M/s. Vitari Distributors Private Limited, Bangalore V. Additional Commissioner of Income tax, Bangalore

ITA 2262/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7621 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 20-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH
• Assessee Lawyers: R E BALASUBRAMANIYAN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.2262/BANG/2016 ASSESSMENT YEAR : 2012-13 M/S. VITARI DISTRIBUTORS PRIVATE LIMITED, NO.44/1-A, BANNERGHATTA ROAD, JAYALAKSHMI INDUSTRIAL ESTATE, BENGALURU-560029. PAN : AAACV4819R VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 7(1), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI. R. E. BALASUBRAMANIYAN, CA REVENUE BY : SHRI. B. R. RAMESH, JCIT DATE OF HEARING : 11.09.2017 DATE OF PRONOUNCEMENT : 13.09.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF CIT(A), INTER ALIA , ON THE FOLLOWING GROUNDS: THE APPELLANT OBJECTS TO THE ORDER OF THE LEARNED CIT(A) ON THE FOLLOWING GROUNDS: 1. THE IMPUGNED ORDER IS OPPOSED TO THE FACTS OF LAW I N SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE APPELLANT. 2. THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOWA NCE MADE IN ACCORDANCE WITH RULE 8D IN AS MUCH AS THE APPLICATI ON OF RULE 8D IS NOT ITA NO. 2262/BANG/2016 PAGE 2 OF 3 MANDATORY AND CANNOT BE INVOKED MERELY BY REJECTING THE CLAIM OF THE ASSESSEE U/S 14A(2) OF THE INCOME TAX ACT, 1961. 3. THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE FAC T THAT THE APPELLANT HAD NOT EARNED ANY EXEMPT INCOME DURING THE YEAR AND AM OUNT OF DISALLOWANCE COMPUTED U/R 8D R.W.S. 14A OF THE INCOME TAX ACT, 1 961 CANNOT EXCEED THE AMOUNT OF INCOME ITSELF. 4. THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE FAC T THAT THE APPELLANT HELD THESE INVESTMENTS TO HAVE A STRATEGIC CONTROL IN TH E GROUP COMPANIES AND NOT TO EARN ANY EXEMPT INCOME OUT OF IT AND AS SUCH PRO VISIONS OF RULE 8D ARE NOT APPLICABLE. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE ADDUCE D IN TIME TO TIME, IT IS REQUESTED THAT THE HONBLE ITAT MAY BE PLEASED TO E XAMINE THE CASE IN THE LIGHT OF JUSTICE AND GRANT THE RELIEF SOUGHT FOR. 2. DURING THE COURSE OF HEARING, THE LEARNED COUNSE L FOR THE ASSESSEE HAS CONTENDED THAT IN THE IMPUGNED ASSESSMENT YEAR, ASSESSEE HAS NOT EARNED ANY EXEMPTED INCOME, THEREFORE NO DISALLOWANCE U/S. 14A IS PERMISSIBLE. HE HAS INVITED OUR ATTENTION TO THE PROFIT AND LOSS ACCOUNT AND THE DETAILS OF OTHER IN COME IN SUPPORT OF HIS CONTENTION THAT HE HAS NOT EARNED ANY EXEMPTED INCOME DURING THE IM PUGNED ASSESSMENT YEAR. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER PLACED REL IANCE UPON THE ORDER OF THE TRIBUNAL AND VARIOUS ORDERS OF THE HIGH COURT IN WHICH IT HA S BEEN HELD THAT IN THE ABSENCE OF ANY EXEMPTED INCOME, THE PROVISIONS OF SECTION 14A CANNOT BE INVOKED. COPY OF THE ORDER OF TRIBUNAL IN THE CASE OF ALLIANCE INFRASTRU CTURE PROJECTS PVT. LTD. V. DCIT, IT NOS. 220 & 1043/BANG/2013 IN ITA NO.220 & 1043/BANG /2013 IS PLACED ON RECORD. 3. THE LEARNED DR ON THE OTHER HAND HAS PLACED RELI ANCE UPON THE ORDER OF THE CIT(A). 4. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWE R AUTHORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND FROM THE RECORD AND PROFIT & L OSS ACCOUNT THAT THE ASSESSEE DID NOT EARN ANY EXEMPTED INCOME DURING THE YEAR. THER EFORE, IN THE ABSENCE OF ANY ITA NO. 2262/BANG/2016 PAGE 3 OF 3 EXEMPTED INCOME, PROVISIONS OF SECTION 14A OF THE A CT CANNOT BE INVOKED. RELIANCE WAS PLACED UPON THE ORDER OF THE TRIBUNAL IN THE CA SE OF ALLIANCE INFRASTRUCTURE PROJECTS PVT. LTD., V. DCIT (SUPRA) AND ALLBANK FIN ANCE LTD., IN ITA NO.465/KOL/2013 IN WHICH IT HAS BEEN HELD IN THE LIGHT OF VARIOUS J UDICIAL PRONOUNCEMENTS OF VARIOUS HIGH COURTS THAT IN THE ABSENCE OF ANY EXEMPTED INC OME, PROVISIONS OF SECTION 14A OF THE ACT CANNOT BE INVOKED. THEREFORE, IN THE LIGHT OF THIS LEGAL POSITION, WE ARE OF THE VIEW THAT IN THE INSTANT CASE, THE AO HAS WRONGLY I NVOKED THE PROVISIONS OF SECTION 14A FOR MAKING THE DISALLOWANCE. ACCORDINGLY, WE S ET ASIDE THE ORDER OF CIT(APPEALS) AND DELETE THE ADDITION MADE IN THIS R EGARD. 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 13 TH SEPTEMBER, 2017. SD/- SD/- BANGALORE. DATED: 13 TH SEPTEMBER, 2017. /NSHYLU/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4 . GUARD FILE BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE. (A. K. GARODIA) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER