PHARMED LTD, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(2)(2), MUMBAI

ITA 3097/MUM/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5110 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 07-08-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 05-06-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MADHU MALATI GHOSH
• Keywords: Earning of tax free income; Set aside
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “C” BENCH : MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER ITA No. 3097/Mum/2024 Assessment Year 2017-18 Pharmed Limited, 141, Pharmed House, Walchand Hirachand Marg, Mumbai PAN : AAACP2191A vs. The Asst. Commissioner of Income Tax, Circle-2(2)(2), Mumbai (Appellant) (Respondent) For Assessee : Shri Vijay Mehta For Revenue : Ms. Madhu Malati Ghosh, CIT-DR Date of Hearing : 08-08-2024 Date of Pronouncement : 09-08-2024 ORDER PER B.R. BASKARAN, A.M : The assessee has filed this appeal challenging the order dt. 01-05-2024 passed by the learned Commissioner of Income Tax (Appeals)-NFAC, Delhi (in short „Ld.CIT(A)‟) and it relates to AY. 2017- 18. The only issue adjudicated by the assessee in this appeal relates to the disallowance of Rs.26.83 lakhs made by the AO u/s. 14A of the Income Tax Act, 1961 („the Act‟). 2 ITA No. 3097/Mum/2024 2. During the assessment proceedings, the AO noticed that the assessee has held investments to the tune of Rs. 59.32 crores in mutual funds, NCD and shares of subsidiary companies. The assessee did not make any disallowance u/s. 14A of the Act. When questioned about the same, the assessee submitted that it has not received any exempt income and hence, disallowance u/s. 14A of the Act is not called for. The AO did not accept the above said contention of the assessee and accordingly, he computed the disallowance u/s. 14A of the Act by applying Rule 8D of the Income Tax Rules, 1962 („the Rules‟) at Rs. 26,83,414/-. 3. In the appellate proceedings, Ld.CIT(A) confirmed the same and hence, the assessee has filed this appeal before the Tribunal. 4. We heard the parties and perused the record. The Ld.AR submitted that the Hon‟ble Delhi High Court in the case of Era Infrastructure (India) Ltd., (2022) 448 ITR674 has held that disallowance u/s. 14A of the Act is not required to be made when the assessee has not earned any exempt income. It was further held that theamendment brought out by the Statute in Section 14A of the Act w.e.f. 01-04-2022, making the disallowance u/s.14A of the Act mandatory even if exempt income is not earned has been held to be prospective in nature by Hon‟ble Delhi High Court in the above said case.Accordingly, Ld.AR submitted that the additionmade by the tax authorities is not justified. 5. We heard the Ld.DR and perused the record. Since the assessee has not earned any exempt incomeduring the year under consideration, the disallowance u/s.14A of the Act is not required to be made as per the decision of the Hon‟ble Delhi High Court in the case of Era Infrastructure (India) Ltd., (supra). Respectfully following the said decision of the Hon‟ble Delhi High Court, we set aside the order passed 3 ITA No. 3097/Mum/2024 by the Ld.CIT(A) and direct the AO to delete the disallowance made u/s.14A of the Act during the year under consideration. 6. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 9 th August, 2024. Sd/- Sd/- [ANIKESH BANERJEE] [B.R. BASKARAN] JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 09-08-2024 TNMM Copy to 1. The Appellant 2. The Respondent 3. The Pr. CIT, Mumbai concerned 4. D.R. ITAT, “C” Bench, Mumbai. 5. Guard File. //By Order// //True Copy // Dy./Asst. Registrar, ITAT, Mumbai