Dy. Commissioner of Income Tax , Circle-16(1), Hyderabad V. Lanco Hydra Power Limited , Hyderabad

ITA 2291/Hyd/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7043 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 02-08-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 10-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N ESTHER
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Rectification of order; Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 37(1); 201; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 2 29 1 /HYD./ 201 8 ASSESSMENT YEAR: 20 1 4 - 15 DY.CIT, CIRCLE 16(1) VS. M/S LANCO HYDRO POWER LIMITED HYDERABAD HYDERABAD [PAN: AA B C V6385R ] (APPELLANT) (RESPONDENT) FOR REVENUE: SMT . N. ESTHER, D.R. FOR ASSESSEE: SHRI P. MURALI MOHANA RAO, AR. DATE OF HEARING : 0 2 /0 8 /2021 DATE OF PRONOUNCEMENT : 30 / 08 /2021 O R D E R PER L.P. SAHU, A.M. THIS APPEAL OF REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 4 , HYDERABAD DATED 28.09 .201 8 PERTAINING TO A.Y. 2014 - 15. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY, FILED ITS RETURN OF INCOME FOR THE AY 2014 - 15 ON 29.11.2014 DECLARING TOTAL LOSS AT RS.3,97,87,752/ - . SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961[IN SHORT THE ACT] ON 28 . 11.2016 DETERMINING THE TOTAL INCOME AT RS. 10,04 ,248/ - BY ITA NO. 2 29 1/HYD/201 8 LANCO HYDRO POWER LTD, HYD. AY 201 4 - 15 2 DISALLOWING U/S 14A OF RS. 4,07,92,000/ - . FURTHER, IT WAS NOTICED THAT THE DISALLOWANCES U/S 14A WAS ADDED TO THE NORMAL INCOME ONLY AND THE SAME WAS NOT ADDED BACK TO THE BOOK PROFIT AS PER EXPLANATION (I)(C ) OF SEC. 115 JB OF THE ACT . SINCE TH E MISTAKE WAS APPARENT ON RECORD, A RECTIFICATION ORDER U/S 154 OF THE ACT WAS PASSED ON 27.05.2017 BY DISALLOWING AN AMOUNT OF RS. 4,07,92,000/ - U/S 14A OF THE ACT. AGGRIEVED ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) DELETED THE ADDITION M ADE BY THE ASSESSING OFFICER STATING THAT SINCE THERE IS NO EXEMPT INCOME RECEIVED OR RECEIVABLE DURING THE RELEVANT A . Y . , T HE PROVISIONS OF SEC.14A R.W. RULE 8D ARE NOT APPLICABLE. 3. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS : 1 . THE L D. C I T(A ) ERRED I N DELEING THE DISALLOWANCE U / S I4A OF RS: 4,07,92, 000/ 2. THE LD. CIT(A ) ERRED IN IGNORING CBDT'S CIRCULAR NO.5 OF 2014 DATED 11.02.2014. 3. THE LD. CIT(A ) ERRED IN IGNORING' THE SUPREME COURT DECISION IN THE CASE OF CIT VS. WALFORT SHARE OF STOCK BROKERS P LTD [326 ITR 1 ] , WHEREIN IT WAS HELD THAT HE MANDATE OF SECTION 14A W AS TO CURB THE PRACTICE OF CLAIMING DEDUCTION OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME AGAINST TAXABLE INCOME AND AT THE SAME TIME AVAIL OF THE TAX INCENTIVE BY WAY OF EXEMPT INCOME WITHOUT MAKING ANY APPORTIONMENT OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME. 4. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE CIT(A) ERRED IN IGNORING THAT THIS EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME IS ALSO NOT ALLOWABLE U/S 37(1) OF THE ACT AS IT CANNOT BE SAID TO BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE ASSESSEES BUSINESS AS CLAIMED. 5. THE LD. CIT(A) ERRED IN IGNORING THE DISALLOWANCE HAS BEEN MADE IN COMPUTATION U//S 115 JB OF THE IT ACT. 2. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE COMPANY DID NOT EARN ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. IN FACT, IN THE GROUNDS, DULY AUTHORISED BY THE LD. CIT (A) , THE REVENUE HAS NOT OBJECTED ITA NO. 2 29 1/HYD/201 8 LANCO HYDRO POWER LTD, HYD. AY 201 4 - 15 3 TO THE CLAIM OF THE ASSESSEE THAT NO EXEMPT INCOME WAS EARNED DURING THE YEAR UNDER CONSIDERATION. AN I DENTICAL ISSUE HAD C OME FOR ADJUDICATION BEFORE THE ITAT HYDERABAD IN NUMBER OF CASES WHEREIN THE BENCH OBSERVED THAT SECTION 14A REFERS TO DISALLOWANCE OF EXPENDITURE 'IN RELATION TO INCOME' WHICH PRE - SUPPOSES EXISTENCE OF INCOME IN THE FORM OF DIVIDEND AS OTHERWISE SECTION 14A CANNOT BE PRESSED INTO SERVICE. IN THE FOLLOWING CASES, THE ITAT, HYDERABAD BENCH HAD TAKEN AN IDENTICAL VIEW. (I) DCIT VS. M/S MODI BUILDERS AND REALTORS P LTD (ITA 1167/HYD/17 DT 03.04.2017) (II) VINAYAK STEELS LIMITED VS. ITO (ITA NO. 103/ HYD / 2017, DATED 04.04.2018) AND (III) M/ S. KAMADHENU SUKRIT PVT LTD VS. ITO (ITA NO.460/HYD/2017, DATED.22.11.2017) 3. SINCE THE VIEW TAKEN BY THE LD. CIT(A) IS IN CONSONANCE WITH THE VIEW TAKEN BY THE ITAT HYDERA BAD BENCH, IN THE ABSENCE OF ANY DIRECT DECISION CITED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE HOLDING A CONTRARY VIEW, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS PASSED BY THE LD. CIT(A). ACCORDINGLY, ALL THE GROUNDS RAISED BY THE REVENUE ARE REJECTED. 3.1. IN REGARD TO GROUND NO.5, (FOR MAT ISSUE U/S 115 JB ) IN REGARD TO THE DISALLOWANCE MADE U/S 14A; ONCE WE HAVE DISMISSED THE APPEAL OF THE REVENUE BY HOLDING THAT THERE IS NO EXEMPT INCOME, NO ADDITION CAN BE CALLED FOR. IN VIEW OF THIS, THE GR OUND NO.5 RAISED BY THE REVENUE IS CONSEQUENTIAL IN NATURE. THUS, THIS GROUND IS ALSO DISMISSED. 4 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON 30 / 0 8 /2021. SD/ - SD/ - (P. MADHAVI DEVI ) ( L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH AUGUST , 2021 *GMV ITA NO. 2 29 1/HYD/201 8 LANCO HYDRO POWER LTD, HYD. AY 201 4 - 15 4 COPY OF ORDER FORWARDED TO: 1. M/S LANCO HYDRO POWER LTD., LANCO HOUSE, PLOT NO.4, SOFTWARE UNITS LAYOUT, HITECH CITY, MADAPUR, HYDERABAD 500 0 81 , TELANGANA 2. ACIT, CIRCLE 16(1), , HYDERABAD 3. A CIT, RANGE 16 , HYDERABAD. 4. CIT(A) - 4 , HYDERABAD 5. PR.CIT - 4 , HYDERABAD. 6. D.R. ITAT HYDERABAD 7. GUARD FILE