DCIT, CHENNAI V. M/s. OPG Energy Private Ltd., CHENNAI

ITA 185/CHNY/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5175 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 12-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G D JAYANTHI ANGAYARKANNI
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , , ' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER / .I.T.A. NO. 185/CHNY/2018 /ASSESSMENT YEAR : 2014-15 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -5(1), CHENNAI 600 034. VS. M/S. OPG ENERGY PVT. LTD., NO. 36, KNOWLEDGE TOWER IV FLOOR, SANJEEVARAYANPETTAI, LITTLE MOUNT, SAIDAPET, CHENNAI 600 015. [PAN: AAACO 4724G] ( /APPELLANT) ( /RESPONDENT) REVENUE BY : SHRI G.D. JAYANTHI ANGAYARKANNI, JCIT ASSESSEE BY : NONE $ /DATE OF HEARING : 30.08.2018 $ /DATE OF PRONOUNCEMENT : 04.10.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, CHENNAI IN ITA NO. 232/16-1 7/A-3 DATED 27.10.2017 FOR ASSESSMENT YEAR 2014-15. :- 2 -: ITA NO. 185/CHNY/2018 2. M/S. OPG ENERGY PVT. LTD., THE ASSESSEE, IS IN T HE BUSINESS OF GENERATION OF POWER. IN THE ASSESSMENT MADE FOR ASSESSMENT YE AR 2014-15, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE MADE INVE STMENTS IN EQUITY INSTRUMENTS ON VARIOUS COMPANIES AND NOT ADMITTED A NY EXPENDITURE RELATED TO THOSE INVESTMENTS. INVOKING SECTION 14A R.W.R. 8D, OUT OF RS. 11,21,79,607/- FINANCE COST, HE DISALLOWED RS. 5,57 ,26,868/- UNDER RULE 8D2(II) & (III). AGGRIEVED AGAINST THAT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) ON THE SUBMI SSIONS MADE BY THE ASSESSEE THAT IT HAS NOT RECEIVED ANY DIVIDEND INCO ME DURING THE ASSESSMENT YEAR AND THE INVESTMENTS, IN UNLISTED COMPANIES BEI NG STRATEGIC INVESTMENTS, SECTION 14A IS NOT APPLICABLE ETC., APPLYING THE DE CISION OF THIS TRIBUNAL IN THE CASE OF ACIT VS M. BASKARAN, IN ITA NO. 1717/MDS/20 13 FOR ASSESSMENT YEAR 2009-10 HELD THAT THE DISALLOWANCE MADE U/S. 14A WA S TO BE DELETED AS THE ASSESSEE HAS NOT EARNED OR RECEIVED EXEMPT INCOME D URING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER THE APPEAL. 3. AGGRIEVED AGAINST THAT ORDER, THE REVENUE FILED THIS APPEAL ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD CIT(A) IS CONTRARY TO LAW A ND FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LD CIT(A) ERRED IN DELETING THE DISALLOWANC E U/S. 14A R.W.R 8D MADE BY THE AC TO THE TUNE OF RS.5,57,26,868/-, RELYING ON THE DECISION OF THE JURISDICTIONAL ITAT IN THE CASE OF SHRI M. BHASKARA N, HOLDING THAT THE DISALLOWANCE CANNOT BE MADE IN THE ABSENCE OF EXEMP T INCOME EARNED DURING A YEAR. :- 3 -: ITA NO. 185/CHNY/2018 2.2 THE LD CIT(A) ERRED IN NOT APPRECIATING THE FAC T THAT THE ASSESSEE HAD HUGE VALUE OF INVESTMENTS IN EQUITY SHARES CAPABLE OF EARNING EXEMPT INCOME AND CLAIMED NO INTEREST EXPENDITURE ATTRIBUTABLE TO SUCH INVESTMENTS, THEREBY ATTRACTING THE PROVISIONS OF SEC. 14A READ WITH RUL E 8D. 2.3 THE LD CIT(A) OUGHT TO HAVE NOTED THAT AS PER T HE DECISION OF THE HONBLE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. DA GA CAPITAL MANAGEMENT PRIVATE LIMITED (117 ITR 169), RULE SD IS APPLICABL E IN ALL CASES WHEREIN EVEN THERE IS NO EXEMPT INCOME IS EARNED. 2.4 THE LD CIT(A) FAILED TO NOTE THAT THE BOARD, VI DE CIRCULAR NO.5 OF 2014, HAS CLARIFIED THAT THE DISALLOWANCE IS APPLICABLE EVEN IN CASES WHERE NO EXEMPT INCOME WAS EARNED DURING THE YEAR, BUT THERE IS A P OSSIBILITY OF EARNING THE EXEMPT INCOME. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 4. THE LD. DR PRESENTED THE CASE ON THE LINES OF GR OUNDS OF APPEAL. AT THE TIME OF HEARING NONE APPEARED FROM THE ASSESSEE SID E, THOUGH THE HEARING NOTICE WAS SERVED ON ASSESSEE ON 19.06.2018. 5. WE HEARD THE LD. DR. SINCE, THE ASSESSEE HAS NO T EARNED ANY DIVIDEND INCOME, THIS CASE CLEARLY FALLS WITHIN THE RATIO OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF REDINGTON INDIA LTD. VS ACIT [2017] 77 TAXMANN.COM 257 (MAD). FOLLOWING THE JURISDICTIONAL HIGH COURT DECISION, S UPRA, WE HOLD THAT SECTION 14A CANNOT BE INVOKED AND HENCE, DISMISS THE REVENU ES APPEAL. :- 4 -: ITA NO. 185/CHNY/2018 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED ON THURSDAY, THE 04 TH DAY OF OCTOBER, 2018 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER /CHENNAI, ) /DATED: 04 TH OCTOBER , 2018 JPV $*+,-, /COPY TO: 1. / /APPELLANT 2. *0/ /RESPONDENT 3. 1 ) ( /CIT(A) 4. 1 /CIT 5. ,* /DR 6. 4 /GF