Chintalapati Holdings Private Limited, Hyderabad, Hyderabad V. DCIT, Central Circle-1(2), Hyderabad, Hyderabad

ITA 196/HYD/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2698 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 08-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.196/HYD/2017 ASSESSMENT YEAR: 2012-13 M/S. CHINTALAPATI HOLDINGS PVT. LTD., HYDERABAD. PAN- AABCC5085D VS. DY. CIT, CENTRAL CIRCLE- 1(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V. RAGHAVENDRA RAO REVENUE BY : SMT. SUMAN MALIK DATE OF HEARING : 25-01-2018 DATE OF PRONOUNCEMENT : 25-01-2018 ORDER PER P. MADHAVI DEVI, J.M.: THIS IS ASSESSEES APPEAL FOR THE A.Y 2012-13, THIS APPEAL IS FILED AGAINST THE ORDER OF THE CIT(A)-1, HYDERABAD DATED 28-11-2016. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A)-1, HYDERABAD HAS ERRED ON FACTS AND IN LAW. 2. THE LD. CIT(A) HAS ERRED THE ISSUE IN ASSESSMENT AND APPEAL. 3. THE LD. CIT(A) IS NOT JUSTIFIED IN NOT FOLLOWING SEVERAL JUDICIAL DECISIONS WHEREIN IT WAS HELD THAT PROVISIONS OF SEC. 147A ARE NOT APPLICABLE IF THERE IS NO EXEMPT INCOME. 4. THE LD. CIT(A) HAS FAILED TO NOTE THAT THE INVESTMENTS HAVE ALL COME OUT OF SHARE CAPITAL, RESERVES & SURPLUS AND SHARE APPLICATION MONEY. 5. THE LD. CIT(A) AND THE A.O FAILED TO NOTICE THAT THE ADMINISTRATIVE EXPENSES INCURRED HAVE NOTHING TO DO WITH THE 2 ITA NO. 196/HYD/2017 M/S CHINTALAPATI HOLDINGS PVT LTD.,, HYDERABAD. INVESTMENTS MADE OR THEIR MAINTENANCE SO THAT SUB-RULE 8D(2)(III) CANNOT INTO PLAY. 6. THERE COULD HAVE BEEN NO SATISFACTION REQUIRED TO BE RECORDED U/S 14A AND RULE 8D IN THE FACTS AND CIRCUMSTANCES OF THE CASE, REFERRED TO IN FOREGOING GROUNDS. 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF INVESTMENTS, HAS FILED ITS RETURN OF INCOME FOR THE A.Y 2012-13 ON 18-12-2013 DECLARING A TOTAL INCOME OF RS. NIL. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE A.O OBSERVED THAT THE ASSESSEE COMPANY HAS MADE INVESTMENTS IN COMPANIES TO THE TUNE OF RS.3,14,85,23,178/- AS ON 31-03-2012 AND THAT THIS INCLUDES A SUM OF RS. 39,67,64,334/- UNDER SHARE APPLICATION MONEY IN THE INVESTEE COMPANIES. OBSERVING THE NET INVESTMENTS YIELDING DIVIDEND AS ON 31-03-2012 ARE AT RS. 275,17,58,844/-, A.O OBSERVED THAT A DISALLOWANCE U/S 14A OF THE IT ACT IS CALLED FOR. ACCORDINGLY A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE. 3. IN REPLY TO THE NOTICE THE ASSESSEE SUBMITTED THAT IT HAS NOT EARNED ANY EXEMPT INCOME DURING THE F.Y 2011-12 AND THEREFORE NO DISALLOWANCE U/S 14A IS CALLED FOR. HOWEVER, THE A.O HELD THAT AS PER THE CBDT CIRCULAR NO. 5 OF 2014 DATED 11-02-2014, THE DISALLOWANCE U/S 14A OF THE ACT HAS TO BE MADE IRRESPECTIVE OF WHETHER THERE IS 3 ITA NO. 196/HYD/2017 M/S CHINTALAPATI HOLDINGS PVT LTD.,, HYDERABAD. EXEMPT INCOME EARNED DURING THE RELEVANT ASSESSMENT YEAR OR NOT. HE ACCORDINGLY MADE THE DISALLOWANCE OF 3,27,82433/- U/S 14A R.W.S 8D OF THE ACT. AGAINST SUCH DISALLOWANCE, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO CONFIRMED THE ORDER OF THE A.O AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISIONS OF THIS TRIBUNAL AND ALSO VARIOUS HIGH COURTS, WHEREIN IT HAS BEEN HELD THAT WHEN THERE NO EXEMPT INCOME EARNED DURING THE RELEVANT ASSESSMENT YEAR, NO DISALLOWANCE U/S 14A OF THE IT ACT IS CALLED FOR. COPIES OF THE SAID ORDERS ARE FILED BEFORE US. 5. THE LD. DR ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING DECISIONS: 1. CHEMINVEST LTD. VS. CIT [2015] 378 ITR 33 (DEL). 2. CIT VS CORRTECH ENERGY PVT LTD [2015] 372 ITR 97 (GUJ). 3. CIT VS. SHIVAM MOTORS PVT LTD [2014]272 CTR 277 (ALL). 4. CIT VS WILSOME TEXTILE INDUSTRIES 319. ITR 204 (P & H). 4 ITA NO. 196/HYD/2017 M/S CHINTALAPATI HOLDINGS PVT LTD.,, HYDERABAD. 5. ACIT VS. M. BASKARAN [2014] 50 TAXMANN. COM 138. 6.1 RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT NO DISALLOWANCE U/S 14A OF THE IT ACT IS CALLED FOR WHERE THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE RELEVANT ASSESSMENT YEAR. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY 2018. SD/- SD/- (B. RAMAKOTAIAH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 25 TH JANUARY, 2018 KRK 1 M/S CHINTALAPATI HOLDINGS PVT LTD., PLOT NO. 18, SOFTWARE UNITS LAYOUT, ILABS CENTRE BUILDING -3, MADHAPUR, HYDERABAD-81. 2 DYCIT, CENTRAL CIRCLE-1(2), HYDERABAD. 3 CIT(A)-1, HYDERABAD 4 ADDL.CIT, RANGE-1, HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE