAT, HYDERABAD IN THE CASE OF PRATHISTA INDUSTRIES LTD., VS. DCIT-16(3), IN ITA NO. 1302/HYD/2015 DATED 29- 04- 2016 HAS CONSIDERED SIMILAR ISSUE AND BY FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT, IN THE CASE O F CHEMINVEST LTD., VS. COMMISSIONER OF INCOME TAX [20 15] 378 ITR 33(DEL), HELD THAT SEC. 14A WILL NOT BE APP LICABLE, WHERE THERE IS NO EXEMPT INCOME IS RECEIVED. THE R ELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: WE FIND THAT SECTION 14A CLEARLY STIPULATES THAT THE EXPENDITURE INCURRED FOR EARNING OF ANY INCOME DOES NOT FORM PART OF THE TOTAL INCOME ALONE CAN BE DISALLOWED. IN THE CASE BEFORE US, WHEN THE ASSESSEE HAS NOT EARNED ANY EXE MPT INCOME, THERE CAN BE NOT DISALLOWANCE U/S 14A OF T HE ACT. THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD., REPORTED IN (2015) 378 ITR 33(DEL) HAS HELD HAT SE CTION 14A WILL NOT APPLY WHERE NO EXEMPT INCOME IS RECEIVED OR REC EIVABLE DURING THE RELEVANT ASSESSMENT YEAR. IN VIEW OF TH E SAME, ASSESSESS APPEAL ON THIS GROUND IS ALLOWED. 6. IN THIS VIEW OF THE MATTER AND ALSO RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT, HYDERABAD IN TH E CASE OF PRATHISTA INDUSTRIES LTD., VS. DCIT-16(3), IN ITA NO. 1302/HYD/2015 DATED 29-04-2016, WE ARE OF THE VIEW THAT THERE IS NO DISALLOWANCE U/S 14A R.W.S 8D, IF THE A SSESSE HAS NOT RECEIVED ANY EXEMPT INCOME WHICH DOES NOT F ORM 6 ITA NO. 1609/HYD/2016 M/S NEKKANTI SEA FOODS, HYD. PART OF THE TOTAL INCOME UNDER THIS ACT. THE CIT ( A) AFTER CONSIDERING THE RELEVANT FACTS HAS RIGHTLY DELETED ADDITIONS MADE BY THE A.O. WE DO NOT FIND ANY ERROR OR INFIR MITY IN THE ORDER OF THE CIT(A), HENCE WE UPHELD THE CIT(A) ORDER AND DELETE ADDITION MADE U/S 14A OF THE IT ACT. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH, 2017. SD/- SD/- (D. MANMOHAN) (G. MANJUNATHA) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED: 13 TH MARCH, 2017 KRK 1) M/S NEKKANTI SEA FOODS LTD., 10-05-24, FLAT NO. G- 4, MAHARA BLOCK, KHAZA FUNCTION HALL LANE, GARDEN TOWERS, MASAB TANK, HYD. 2) ACIT, CIRCLE -16(1) HYDERABAD 3) CIT -4, HYDERABAD 4) PCIT-4, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 6) GUARD FILE