Serene Estates Private Limited, Hyderabad V. Deputy Commissioner of Income Tax, Circle-3(1), Hyderabad

ITA 1860/Hyd/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6931 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 09-09-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 14-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D J PRABHAKAR ANAND
• Assessee Lawyers: A V RAGHURAM
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A

Judgement Text

TA NO. 1860/HYD/2017 SERENE ESTATES PVT. LTD., HYD. PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL H YDERABAD A B ENCH, HYDERABAD (THROUGH VIDEO CONFERENCING) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER ITA NO. 1860 / HYD/201 7 ASSESSMENT YEAR: 2013 - 14 SER ENE ESTATES PVT. L TD. , HYDERABAD . PAN AAJCS 5462 Q VS. DY. COMMISSIONER OF INCOME - T AX, CIRCLE 3( 1), HYDERABAD ( APPELLANT) (RESPONDENT) ASSESSEE BY : SRI A.V. RAGHURAM REVENUE BY: D.J. PRABHAKAR ANAND DATE OF HEARING: 0 9 / 09/ 2020 DATE OF PRON OUNCEMENT: 10 / 0 9 /20 20 ORDER PER D.S. SUNDER SINGH, A .M. THIS IS ASSESSEE S APPEAL FOR THE A.Y 2013 - 14 AGAINST THE ORDER OF THE CIT (A) - 3 , HYDERABAD, DATED 1 8 .0 8 .201 7 . ALL THE GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL AR E RELATED TO THE DISALLOWANCE MADE BY THE AO U/S 14A R.W. RULE 8D OF THE I.T. RULES , WHICH WAS SUSTAINED BY THE LD. CIT(A). 2. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND OUT THAT THE ASSESSEE HAS MADE THE INVESTMENTS TO THE TUNE OF RS. 8,27,06,271 / - B UT NOT MADE ANY DISALLOWANCE RELATING TO EARNING OF EXEM PT IN CO ME. THEREFORE, THE AO INVOKED RULE 8D OF THE I.T. RULES AND COMPUTED THE DISALLOWANCE UNDER SECTION 14A READ W ITH RUL E 8D TO THE EXTENT OF RS. 14,28,529/ - BY RELYING ON THE CBDT CIRCULAR NO. 5/ 2014 , DATED 11 TH FEBRUARY, 2014 . AGAINST THE ORDER OF THE AO, TH E ASSES SEE WENT ON APPEAL BEFORE THE CIT (A) AND THE LEARNED CIT (A) SUSTAI NED THE DISALLOWANCE FOLLOWING THE DECISION OF HON B LE DELHI TA NO. 1860/HYD/2017 SERENE ESTATES PVT. LTD., HYD. PAGE 2 OF 4 HIGH COURT IN THE CASE OF INDIABULLS FINANCIAL SERVICES L TD., VS. DCIT [2016] 76 TAX MANN.COM 268 (DELHI). 3. AGAINST THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. WHEN THE APPEAL WAS TAKEN UP FOR HEARING, THE LD. AR SUBMITTED THAT DURING THE AY UNDER CONSIDERATION, THE ASSESSEE DID NOT EARN ANY DIVIDEND INCOME AND, THE REFORE, ARGUED THAT THERE IS NO CASE FOR MAKING DIS ALLOWANCE U/S 14A OF THE ACT. THE LD. AR DREW OUR ATTENTION TO THE PAGE NO. 19 OF THE PAPER BOOK TO SUBMIT THAT THE OTHER INCOME EARNED BY THE ASSESSEE CONSTITUTES INTEREST INCOME AND MISC ELLANEOUS INCOME AND NO EXEMPT INCOME WAS EARNED BY THE ASSESSEE. THE CONTEN TION OF THE LD. AR IS SUPPORTED BY THE ORDER OF LD. CIT(A) WITH REGARD TO EARNING OF EXEMPT INCOME. 