Seven Hills Bytes Pvt. Ltd., Kolkata V. DCIT, Cir-1(1), Kolkata

ITA 246/KOL/2023

AI Insights

The case involves Seven Hills Bytes Pvt. Ltd., the appellant, contesting an addition of Rs.1,31,797 made under Section 14A of the Income Tax Act by the lower authorities, which pertained to notional expenses incurred for earning exempt income. The appellant argued that no exempt income was earned during the assessment year 2015-16, supported by various High Court judgments. The respondent, DCIT, Circle-1(1), Kolkata, relied on the newly inserted explanations to Section 14A, arguing for a retrospective application. The Tribunal, however, aligned with the Delhi High Court's decision, applying the explanation prospectively and thus favoring the appellant.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128251 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-05-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 21-03-2023
• Other Referred Cases: Cheminvest Ltd. vs. CIT, CIT vs. M/s. Holcim India Pvt. Ltd., CIT v. Shivam Motors (P.) Ltd., CIT vs. Ashika Global Securities Ltd., ACIT vs. Williamson Financial Services Ltd., PCIT Vs. Era Infrastructure (India) Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A; 250

Judgement Text

आयकर अपीलȣय अͬधकरण, कोलकाता पीठ ‘बी’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA Įी संजय गग[, ÛयाǓयक सदèय एवं Įी मनीष बोरड, लेखा सदèय के सम¢ Before Shri Sanjay Garg, Judicial Member and Dr. Manish Borad, Accountant Member I.T.A No.246/Kol/2023 Assessment year: 2015-16 Seven Hills Bytes Pvt. Ltd............................................................Appellant 156A, Lenin Sarani, 1 st Floor, Kolkata-700013. [PAN: AAKCS4244B] vs. DCIT, Circle-1(1), Kolkata........................................................Respondent Appearances by: Shri Miraj d. Shah, AR, appeared on behalf of the appellant. Shri P. P. Barman, Addl. CIT- Sr. DR, appeared on behalf of the Respondent. Date of concluding the hearing : May 09, 2023 Date of pronouncing the order : June 27, 2023 आदेश / ORDER संजय गग[, ÛयाǓयक सदèय ɮवारा / Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 03.02.2023 of the National Faceless Appeal Centre (hereinafter referred to as the ‘CIT(A)’) passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. The assessee in this appeal has assailed the action of the lower authorities in making/confirming the addition of Rs.1,31,797/- u/s 14A of the Act in respect of notional expenses incurred for earning of exempt income. At the outset, the ld. counsel for the assessee has invited our attention to para 5 of the impugned order of the CIT(A) to submit that the undisputed fact is that the assessee has not earned any exempt I.T.A No.246/Kol/2023 Assessment year: 2015-16 Seven Hills Bytes Pvt. Ltd 2 income during the year. He in this respect has relied upon the following case laws: Cheminvest Ltd. vs. CIT 378 ITR 33 (Del). CIT vs. M/s. Holcim India Pvt. Ltd. in ITA no. 486/2014 and ITA no. 299/2014; Judgment dt. 5-9-2014 CIT v. Shivam Motors (P.) Ltd. [2015] 230 Taxman 63 CIT vs. Ashika Global Securities Ltd. (G.A. No. 2122 of 2014) dt. 11/06/2018 In these case laws, Hon’ble High Courts have been unanimous to hold that where the assessee has not derived any tax exempt income from investments, then no disallowance is attracted u/s 14A of the Act. 3. The ld. D/R, however, has relied upon the newly inserted explanations to Section 14A of the Act, which is extracted for the sake of ready reference:- “14A. [(1)] [Notwithstanding anything to the contrary contained in this Act, for the purposes of] computing the total income under this Chapter, 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 this Act.] ************************ *********************** [Explanation.—For the removal of doubts, it is hereby clarified that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where the income, not forming part of the total income under this Act, has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such income not forming part of the total income.]” I.T.A No.246/Kol/2023 Assessment year: 2015-16 Seven Hills Bytes Pvt. Ltd 3 The ld. D/R has further relied on the decision of the Co-ordinate Bench of ITAT Guwahati in the case of ACIT vs. Williamson Financial Services Ltd. reported in [2022] 140 taxmann.com 164 (Guwahati - Trib.). (Judicial Member herein being party to the said decision), to submit that the said explanation to Section 14A of the Act is retrospectively applicable. 4. However, the ld. A/R, has relied upon the recent decision of the Hon’ble Delhi High Court in the case of PCIT Vs. Era Infrastructure (India) Ltd. (ITA 204/2022) judgment dt. 20/07/2022, wherein, it has been held that the aforesaid explanation inserted to Section 14A of the Act is applicable prospectively. 5. Respectfully abiding by the principle of judicial hierarchy, the Hon’ble Delhi High Court being a Higher Court, and as no decision of the Hon’ble Jurisdictional High Court or Hon’ble Supreme Court is available on this issue as yet, hence applying the said decision of the Hon’ble Delhi High Court, we allow the appeal of the assessee. The additions made by the Assessing Officer u/s 14A of the Act stand deleted. 6. In the result, the appeal of the assessee stands allowed. Kolkata, the 27 th June, 2023. Sd/- Sd/- [डॉÈटर मनीष बोरड /Dr. Manish Borad] [संजय गग[ /Sanjay Garg] लेखा सदèय /Accountant Member ÛयाǓयक सदèय /Judicial Member Dated: 27.06.2023. RS Copy of the order forwarded to: 1. Seven Hills Bytes Pvt. Ltd 2. DCIT, Circle-1(1), Kolkata 3. CIT(A)- 4. CIT- , I.T.A No.246/Kol/2023 Assessment year: 2015-16 Seven Hills Bytes Pvt. Ltd 4 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches