Udhayaman Investments Pvt Ltd, Bangalore V. Deputy Commissioner of Income Tax, Circle-7(1)(1), Bangalore

ITA 1877/BANG/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0654 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-12-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 18-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Assessee Lawyers: ANUSHRI K R
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 250; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA 1 877 /BANG/201 7 A. Y : 20 13 1 4 M/S. UDHAYAMAN INVESTMENTS PVT. LTD., 1 ST FLOOR, EMBASSY POINT, 150 INFANTRY ROAD, BANGALORE 560 001. PAN NO : AAACU2524J VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7(1) (1), BANGALORE. APPELLANT RESPONDENT A PPELLANT BY : MS. ANUSHRI K. R, C.A RE SPONDENT BY : SHRI. MANJEET SINGH, ADDL. CIT DR DATE OF H EARING : 1 6 . 1 2 .2019 DATE OF PRONOUNCEMENT : 20 . 1 2 .2019 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 16/06/17 PASSED BY LD. CIT (A) 7, BANGALORE FOR ASSESSMENT YEAR 2013 14 ON FOLLOWING GROUNDS OF APPEAL : 1 THE CIT(A) ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN SUSTAINING THE FOLLOWING ADDITIONS : RS. (I) DISALLOWANCE OF SHORT TERM CAPITAL LOSS 2,63,77,000 (II) ADDITIONAL U/S. 14A OF THE ACT 10,01,602 (III) ADOPTING THE INCOME RETURNED AT RS. 1,80,54,440 AS AGAINST THE LOSS OF RS. 2.63.77,000 ITA 1877/BANG/2017 PAGE 2 OF 5 2 HE ERRED IN NOT CONSIDERING THE GROUND RELATING TO THE DISALLOWANCES MADE UNDER SHORT TERM CAPITAL LOSS AND THE DIFFERENCE BETWEEN THE INCOME ADOPTED IN THE ASSESSMENT ORDER AND THE INCOME RETURNED. 3 HE FAILED TO APPRECIATE THAT THE APPELLANT DID NOT RECEIVE ANY DIVIDEND AND THAT, THEREFORE, NO DISALLOWANCES SHOULD HAVE BEEN MADE UNDER RULE 8D R.W.S 14A(2) OF THE ACT. 4 HE ERRED IN NOT FOLLOWING THE DECISION OF THE SPECIAL BENCH IN VIREET INVESTMENT (P) LIMITED (165 ITD 27/82 (ITAT SPECIAL BENCH, DELHI. 5 THE APPELLANT, THEREFORE, PRAYS THAT THE DISALLOWANCES, AS ABOVE, MAY BE DELETED. BRIEF FACTS OF THE CASE ARE AS UNDER: 2 ASSESSEE FILED ITS RETURN OF INCOME ON 28/09/00 713 DECLARING TOTAL INCOME OF NIL AND CURRENT YEAR LOSS OF RS. 2,63,77,000/-. STATUTORY NOTICES WERE ISSUED TO ASSESSEE IN RESPONSE TO WHICH REPRESENTATIVE OF ASSESSEE APPEARED BEFORE LD.AO AND FILED REQUISITE DETAILS AS CALLED FOR. IT HAS BEEN SUBMITTED THAT AFTER PERUSING VARIOUS DETAILS FILED BY ASSESSEE, LD.AO COMPLETED ASSESSMENT BY MAKING FOLLOWING ADDITIONS: DISALLOWANCE OF SHORT TERM CAPITAL LOSS - RS. 2,63,77,000/- DISALLOWANCE UNDER SECTION 14 A READ WITH RULE 8D (II) (III) AMOUNTING TO RS.10,01,602/-. 3 AGGRIEVED BY ADDITIONS MADE BY LD. AO ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A), WHO CONFIRMED THE SAME. AGGRIEVED BY ORDER PASSED BY LD. CIT (A) ASSESSEE IS IN APPEAL BEFORE US NOW. GROUND NO. 1 IS GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ADJUDICATION. GROUND NO. 2 AT THE OUTSET IT IS OBSERVED THAT LD.AR DID NOT RAISE ANY ARGUMENTS REGARDING DISALLOWANCE MADE UNDER SHORT TERM CAPITAL ITA 1877/BANG/2017 PAGE 3 OF 5 LOSS. ON PERUSAL OF RECORDS WE NOTE THAT THIS ISSUE DOES NOT ARISE OUT OF THE IMPUGNED ORDER. EVEN BEFORE LD. CIT (A) ASSESSEE HAD NOT RAISED THIS ISSUE AND THEREFORE NOW HAS ATTAINED FINALITY. THE ONLY GROUND RAISED BY ASSESSEE BEFORE LD. CIT (A) WAS IN RESPECT OF DISALLOWANCE COMPUTED BY LD.AO UNDER SECTION 14 A ACCORDINGLY, WE DISMISS THIS GROUND. GROUND NO. 3 IS IN RESPECT OF DISALLOWANCE MADE UNDER SECTION 14 A READ WITH RULE 8D (II) AND (III). 4 IT HAS BEEN SUBMITTED BY LD. AR THAT ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAS NOT EARNED ANY EXEMPT INCOME WHICH HAS BEEN OBSERVED BY LD. AO IN PARA 5.4 OF ASSESSMENT ORDER. HE THUS PLACING RELIANCE UPON DECISION OF HONBLE SUPREME COUR T IN CASE OF CIT VS. CHETTINAD LOGISTICS (P) LTD., REPORTED IN (2018) 95 TAXMANN.COM 250 WHEREIN HONBLE SUPREME COURT UPHOLD READ THE DECISION OF HONBLE MADRAS HIGH COURT REPORTED IN (2017) 18 TAXMANN.COM 221 . LD. AR PLACING RELIANCE UPON THESE DECISIONS SUBMITTED THAT AS ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME THERE CANNOT BE ANY EXPENDITURE IS ATTRIBUTABLE FOR DISALLOWANCE UNDER SECTION 14 A OF THE ACT. LD. SR. DR PLACED RELIANCE UPON ORDERS PASSED BY AUTHORITIES BELOW. 5 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. IT IS A WELL-SETTLED PRINCIPLE THAT FOR COMPUTING DISALLOWANCE UNDER SECTION 14 A, THERE HAS TO BE EXEMPT INCOME AGAINST THE TAXABLE INCOME. HONBLE COURTS HAVE HELD THAT SECTION 14 A OF THE ACT CAN ONLY BE TRIGGERED IF ASSESSEE SEEKS TO SQUARE OF EXPENDITURE AGAINST INCOME WHICH ITA 1877/BANG/2017 PAGE 4 OF 5 DOES NOT FORM PART OF TOTAL INCOME UNDER THE ACT. IN THE PRESENT FACTS OF THE CASE ADMITTEDLY THERE IS NO EXEMPT INCOME EARNED BY ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND THEREFORE THERE CANNOT BE ANY DISALLOWANCE MADE UNDER SECTION 14 A READ WITH RULE 8D (II) AND (III) OF THE ACT. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED. 6 IN THE RESULT APPEAL FILED BY ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2019. SD/- (A.K. GARODIA) ACCOUNTANT MEMBER SD/- (BEENA PILLAI) JUDICIAL MEMBER BANGALORE, DATED, 20 TH DECEMBER, 2019. /MK/ COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. ITA 1877/BANG/2017 PAGE 5 OF 5 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR. P. S. .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SECTION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. .. 14. DICTATION NOTE ENCLOSED