The Dy. Commissioner of Income Tax, Circle-1(1)(1), Ahmedabad V. Adani Wilmar Ltd., Ahmedabad

ITA 2210/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9896 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 04-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BIREN SHAH
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I MAHAVIR PRASAD , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 1(1)(1), AHMEDABAD (APPELLANT) VS ADANI WILMAR LTD. FORTUNE HOUSE MITHAKHALI CROSS ROAD, NAVRANGPURA, AHMEDABAD - 380009 PAN: AABCA8056G (RESPONDENT) REVENUE BY : S H RI KAMLESH MAKWANA , SR. D . R. ASSESSEE BY: SHRI BIREN SHAH, A.R. DATE OF HEARING : 09 - 05 - 2 019 DATE OF PRONOUNCEMENT : 15 - 05 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - T HESE TWO APPEALS FILED BY REVENUE FOR A.Y. 2014 - 15 & 2013 - 14 , ARI SE FROM ORDER OF THE CIT(A) - 1, AHMEDABAD , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. BOTH THE APPEALS OF THE REVENUE HAVE BEEN FILED AGAINST TH E DECISION OF LD. CIT(A) IN DELETING THE DISALLOWANCE MADE U/S. 14A OF THE AC T. SINCE THE I T A NO . 2210 & 2211 / A HD/20 17 A .Y. 2014 - 15 & 2013 - 14 I.T.A NO. 2210 & 2211 /AHD/20 1 7 A.Y. 2014 - 15 & 2013 - 14 PAGE NO D CIT VS. ADANI WILMAR LTD. 2 COMMON SOLITARY ISSUE OF DISALLOWANCE U/S. 14A IS INVOLVED IN BOTH THE APPEALS OF THE REVENUE, THEREFORE, FOR THE SAKE OF CONVENIENCE, THESE TWO APPEALS ARE ADJUDICA TED TOGETHER BY TAKING THE FACTS OF 2211/AHD /2017 AND ITS FINDINGS WILL ALSO BE APPLICABLE TO ITA NO. 2210/AHD /2017 3. THE BRIEF FACT IS THAT ASSESSEE HAS FILED RETURN OF INCOME OF RS. 1 , 25 , 71 , 480/ - ON 28 TH NOV, 2013. THEREAFTER, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 4 TH SEP, 2014. DURING THE COURSE OF ASSE SSMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS MAD E INVESTMENT TO THE TUNE OF RS. 27 , 78 , 87 , 305/ - ON 31 ST MARCH, 2012 AND THE SAME WAS INCREASED TO RS. 1 , 57 , 04 , 32 , 421/ - AS ON 31 ST MARCH, 2013. HOWEVER, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS NOT MADE AN Y DISALLOWANCE U/S. 14A R.W. RULE 8D OF THE IT RULE IN RESPECT OF ANY EXPENDITURE INCURRED FOR THE AFORESAID INVESTMENT . ON QUERY, TH E ASSESSE HAS EXPLAINED ALONG WITH RELEVANT DETAIL THAT INTEREST FREE FUNDS WER E USED FOR INVESTING IN EQUITY SHARES, THEREFORE, NO DISALLOWANCE WAS REQUIRED TO BE MADE U/S. 14A R.W. RULE 8D OF THE IT RULES. THE ASSESSEE HAS ALSO EXPLAINED TH A T IT H AS NO T MADE A N Y CLAIM FOR EXEMPTION OF ANY INCOME FROM PAYMENT OF TAX , THEREFORE, THE DISALLOWANCE U/S. 14A SHOULD NOT BE MADE. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AFTER REFERRING CBDT CIRCULAR NO. 5/2014 DATED 11 TH FEB, 2014 STATED THAT DISALLOWANCE CAN BE MADE BY INVOKING SECTION 14A OF THE ACT EVEN NO INCOME HAS BEEN EARNED BY A N ASSESSEE CLAIMED AS EXEMPT DURING THE YEAR UNDER CONSIDERATION . THEREFORE , THE ASSESSING OFFICER HAS COMPUTED DISALLOWANCE U/S. 14A R.W . RULE 8D TO THE AMOUNT OF RS. 4 , 72 , 00 , 565/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. I.T.A NO. 2210 & 2211 /AHD/20 1 7 A.Y. 2014 - 15 & 2013 - 14 PAGE NO D CIT VS. ADANI WILMAR LTD. 3 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER A FTER FOLLOWING THE DECISION OF J URIS DICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. CORRTECH INDIA PVT. L TD. (2014) 45 TAXMAN.COM 116. 