Deputy Commissioner of Income Tax Central Circle-1(3), Bangalore V. M/s Pune Dynasty Projects Pvt Ltd , Bangalore

ITA 3260/BANG/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0104 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 05-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUSHRI
• Assessee Lawyers: G GURUSAMY
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.3260 & 3261/BANG/2018 ASSESSMENT YEAR : 2013-14 & 2014-15 THE DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(3), BENGALURU. VS. M/S PUNE DYNASTY PROJECTS PVT. LTD., 1 ST FLOOR, EMBASSY POINT, 150 INFANTRY ROAD, BENGALURU-560 001. PAN AAECP 1340 D APPELLANT RESPONDENT APPELLANT BY : SHRI ANUSHRI, C.A RESPONDENT BY : SHRI G GURUSAMY, CIT (DR) DATE OF HEARING : 20.11.2019 DATE OF PRONOUNCEMENT : 26.12.2019 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER : THE REVENUE HAS FILED THESE APPEALS CHALLENGING TH E ORDERS PASSED BY LD CIT(A)-5, BENGALURU, WHEREIN HE HAS DE LETED THE DISALLOWANCE MADE BY THE AO U/S 14A OF THE ACT AND THESE APPEALS RELATE TO ASST. YEARS 2013-14 AND 2014-15. SINCE T HE ISSUE URGED IN THESE APPEALS IS IDENTICAL IN NATURE, BOTH WERE HEA RD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NOS.3260 & 3261 /BANG/2018 PAGE 2 OF 5 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND LEASING OF OFFICE SPACES. THE AO N OTICED THAT THE ASSESSEE HAS HELD INVESTMENTS, INCOME FROM WHICH IS EXEMPT. IN BOTH THE YEARS UNDER CONSIDERATION THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U/S 14A OF THE ACT. THE AO, HOWEVER, TOOK THE VIEW THAT PROVISIONS OF SEC.14A SHOULD BE APPLIED TO THE ASSESSEE AND ACCORDINGLY PROPORTIONATE EXPENSES SHOULD BE DISALL OWED. ACCORDINGLY THE AO DISALLOWED A SUM OF RS.995.24 LA KHS AND RS.1247.95 LAKHS RESPECTIVELY IN ASST. YEARS 2013-1 4 AND 2014-15 BY INVOKING PROVISIONS OF SEC. 14A OF THE ACT R.W. RULE 8D OF INCOME-TAX RULES. 3. IN THE APPELLATE PROCEEDINGS BEFORE LD CIT(A), T HE ASSESSEE CONTENDED THAT NO DISALLOWANCE U/S 14A SHOULD BE MA DE SINCE IT DID NOT RECEIVE ANY EXEMPT INCOME DURING BOTH THE Y EARS UNDER CONSIDERATION. THE LD CIT(A) WAS CONVINCED WITH TH E CONTENTIONS OF THE ASSESSEE AND ACCORDINGLY DELETED THE DISALLOWAN CE MADE U/S 14A OF THE ACT IN AY 2013-14. IN AY 2014-15, THE L D CIT(A) EXPRESSED THE VIEW THAT THE DISALLOWANCE U/S 14A SH OULD BE RESTRICTED TO THE EXEMPT INCOME. THE REVENUE IS AG GRIEVED. 4. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICED THAT THE LD CIT(A) HAS FOLLOWED THE DECISION RENDER ED BY HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS LTD., (372 ITR 694) AND CHEMINVEST LTD. VS. ITO (2015)(378 ITR 33) . TO COME TO THE CONCLUSION THAT DISALLOWANCE U/S 14A IS NOT WA RRANTED WHEN THE ASSESSEE DID NOT EARN ANY EXEMPT INCOME AND IF ANY EXEMPT INCOME IS EARNED BY THE ASSESSEE, THEN THE DISALLO WANCE U/S14A ITA NOS.3260 & 3261 /BANG/2018 PAGE 3 OF 5 SHOULD NOT EXCEED THE AMOUNT OF EXEMPT INCOME. THE FOLLOWING OBSERVATIONS MADE BY HONBLE DELHI HIGH COURT IN TH E CASE OF CHEMINVEST LTD (SUPRA) ARE RELEVANT HERE:- 23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINB EFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT T HE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE ENVISAGES THAT THERE SHOULD BE AN ACTUAL RE CEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME , DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISAL LOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME . IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. 5. SINCE THE LD CIT(A) HAS FOLLOWED THE DECISION RE NDERED BY HONBLE DELHI HIGH COURT IN THE ABOVE SAID CASES, W E DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER PASSED BY LD CIT(A) IN BOTH THE YEARS UNDER CONSIDERATION. 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENU E ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DECEMBER, 2019. SD/ - (PAVAN KUMAR GADALE) JUDICIAL MEMBER SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, THE 26 TH DECEMBER , 2019. /VMS/ ITA NOS.3260 & 3261 /BANG/2018 PAGE 4 OF 5 COPY TO: 1. APPELLANT (S) / CROSS OBJECTOR(S) 2. RESPONDENT(S) 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, BANGALORE ITA NOS.3260 & 3261 /BANG/2018 PAGE 5 OF 5 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DICTATION NOTE ENCLOSED DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. . 14. DICTATION NOTE ENCLOSED