The Asst. Commissioner of Income Tax, Circle-2(1)(1), Ahmedabad V. M/s. Harsha Engineers Ltd., Ahmedabad

ITA 2112/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3378 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 22-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Question of law; Reasonable cause; Condonation of delay
• Section: 14A; 115JB

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.2112/AHD/2017 / ASSTT. YEAR: 2014-15 ACIT, CIR.2(1)(1) AHMEDABAD. VS. M/S.HARSHA ENGINEERINGS LTD. SAKHEJ BAVLA ROAD PO CHANGODAR AHMEDABAD. PAN : AAACH 4828 C / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI S.K. DEV, SR.DR ASSESSEE BY : SHRI TUSHAR HEMANI, AR ! / DATE OF HEARING : 20/02/2019 '#$ ! / DATE OF PRONOUNCEMENT: 21 /02/2019 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST OR DER OF THE LD.CIT(A)-2, AHMEDABAD DATED 2.6.2017 PASSED FOR TH E ASSTT.YEAR 2014-15. 2. AT THE OUTSET IT WAS POINTED OUT TO THE BENCH THA T THE APPEAL OF THE REVENUE IS BARRED BY LIMITATION, I.E. REVENU E HAS FILED THE PRESENT APPEAL LATE BY 20 DAYS. REVENUE HAS FILED AN APPLICATION DATED 22.9.2017 REQUESTING FOR CONDONATION OF DELAY IN FILING THE APPEAL. IT IS PLEADED IN THE APPLICATION THAT COMP ETENT AUTHORITY I.E. PR.CIT AT THE RELEVANT TIME WAS HOLDING ADDITI ONAL CHARGES OF ITA NO.2112/AHD/2017 2 PCIT-1, PCIT-5, PCIT-6 BESIDES HOLDING THE CHARGE O F CIT(EXEMPTION), THEREFORE, DUE TO TREMENDOUS WORK L OAD, APPEAL OF THE REVENUE COULD NOT BE FILED WITHIN TIME. THE LD.DR SUBMITTED THAT SINCE DELAY WAS CAUSED DUE TO THE RE ASONS BEYOND ITS CONTROL, THE DELAY IN FILING APPEAL MAY BE COND ONED. 3. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE VI EW THAT REVENUE IS PREVENTED BY REASONABLE CAUSE AS NARRATE D IN THEIR LETTER DATED 22.9.2017. THEREFORE, WE CONDONE THE DELAY OF 20 DAYS IN FILING APPEAL BY THE REVENUE, AND WE PROCEE D TO ADJUDICATE THE ISSUE AGITATED IN THE APPEAL. 4. ONLY SUBSTANTIVE GROUND RAISED IN THE REVENUES APPEAL IS THAT THE LD.CIT(A) HAS ERRED IN DELETING DISALLOWAN CE OF RS.1,54,01,047/- UNDER SECTION 14A OF THE ACT R.W. 8D OF THE RULE. 5. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAS FIL ED ITS RETURN OF INCOME ON 25.11.2014 DECLARING TOTAL INCOME OF RS.51,36,60,937/- UNDER NORMAL PROVISIONS OF ACT AN D BOOK PROFIT OF RS.65,80,3,122/- UNDER THE MAT PROVISIONS UNDER SECTION 115JB OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) OF THE A CT WAS ISSUED AND SERVED UPON THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS I NVESTED IN SHARES OF DIFFERENT LIMITED COMPANY, AND ACCORDINGL Y THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF INVESTMENT IN SHARE S ALONG WITH WORKING OF DISALLOWANCE UNDER SECTION 14A OF THE AC T. IN RESPONSE TO THAT THE ASSESSEE EXPLAINED THAT SINCE THE ASSES SEE HAS NOT CLAIMED ANY EXEMPT INCOME, THEREFORE, THE PROVISION S OF SECTION 14A WOULD NOT BE APPLICABLE TO THE ASSESSEES CASE. HOWEVER, THE ITA NO.2112/AHD/2017 3 LD.AO DID NOT ACCEPT CONTENTIONS OF THE ASSESSEE, A ND MADE ADDITION BY INVOKING RULE 8D. 6. DISSATISFIED WITH THE ORDER OF THE LD.AO, ASSESS EE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). THE LD.FIRS T APPELLATE AUTHORITY FOUND THAT IDENTICAL ISSUE ON SIMILAR FAC TS HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN PRECEDING YEAR I.E. ASSTT.YEAR 2013-14 WHEREBY IT WAS HELD THAT THE ASSESSEE DID N OT EARN ANY EXEMPT INCOME DURING THE PREVIOUS YEAR, AND IN SUCH CASES, PROVISIONS OF SECTION 14A WOULD NOT BE APPLICABLE. FOLLOWING THE DECISION TAKEN IN THE ASSTT.YEAR 2013-14, AND ALSO RELYING ON LARGE NUMBER OF AUTHORITATIVE JUDGMENTS ON SIMILAR ISSUE, THE LD.CIT(A) DELETED DISALLOWANCE MADE UNDER SECTION 14A. AGGRI EVED REVENUE IS NOW BEFORE THE TRIBUNAL. 