Deputy Commissioner of Income Tax Circle-1(1)(1), Bangalore V. M/s Axis Aerospace & Tecnologies Pvt Ltd , Bangalore

ITA 329/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2311 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 02-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NANDINI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI G MANJUNATH, ACCOUNTANT MEMBER ITA NO.329 & 330/BANG/2018 (ASST. YEAR 2011-12 & 2012-13) THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1(1)(1), BENGALURU . APPELLANT VS. M/S AXIS AEROSPACE & TECHNOLOGIES PVT. LTD., 54, RICHMOND ROAD, BENGALURU. . RESPONDENT PAN AACCB1728K. APPELLANT BY : SMT. NANDINI, JCIT RESPONDENT BY : SMT. SHEETHAL BORKAR, ADVOCATE DATE OF HEARING : 28-8-2018 DATE OF PRONOUNCEMENT : 7-9-2018 O R D E R PER SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER : THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), INTER ALIA , ON FOLLOWING GROUNDS: ITA NOS.329 & 330/B/18 2 1. THE ORDER OF THE LEARNED CIT (APPEALS), IN SO FA R AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OP POSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT (A) ERRED IN ALLOWING THE ASSESSEE'S APPEAL ON THE ISSUE OF DISALLOWANCE MADE U/S 14A R. W. RULE 8D AS THE SAID MATTER HAS NOT REACHED FINALITY DUE TO PENDENCY OF REVENUE'S APPEAL BEFORE THE HON'BLE HIGH COURT OF KARNATAKA AGAINST THE DECISION OF JURISDICTIONAL ITAT IN THE CASE OF M/S AMBUTHIRTHA POWER PVT. LTD IN ITA NO.243/2016, DATED: 07.07.201 7 AND AN SLP BEFORE THE HON'BLE APEX COURT AGAINST TH E DECISION OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF M/S CHEMINVEST LTD (378 ITR 33 (DEL)). 3. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT TH E ORDER OF THE LD. CIT (A) BE REVERSED AND THAT OF TH E ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT T HE TIME OF HEARING OF APPEAL. 2. DURING THE COURSE OF HEARING, THE LEARNED COUNSE L FOR THE ASSESSEE HAS CONTENDED THAT THE ASSESSEE DID NOT EA RN ANY EXEMPTED INCOME, THEREFORE, PROVISIONS OF SECTION 14A CANNOT BE INVOKED IN VIEW OF JUDGMENT OF THE APEX COURT. 3. THE LEARNED DR PLACED RELIANCE UPON THE ASSESSME NT ORDER. 4. HAVING CAREFULLY EXAMINED THE ORDERS OF AUTHORI TIES BELOW, WE FIND THAT UNDISPUTEDLY THE ASSESSEE HAS NOT EARNED ANY EXEMPTED ITA NOS.329 & 330/B/18 3 INCOME. NOW IT IS SETTLED POSITION OF LAW THAT WHE NEVER ASSESSEE DID NOT EARN ANY EXEMPT INCOME, NO DISALLOWANCE COULD B E MADE U/S. 14A OF THE ACT. THE HON'BLE DELHI HIGH COURT IN THE C ASE OF CHEMINVEST LTD. V. CIT, 378 ITR 33 (DEL) HAS CATEGORICALLY HELD THAT SECTION 14A ENVISAGES THAT THERE SHOULD BE ACTUAL RECEIPT OF IN COME WHICH WAS NOT INCLUDIBLE IN THE TOTAL INCOME DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE IN RELATION TO THE SAID INCOME. WHEREVER THERE IS NO EXEMPT INCOME INCLUDIBLE IN TH E TOTAL INCOME OF THE ASSESSEE, THE PROVISIONS OF SECTION 14A CANNOT BE INVOKED. THE RELEVANT OBSERVATIONS OF THE JUDGMENT OF THE HON'BL E DELHI HIGH COURT ARE EXTRACTED HEREUNDER:- '15. TURNING TO THE CENTRAL QUESTION THAT ARISES FOR CONSIDERATION, THE COURT FINDS THAT THE COMPLETE ANSWER IS PROVIDED BY THE DECISION OF THIS COURT IN CIT V. HOLCIM INDIA (P) LTD. (DECISION DATED 5TH SEPTEMBER 2014, IN I. T. A. NO. 486 OF 2014). IN THAT CASE, A SIMILAR QUESTION AROSE, VIZ., WHETHER THE INCOME-TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN DELETING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT WHEN NO DIVIDEND INCOME HAD BEEN EARNED BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR ? THE COURT REFERRED TO THE DECISION OF THIS COURT IN MAXOPP INVESTMENT LTD. (SUPRA) AND TO THE DECISION OF THE SPECIAL BENCH OF THE INCOME-TAX APPELLATE TRIBUNAL IN THIS VERY CASE, I.E., CHEMINVEST LTD. V. CIT [2009] 317 ITR (AT) 86 (DELHI) [SB]. THE COURT ALSO REFERRED TO THREE DECISIONS OF DIFFERENT HIGH COURTS WHICH HAVE DECIDED THE ISSUE AGAINST REVENUE. THE FIRST ITA NOS.329 & 330/B/18 4 WAS THE DECISION IN CIT V. LAKHANI MARKETING INCL. (DECISION DATED APRIL 2, 2014, OF THE HIGH COURT OF PUNJAB AND HARYANA IN I. T. A. NO. 970 OF 2008)--SINCE REPORTED IN [2015] 4 ITR- OL 246 (P&H)-- WHICH IN TURN REFERRED TO TWO EARLIER DECISIONS OF THE SAME COURT IN CIT V. HERO CYCLES LTD. [2010] 323 ITR 518 (P&H) AND CIT V. WINSOME TEXTILE INDUSTRIES LTD. [2009] 319 ITR 204 (P&H). THE SECOND WAS OF THE GUJARAT HIGH COURT IN CIT V. CORRTECH ENERGY (P.) LTD. [2014] 223 TAXMANN 130 (GUJ) ; [2015] 372 ITR 97 (GUJ) AND THE THIRD OF THE ALLAHABAD HIGH COURT IN CIT V. SHIVAM MOTORS (P) LTD. (DECISION DATED 5TH MAY, 2014, IN I. T. A. NO. 88 OF ITA NO.1107/BANG/2016 2014). THESE THREE DECISIONS REITERATED THE POSITION THAT WHEN AN ASSESSEE HAD NOT EARNED ANY TAXABLE INCOME IN THE RELEVANT ASSESSMENT YEAR IN QUESTION 'CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT FOR DISALLOWANCE.' 5. IN THE LIGHT OF THE AFORESAID JUDGMENT, THE PRO VISIONS OF SECTION 14A CANNOT BE INVOKED AS THERE IS NO EXEMPT INCOME IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(APPEALS) WHO HAS RIGHTLY DELETED THE ADDITION. 6. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMIS SED. ITA NOS.329 & 330/B/18 5 ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH SEPT, 2018 . SD/- SD/- (G MANJUNATH) (SUNI L KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED : 7/9/2018 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVA TE SECRETARY, ITAT, BANGALORE .