5. WE HAVE HEARD BOTH THE ISSUES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. WE HAVE NOTICED THAT IT IS UNDISPUTED FACT THAT ASSESSEE HAS NOT EARN ED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. VIDE A NUMBER OF JUDICIAL PRONOUNCEMENTS THE CO - ORDINATE BENCHES OF THE I TAT AHMEDABAD HAVE HELD THAT NO DISALLOWANCE SHALL BE MADE UNDER SECTION 14A OF THE ACT IF THE ASSES SEE HAS NOT EARNED ANY EXEMPT INCOME OTHERWISE THE DISALLOWANCE SHALL BE RESTRICTED TO THE EXEMPT INCOME. SECTION 14A(1) PROVIDES THAT FOR THE PURPOSE OF COMPUTING TOTAL INCOME UNDER CHAPTER IV, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE I N RELATION TO INCOME WHICH DOES NOT FORM PART OF OTHER TOTAL INCOME UNDER THE ACT. WE HAVE NOTICED THAT ID. CIT(A) HAS FOLLOWED THE DECISION OF THE CO - ORDINATE BENCH OF THE ITAT IN THE CASE OF SHAH ALLOYS LTD. (2315/AHD/2010 DATED 27 - 03 - 2015 AND THE DECISI ON OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CO RRETECH ENERGY PVT. LTD. (45 TAXMANN.COM 116) ON IDENTICAL ISSUE OF DISALLOWANCE U/S. 14A WHEN NO DIVIDEND INCOME IS EARNED BY THE ASSESSEE. THE JUDICIAL FINDINGS OF THE HON'BLE JURISDICTIONAL H IGH COURT AND THE DECISION OF THE CO - ORDINATE BENCH OF THE ITAT HAVE BEEN ELABORATED IN THE DECISION O F THE LD. CIT(A) VIDE WHICH SIMILAR ISSUE ON IDENTICAL FACTS HAVE BEEN DECI DED IN FAVOUR OF THE ASSESSEE. WE HAVE ALSO PERUS ED THE JUDICIAL PRONOUNCEMEN T I N THE CASE OF CIT V CORRTECH ENERGY (P) LTD (2014) 45 TAXMANN.COM.116 OF HON'BL E HIGH I.T.A NO. 2210 & 2211 /AHD/20 1 7 A.Y. 2014 - 15 & 2013 - 14 PAGE NO D CIT VS. ADANI WILMAR LTD. 4 COURT OF GUJARAT WHEREIN IT IS HELD THAT IN A CASE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION OF ANY INCOME FROM PAYMENT OF TAXES, IN THAT CASE DISALLOWANCE U/S 14A OF THE ACT COULD NOT BE MADE. IT IS CRYSTAL CLEAR THAT THE JURISDICTIONAL HIGH COURT HAS DECIDED THAT TO ATTRACT THE PROVISION OF SECTION 14A IT IS REQUIRED THAT ASSESSEE SHOULD HAVE EARNED AN EXEMPT INCOME, IF THE ASSESSEE HAS NOT EARNED AN EXEMPT INCOM E AND NOT CLAIMED SO IN THE RETURN OF INCOME THEN THE PROVISION OF SECTION 14A ARE NOT APPLICABLE. WE FIND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HAS NOT EARNED ANY EXEMPT INCOME AND HAS NOT CLAIMED ANY SUCH EXEMPT INCOME IN THE RETU RN OF INCOME THEREFORE AS PER OUR CONSIDERED OPINION THE PROVISION OF SECTION 14A ARE NOT APPLICABLE. IN VIEW OF THE ABOVE MENTIONED FACTS AND CIRCUMSTANCES AND FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT OF GUJARAT, WE CONSIDER THAT THE DISALLOWANCE U/S. 14A R.W.S RULE 8D CANNOT BE MADE AS THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. ACCORDING LY, THE APPEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL ITA NO. 2210/AHD/2017 AND 2211/AHD/2017 FILED BY THE REVENUE ARE D ISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 1 5 - 05 - 201 9 SD/ - SD/ - (MAHAVIR PRASAD ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 15 /05 /2019 I.T.A NO. 2210 & 2211 /AHD/20 1 7 A.Y. 2014 - 15 & 2013 - 14 PAGE NO D CIT VS. ADANI WILMAR LTD. 5 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,