7. BEFORE US, THE LD.DR RELIED UPON THE ORDER OF THE AO, WHILE LD.COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER O F THE LD.CIT(A). HE ALSO MADE REFERENCE TO THE DECISION OF HONBLE G UJARAT HIGH COURT IN THE CASE OF CIT VS. CORRETECH ENERGY P.LTD ., 372 ITR 97 (GUJ) WHEREIN IT IS HELD THAT IF THERE IS NO TAX FR EE INCOME IN THE HANDS OF THE ASSESSEE, THEN NO DISALLOWANCE UNDER S ECTION 14A R.W. RULE 8D OF INCOME TAX RULES OUGHT TO BE MADE. 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND GONE TH ROUGH THE RECORD CAREFULLY. WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HO NBLE HIGH COURT RENDERED IN THE CASE OF CORRECTECH ENERGY (SUPRA). THE HONBLE HIGH COURT HAS OBSERVED THAT IF NO TAX FREE INCOME WAS E ARNED BY THE ASSESSEE, THEN NO EXPENSES CAN BE CONSTRUED AS INCU RRED BY THE ASSESSEE, BECAUSE PLAIN READING OF SECTION 14A PROV IDES THAT IF AN ITA NO.2112/AHD/2017 4 ASSESSEE INCURRED EXPENDITURE IN RELATION TO EARNIN G OF TAX FREE INCOME THEN SUCH EXPENDITURE WOULD NOT BE ALLOWED. THE LD .CIT(A) HAS RECORDED A FINDING THAT NEITHER INTEREST/OTHER EXPE NSES WERE INCURRED NOR ANY EXEMPT INCOME WAS EARNED BY THE ASSESSEE, A ND THEREFORE, THERE IS NO QUESTION OF ALLOCATING EXPENDITURE. TH E RELEVANT OBSERVATION OF THE HONBLE HIGH COURT IN THIS REGARD READS AS U NDER: 4. COUNSEL FOR THE REVENUE SUBMITTED THAT THE ASSE SSING OFFICER AS WELL AS CIT(APPEALS) HAD APPLIED FORMULA OF RULE 8D OF THE INCOME TAX RULES, SINCE THIS CASE AROSE AFTER THE A SSESSMENT YEAR 2009-2010. SINCE IN THE PRESENT CASE, WE ARE CONCER NED WITH THE ASSESSMENT YEAR 2009-2010, SUCH FORMULA WAS CORRECT LY APPLIED BY THE REVENUE. WE HOWEVER, NOTICE THAT SUB-SECTION (L) OF SECTION 14A PROVIDES THAT FOR THE PURPOSE OF COMPUTING TOTA L INCOME UNDER CHAPTER IV OF THE ACT, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN THE PRESENT CASE, THE TRIBUNAL HAS RECORDED THE FINDING OF FACT THAT THE ASSESSEE DID NOT IJNAKE ANY CLAIM FOR EXEMPTION OF ANY INCOME FROM PAYMENT OF TAX. IT WAS ON THIS BASI S THAT THE TRIBUNAL HELD THAT DISALLOWANCE UNDER SECTION 14A O F THE ACT COULD NOT BE MADE. IN THE PROCESS TRIBUNAL RELIED ON THE DECISION OF DIVISION BENCH OF PUNJAB AND HARYANA HIGH COURT IN CASE OF CIT V WINSOME TEXTILE INDUSTRIES LTD. [2009] 319 ITR 204 IN WHICH ALSO THE COURT HAD OBSERVED AS UNDER : '7. WE DO NOT FIND ANY MERIT IN THIS SUBMISSION. TH E JUDGEMENT OF THIS COURT IN ABHISHEK INDUSTRIES LTD (2006) 286 IT R 1 WAS ON THE ISSUE OF ALLOWABILITY OF INTEREST PAID ON LOANS GIV EN TO SISTER CONCERNS, WITHOUT INTEREST. IT WAS HELD THAT DEDUCT ION FOR INTEREST WAS PERMISSIBLE WHEN LOAN WAS TAKEN FOR BUSINESS PU RPOSE AND NOT FOR DIVERTING THE SAME TO SISTER CONCERN WITHOU T HAVING NEXUS WITH THE BUSINESS. THE OBSERVATIONS MADE THEREIN HA VE TO BE READ IN THAT CONTEXT. IN THE PRESENT CASE, ADMITTEDLY TH E ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION. IN SUCH A SITUATI ON SECTION 14A COULD HAVE NO APPLICATION.' 5. WE DO NOT FIND ANY QUESTION OF LAW ARISING, TAX APPEAL IS THEREFORE DISMISSED. 9. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONB LE HIGH COURT CITED (SUPRA), WE ARE OF THE VIEW THAT THE CIT(A) I S JUSTIFIED IN DELETING THE DISALLOWANCE. ITA NO.2112/AHD/2017 5 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 21 ST FEBRUARY, 2019. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER