Dy. Commissioner of Income Tax , Central Circle-2(1), Hyderabad V. Indu Projects Limited , Hyderabad

ITA 2044/Hyd/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5298 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 22-03-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 15-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DIPAK R
• Assessee Lawyers: MD AFZAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 2044/HYD/2018 ASSESSMENT YEAR: 2014-15 DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(1), HYDERABAD VS M/S.INDU PROJECTS LIMITED, HYDERABAD [PAN: AAACI8812M] (APPELLANT) (RESPONDENT) FOR REVENUE : DR.DIPAK R., DR FOR ASSESSEE : SHRI MD.AFZAL, AR DATE OF HEARING : 22-03-2021 DATE OF PRONOUNCEMENT : 04-05-2021 O R D E R PER S.S.GODARA, J.M. : THIS REVENUES APPEAL FOR AY.2014-15 ARISES FROM THE CIT(A)-12, HYDERABADS ORDER DATED 23-07-2018 PASSED IN APPEAL NO.10102 / 2017-18 IN PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961 [IN SHORT, THE ACT]. HEARD BOTH PARTIES. CASE FILE PERUSED. 2. THE REVENUES SOLE SUBSTANTIVE GRIEVANCE RAISED IN THE INSTANT APPEAL DIRECTING THE ASSESSING OFFICER TO RESTRIC T SECTION 14A R.W. RULE 8D DISALLOWANCE OF RS.28,94,6 0,727/- TO THE EXTENT OF EXEMPT INCOME ONLY AMOUNTING TO RS.11.60 L AKHS AS UNDER: ITA NO. 2044/HYD/2018 :- 2 -: 5.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE APPELLANT AS WELL AS THE OBSERVATIONS OF THE AO IN THE IMPUGNED ORDER. THE VARIOUS JUDICIAL PRONOUNCEMENTS ON THE S UBJECT, RELIED UPON BY THE ASSESSING OFFICER AS WELL AS BY THE APP ELLANT'S AR, HAVE BEEN PERUSED. THE APPELLANT'S AR HAS QUOTED A NUMBE R OF DECISIONS IN SUPPORT OF HIS CONTENTION THAT DISALLOWANCE U/S. 14A HAS TO BE RESTRICTED TO THE EXEMPT INCOME EARNED BY THE ASSES SEE DURING THE RELEVANT ASSESSMENT YEAR. THE FACTS OF THE PRESENT CASE ARE THAT EXEMPT INCOME OF RS.11,60,000/- HAS BEEN EARNED BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION. THIS FACT HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER ALSO, WHO, HOWEVER, HAS RE LIED UPON CASE- LAWS ON DIFFERENT ASPECTS OF THIS ISSUE, AND HAS CO MPUTED THE DISALLOWANCE AS PER THE PROVISIONS OF SECTION 14A R .W.RULE 8D(2), AT RS.28,94,60,727/-. AFTER PERUSING THE VARIOUS JUDGE MENTS ON THE ISSUE, IT IS SEEN THAT, NOW IT IS SETTLED POSITION OF LAW THAT THE DISALLOWANCE U/S 14A READ WITH RULE 8D SHOULD BE RE STRICTED TO THE EXEMPT INCOME EARNED DURING THE YEAR. THE DECISIONS ARE AS UNDER: (I) JOINT INVESTMENT PVT. LTD. (HON'BLE DELHI HIGH COUR T) (372 ITR 694) (II) NIMBUS COMMUNICATIONS LTD. (HON'BLE ITAT, MUMBAI) 47 ITR(T) 496 (III) DAGA GLOBAL CHEMICALS PVT. LTD. (HON'BLE ITAT , MUMBAI) (ITA NO.5592/MUM/2012) (IV) PEST CONTROL INDIA PVT LTD VS DCIT (MUM I TAT) (ITA NO. 5048/MUM/2016 & ITA NO. 5608/MUM/2016) (V) PR.CIT VS M/S EMPIRE PACKAGE PVT. LTD. (PUNJ AB& HARYANA HC) (ITA NO. 415 OF 2015) (VI) SANGHAVI EXPORTS INTERNATIONAL P LTD VS ACIT (ITA NO. 3405/MUM/2015) IN ITS RECENT JUDGEMENT DATED 22-05-2018 IN THE CAS E OF M/S.JASPER INDUSTRIES PRIVATE LIMITED, VS. DCIT, CIRCLE-2(1), HYDERABAD (ITA NO.1403/HYD/2017), THE HON'BLE ITAT 'A' BENCH, HYDE RABAD, HELD AS UNDER: '3. THE LEARNED DR SUPPORTED THE ORDER OF THE AO AN D ALSO PLACED RELIANCE UPON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL AT ITAT AMRITSAR IN THE CASE OF LALLY MOTORS INDIA (P) LTD VS. PR.CIT REPORTED IN (2018) 93 TAXMANN.COM 39 (AMRITSAR - TR IB.) WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANC E UPON THE FOLLOWING DECISIONS: I) HON'BLE DELHI HIGH COURT IN THE CASE OF JT.INVES TMENTS (P) LTD VS. CIT IN ITA NO.117/2015 DATED 25 TH FEBRUARY 2015. II) ITAT HYDERABAD IN THE CASE OF KAMADHENU SUKRIT PUT LTD VS. ITO IN ITA NO.460/HYD/ 2017, DATED 22.11.2017 ITA NO. 2044/HYD/2018 :- 3 -: III) ITAT HYDERABAD IN THE CASE OF M/S. TGV PROJECT S & INVESTMENTS (P) LTD VS. ASSTT. CIT IN ITA NO.846/HYD/2016, DATE D 28.02.2017. IV) HON'BLE HIGH COURT OF PUNJAB & HARYANA IN THE C ASE OF PR.CIT VS. EMPIRE PACKAGE (P) LTD REPORTED IN (2017) 81 TAXMAN N.COM 108 (P&H HC) DATED 12TH JANUARY, 2016. 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE DELHI HIGH COURT (SUPRA), W HEREIN IT HAS BEEN CLEARLY HELD THAT THE DISALLOWANCE U/S 14A CANNOT E XCEED THE EXEMPT INCOME EARNED BY THE ASSESSEE. IN SIMILAR CASES, TH E COORDINATE BENCHES OF THIS TRIBUNAL HAVE BEEN FOLLOWING THE DE CISIONS OF VARIOUS HIGH COURTS TO THE EFFECT THAT WHEN THERE IS NO EXE MPT INCOME, THERE CANNOT BE ANY DISALLOWANCE U/S 14A OF THE ACT AND F URTHER THAT THE DISALLOWANCE U/S 14A CANNOT EXCEED THE EXEMPT INCOM E EARNED BY THE ASSESSEE. THEREFORE, WE SEE NO REASON TO INTERF ERE WITH THE ORDER OF THE CIT (A). ACCORDINGLY, REVENUE'S APPEALS IS D ISMISSED'. RESPECTFULLY FOLLOWING THE JUDGEMENT OF THE JURISDI CTIONAL TRIBUNAL, THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFIC ER ON THIS ISSUE IS ORDERED TO BE DELETED. 3. IT HAS COME ON RECORD THAT THE CIT(A)S ORDER HAS DU LY CONSIDERED A CATENA OF CASE LAW (SUPRA) TO UPHOLD THE IMPUGNED 14A R.W. RULE 8D DISALLOWANCE IN PRINCIPLE BUT TO BE RESTRICTED TO THE EXTENT OF EXEMPT INCOME ONLY FOR THE PURP OSE OF QUANTIFICATION THEREOF. NO JUDICIAL PRECEDENT TO TH E CONTRARY HAS BEEN QUOTED FROM THE REVENUES SIDE. WE THUS AFFI RM THE CIT(A)S ACTION RESTRICTING THE SAME IN FOREGOING TERMS . 4. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH MAY, 2021 SD/- S D/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 04-05-2021 TNMM ITA NO. 2044/HYD/2018 :- 4 -: COPY TO : 1.DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(1 ), HYDERABAD. 2.M/S.INDU PROJECTS LIMITED, #1009, INDU FORTUNE FI ELDS, 13 TH PHASE, KPHB COLONY, KUKATPALLY, HYDERABAD. 3.CIT(APPEALS)-12, HYDERABAD. 4.PR.CIT-CENTRAL, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.