M/s Khoday India Limited , Bangalore V. Deputy Commissioner of Income Tax Circle-4(1)(1), Bangalore

ITA 2488/BANG/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4350 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 23-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 250; 201; 13; 154

Judgement Text

ITA NO S .248 8 & 2489 (B)/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL B ENGALU R U BENCHES : A , B ENGALURU BEFORE SHRI PRADIP KUMAR KEDIA, AM & SMT.BEENA PILLAI, JM ITA NO. 248 8 & 2489 (BANG)/2017 (ASSESSMENT YEAR S : 201 3 - 14 ) M/S KHODAY INDIA LIMITED . BREWERY HOUSE, 7 TH MILE, KANAKPURA ROAD, BANGALORE - 560 0 62 PAN NO. AA ACK673 4C APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME T AX , CIRCLE - 4( 1)( 1 ), BMTC BUILDING, 6THFLOOR, KORAMANAGALA, BANGALORE RESPONDENT APPELLANT BY : SHRI V. SRIDHAR, C A REVENUE BY : SHRI B.R.RAMESH, JC IT DATE OF HEARING : 24 - 0 2 - 20 20 DATE OF PRONOUNCEMENT : 26 - 02 - 2020 O R D E R PER PRA DIP KUMAR KEDIA : A M THE CAPTIONED APPEAL S HA VE BEEN FILED BY THE ASSESSEE IN RESPECT OF ASSESSMENT YEARS 2013 - 14 IN QUESTION AGAINST THE RESPECTIVE ORDERS PASSED BY THE CIT(A) - 4, BENGALURU ARISING FROM THE ORDER PASSED BY THE A O U/S 143(3) AND 154 OF THE IT ACT, 1961 ( THE ACT ) BOTH DATED 30 - 08 - 2017. 2. THE SOLITARY ISSUE INVOLVED IN BOTH THE APPEALS R E LATES TO DISALLOWANCE MADE U/S 14A OF THE ACT. ITA NO S .248 8 & 2489 (B)/2017 2 3. BRIEFLY STATED, THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013 - 14 IN QUESTION WHICH WAS SUBJECTED TO SCRUTINY ASSESSMENT AND THE ASSESSMENT ORDER WAS FRAMED U/S 143(3) OF THE ACT BY AN ORDER DATED 20 - 01 - 2016. WHILE FRAMING THE ASSESSMENT U/S 143(3 ), THE AO CARRIED OUT A DISALLOWANCE OF RS.49,50,262/ - U/S 14 A OF THE ACT. THE ASSESSEE PREFERRED AN APPEAL AG A INST THE AFORESAID DISALLOWANCE BEFORE THE CIT(A). DURING THE PENDENCY OF APPEAL, THE AO PASSED ANOTHER ORDER U/S 154 OF THE ACT ON 28 - 06 - 2017 WHEREBY THE DISALLOWANCE U/S 14A OF THE ACT WAS REVISED AND ENHANCED FROM RS.49,50,262/ - TO RS.2,17,23,007/ - . THE CIT(A) UPHELD THE ENHANCED DISALLOWANCE OF RS.2,17,23,007/ - IN THE FIRST APPEAL. IN THIS BACKDROP, THE CAPTIONED APPEALS ARE PRESENTED BEFORE THE TR IBUNAL IE. O NE AGAINST THE ORIGINAL DISALLOWANCE AND THE OTHER AGAIN S T THE REVISED / ENHANCED DISALLOWANCE. 4. WE HAVE HEARD RIVAL SUBMISSIONS ON THE ISSUE. AS POINTED OUT ON BEHALF OF THE ASSESSEE, THE ASSESSEE HAS CLAIMED EXEMPT INCOME DURING THE YEAR TO THE EXTENT OF RS. 28,000 / - AS AGAINST THE AFORESAID EXEMPT INCOME, ASSESSEE HAS SUO MOTU DISALLOWED AMOUNT OF RS. 13 , 527/ - UNDER S EC .14A OF THE ACT. THE DISALLOWANCE UNDER S. 14A CANNOT EXCEED THE EXEMPT INCOME. THEREFORE, NO DISALLOWANCE IS PERMISSIBLE IN EXCESS OF RS. 28 , 000/ - IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY P. LTD. 372 ITR 97 (GUJ.) . IN ANOTHER JUDGMENT IN THE CASE OF CIT VS. VISION FINSTOCK LTD . TAX APPEAL NO. 486 OF 2017 DATED 31.07.2017 THE HONBLE GUJARAT HIGH COURT HAS ONCE AGAIN EXPRESSED THE SIMILAR VIEW AND HELD THAT DISALLOWANCE OF EXPENDITURE IN TERMS OF SECTION 14A R.W. RULE 8D CANNOT EXCEED THE EXEMPT INCOME ITSELF. IT IS NOTICED THA T SLP(CIVIL) [DIARY NO. 13152/2018 ] FILED BY THE REVENUE AGAINST THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN VISION FINSTOCK LTD. (SUPRA) HAS BEEN DISMISSED ON MERITS BY THE HONBLE SUPREME COURT VIDE ORDER DATED 07.05.2018. THE REFERENCE IS ALSO MA DE TO THE DECISION OF HONBLE SUPREME COURT OF INDIA IN CIT VS. CHETTINAD LOGISTICS (P.) LTD. ITA NO S .248 8 & 2489 (B)/2017 3 (2018) 95 TAXMANN.COM 250 (SC). THUS, IN THE LIGHT OF JUDICIAL PRECEDENTS NOTED ABOVE, NO ADDITIONAL DISALLOWANCE IS CALLED FOR UNDER S EC. 14A OF THE ACT IN EXCES S OF EXEMPT INCOME. T H E DISALLOWANCE IS THUS REQUIRED TO BE RESTRICTED TO THE EXTENT OF EXEMPT INCOME. 5. IN THE RESULT, BOTH THE APPEAL S OF THE AS S ES S EE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 - 02 - 2020 SD/ - S D/ - (BEENA PILLAI) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: BENGALURU DATED: 26 - 02 - 2020 * AM COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5. DR 6 .GUARD FILE BY ORDER ASST.REGISTRAR ITA NO.155(B)/2017 4