DCIT, Circle-3(1), Hyderabad, Hyderabad V. NCC Power Projects Limited (Presently Sembcorp Gayatri Power Limited) Hyderabad, Hyderabad

ITA 1631/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6078 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 02-12-2016
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: V SIVA KUMAR; C S SUBRAMANYAM
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 115JB

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1631/HYD/2016 ASSESSMENT YEAR: 2012-13 THE DY INCOME TAX OFFICER CENTRAL CIRCLE- 3 HYDERABAD VS. M/S. NCC POWER PROJECTS LTD (PRESENTLY M/S SEMBCORP GAYATRI POWER LTD.), HYDERABAD. PAN AACCN8774F (APPELLANT) (RESPONDENT) REVENUE BY : SMT. SUMAN MALIK ASSESSEE BY : S HRI C.S. SUBRAMANYAM & SHRI V. SIVA KUMAR DATE OF HEARING : 02 - 03 - 201 7 DATE OF PRONOUNCEMENT : 10 - 0 3 - 2017 ORDER PER P. MADHAVI DEVI, J.M.: IN THIS APPEAL, THE REVENUE IS AGGRIEVED BY THE ORD ER OF THE CIT(A)-IV, HYDERABAD DATED 20-09-2016, THE REVE NUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THE LD. CIT(A) ERRED BOTH IN LAW AND ON FACTS O F THE CASE. 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION MA DE RS. 5,31,29,747/- U/S 14A READ WITH RULE 8D 3. THE LD. CIT(A) ERRED IN DELETING THE ADDITION MA DE U/S 14A READ WITH RULE 8D NOT CONSIDERING THE FACT THAT THE FINANCE COST CAPITALIZED BY THE ASSESSEE UNDER THE HEAD PR E-OPERATIVE EXPENDITURE IS ALLOWABLE IN THE SUBSEQUENT ASST. Y EARS THEREBY AMOUNTING TO ALLOWING THE EXPENDITURE ATTRIBUTABLE TO THE EXEMPTED INCOME FOR THIS YEAR. 2 ITA NO. 1631/HYD/2016 M/S NCC POWER PROJECTS LTD., HYD. 4. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TIM E OF HEARING 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE BUSINESS OF GENERATION OF POWER, FIL ED ITS RETURN OF INCOME FOR THE A.Y 2012-13 ON 29-09-2012 ADMITTING INCOME OF RS. 31,07,399/- UNDER NORMAL PROVISIONS AND BOOK LOSS U/S 115JB OF THE IT ACT AT NIL. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE A.O OBSERVED THAT THE ASSESSEE HAS SHOWN AN AMO UNT OF RS.59,63,18,627/- TOWARDS INVESTMENT IN SHARES A S ON 31-03-2012 AND THAT THE INCOME FROM SHARES IS DIVID END INCOME, WHICH IS EXEMPT FROM TAX U/S 10(38) OF THE IT ACT. THE A.O HAS ALSO OBSERVED THAT THE ASSESSEE HAS CLA IMED INTEREST AMOUNT OF RS. 26,25,70,168/-. THE ASSESSE E WAS ASKED TO EXPLAIN AS TO WHY THE DISALLOWANCE U/S 14A OF THE IT ACT READ WITH RULE 8D SHOULD NOT BE MADE. THE ASSESSEE FILED ITS REPLY VIDE LETTER DATED 12-12-20 14. HOWEVER, THE A.O WAS NOT CONVINCED AND TAKING INTO CONSIDERATION UNDER CBDT CIRCULAR NO.5 / 2014 DATED 11- 02-2014, THE A.O HELD THAT THE PROVISIONS OF SECTI ON 14A READ WITH RULE 8D ARE APPLICABLE TO ASSESSEES CASE AND THE DISALLOWANCE IS CALLED FOR. ACCORDINGLY, HE COMPUT ED THE DISALLOWANCE AT RS. 5,31,29,747/-. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE CIT(A) STATING THAT THE ASSESSEE HAS NOT CLAIMED AN Y EXPENDITURE, LEAVE ALONE, THE INTEREST EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT AND THEREFORE NO DISALLOWAN CE U/S 3 ITA NO. 1631/HYD/2016 M/S NCC POWER PROJECTS LTD., HYD. 14A OF THE IT ACT IS CALLED FOR. THE CIT(A) ACCEPT ED THE ASSESSEES CONTENTION AND ALLOWED THE SAME. AGAINS T THE RELIEF GRANTED BY THE CIT(A), THE REVENUE IS AN APP EAL BEFORE US. 4. WHILE THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT AS PER THE CBT D CIRCULAR NO. 05/2014, IRRESPECTIVE OF WHETHER THE A SSESSEE HAS EARNED DIVIDEND INCOME OR WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE FOR EARNING OF SUCH INCOME , THE DISALLOWANCE U/S 14A READ WITH RULE 8D IS CALLED FO R AS RIGHTLY DISALLOWED BY THE A.O. 5. LD. COUNSEL FOR THE ASSESSEE, ON OTHER HAND, SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THA T ONLY THE EXPENDITURE WHICH HAS BEEN INCURRED FOR EARNING OF THE EXEMPT INCOME IS TO BE DISALLOWED AND IN THE RELEVA NT A.Y, THE ASSESSEE HAS NEVER CLAIMED ANY EXPENDITURE TOWA RDS EARNING OF THE DIVIDEND / EXEMPT INCOME. THEREFORE , ACCORDING TO HIM, NO DISALLOWANCE IS CALLED FOR AS RIGHTY APPRECIATED BY THE CIT(A). 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THOUGH ASSESSEE HA S EARNED DIVIDEND INCOME DURING THE RELEVANT A.Y, IT HAS NOT CLAIMED ANY EXPENDITURE, LEAVE ALONE, THE INTEREST EXPENDITURE. U/S 14A OF THE IT ACT, ONLY SUCH EXPE NDITURE 4 ITA NO. 1631/HYD/2016 M/S NCC POWER PROJECTS LTD., HYD. WHICH HAS BEEN INCURRED FOR EARNING OF THE EXEMPT I NCOME IS TO BE DISALLOWED. FURTHER, THE ASSESSEE HAS TREA TED THE INTEREST EXPENDITURE AS PRE-OPERATIVE EXPENSES AND HAS NOT EVEN DEBITED TO THE PROFIT AND LOSS ACCOUNT. IN VIE W OF THE SAME, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE REVENUES APPEAL IS DISMI SSED. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON 10 TH MARCH, 2017. SD/- SD/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 10 TH MARCH, 2017. KRK 1) M/S NCC POWER PROJECT LTD. PRESENTLY M/S SEMBCORP GAYATHRI POWER LTD, 6-3-1090, A BLOCK, 5 TH FLOR, TSR TOWER, RAJBHAVAN ROAD, SOMAJIGUDA, HYDERABAD. 2) DCIT, CIRCLE -3(1), HYDERABAD 3) CIT -IV, HYDERABAD 4) PCIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 6) GUARD FILE 5 ITA NO. 1631/HYD/2016 M/S NCC POWER PROJECTS LTD., HYD.