5 . WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE ORDERS OF THE A UTHORI TIES BELOW. IN THIS CONNECTION, W E REFER TO THE DECISION OF THE INDIA BULLS FI NANCIAL SERVICES L TD., ON WHICH RELI ANCE PLACED BY THE CIT(A) IN HIS ORDER. IN THE DECISION CITED SUPRA, THE ASSESSEE REPORTED THE EX EMPT INCOME AT RS. 105.24 CRORES AND MAD E DISALLOWANCE OF RS. 25.1 LAKHS. THE AO INVOKED RULE 8D OF IT RULES AND MADE DISALLOWANCE OF RS. 3,87,10,146/ - . ON APPEAL, THE HON BLE HIGH COURT OF DELHI HELD THAT MERELY BECAUSE THE AO DID NOT RE CORD HIS DISSATISFACTION WITH REGARD TO THE DISALLOWANCE M ADE BY THE ASSESSEE, THE ADDITION MADE BY THE AO CANNOT BE DELETED , W HEN, THERE IS AN ELABORATE ANALYSIS CARRIED BY THE AO IN RESPECT OF ALL THE IMPORTANT I SSUES IN HIS ORDER. THEREFORE, THE CASE LAW RELIED UPON BY THE LD. CIT(A) IS DISTIN GUISHABLE F ROM T HE FACTS OF THE ASSESSEE S CASE AND D OES NOT HELP THE REVENUE. 5.1 IN THE INSTANT CASE, THOUGH THE ASSESSEE HAS MADE INVESTMENTS, THE ASSESSEE DID NOT EARN ANY EXEMPT IN COME. IN THIS CONNECTION, THE COORDI NATE BENC H OF THIS TRIBUN AL IN THE CASE OF TA NO. 1860/HYD/2017 SERENE ESTATES PVT. LTD., HYD. PAGE 3 OF 4 P RATHI STA INDUSTRIES LTD., SECUNDERA BAD VS. THE DCIT, CIRC1E - 16(3), HYDERABAD IN ITA NO.1302 /0 HYD / 2015 DATED 29.04.2016 FOR THE A.Y. 2011 - 12 , HAS HELD AS UNDER: 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT SECTION 1 4A CL EA RLY STIPULATES THA T THE EXPENDITURE INCURRED FOR EARNING OF ANY INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME ALONE CAN BE DISALLOWED. IN THE CASE BEFORE US, WHEN THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME, THERE CAN BE NO DISALLOWANCE UNDE R SEC TI ON 14A OF THE ACT. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMIN VEST LTD., REPORTED IN (2015) 378 ITR 33 (DEL.) HAS HELD THAT SECTION 14A WILL NOT APPLY WHERE NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT ASSESSMENT YEAR .. ' RESP EC TFULLY FOLLOWING T HE ABOVE DECISION OF HON'BLE ITAT IN THE CASE OF PRATHISTA INDUSTRIES AND SIN C E THE APPELLANT HAS NOT EARNED ANY DIVIDEND DURING THE RELEVANT ASSESSMENT YEAR; THE PROVISIONS OF SECTION 14A R.W. RULE 8D ARE NOT APPLICABLE IN THIS CA SE. T HE REFORE, WE SET ASIDE THE ORDER OF CIT(A) AND DELETE THE DISALLOWANCE MADE BY THE AO U/S 14A R.W. RULE 8D OF THE ACT. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH SEPTEMBER, 2020 . SD/ - SD/ - (P. MADHAVI DEVI) JUDICIAL MEMB E R (D.S.SUNDER SINGH) ACCOUNTANT MEMBER HYDERABAD, DATED 10 TH SEPTEMBER, 2020 . KV TA NO. 1860/HYD/2017 SERENE ESTATES PVT. LTD., HYD. PAGE 4 OF 4 COPY TO: 1 SERENE ESTATES PVT. L TD. , C/O A. V. RAGHURAM, P. VINOD & M. NEELIMA DEVI, ADVOCATE S, 610, BABUKHAN ESTATE , BASHEERBAGH, HYD. - 1 2 DCI , CIRCLE 3( 1), SIGNATURE TOWERS, KONDAPUR, HYDERABAD 500 084 3 CIT (A) - 3 , HYDERABAD 4 PR. CIT 3, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER