ITO 11(1)(3), MUMBAI V. SAICHARAN CONSULTANCY PVT. LTD., MUMBAI

ITA 3451/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2316 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 21-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

P A G E | 1 ITA NO.3451/MUM/2018 AY. 2014 - 15 THE INCOME TAX OFFICER - 11(1)(3) VS. M/S SAICHARAN CONSULTANCY PVT. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO.3451/MUM/2018 (ASSESSMENT YEAR: 2014 - 15) INCOME TAX OFFICER - 11(1)(3) ROOM NO.201, AAYAKAR BHAVAN M.K. MARG, MUMBAI 400 020 VS. M/S SAICHARAN CONSULTANCY PVT. LTD., 317, 3 RD FLOOR, RAHEJA CHAMBERS, FREE PRESS MARG, NARIMAN POINT, MUMBAI - 400 021 PAN AAKCS5972N (APPELLANT) (RESPONDENT) REVENUE BY : SHRI NITIN WAGHMODE , DR ASSESSEE BY : NONE DATE OF HEARING : 08/08/2019 DATE OF PRONOUNCEMENT : 28/08/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 2014 - 15. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX - 18, MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). THOUGH THE CASE WAS FIXED FOR HEARING ON 08.08.2019 NEITHER THE ASSESSEE NOR ITS AUTHORIZED REP RESENTATIVE APPEARED BEFORE THE TRIBUNAL ON THE ABOVE DATE. BECAUSE OF NON - COMPLIANCE BY THE ASSESSEE, WE ARE PROCEEDING TO DISPOSE P A G E | 2 ITA NO.3451/MUM/2018 AY. 2014 - 15 THE INCOME TAX OFFICER - 11(1)(3) VS. M/S SAICHARAN CONSULTANCY PVT. LTD. OFF THIS APPEAL AFTER HEARING THE LD. DR AND EXAMINING THE MATERIALS AVAILABLE ON RECORD. 2. THE GROUNDS OF APPEAL FILED BY THE R EVENUE READ AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN GIVING RELIEF TO THE ASSESSEE BY RELYING ON THE FACTS THAT ASSESSEE HAS NO EXEMPT INCOME BY IGNORING T HE CBDT CIRCULAR NO.5/2014 WHICH STATES THAT IT IS NOT NECESSARY THAT EXEMPT INCOME SHOULD NECESSARILY BE INCLUDED IN A PARTICULAR YEARS INCOME FOR DISALLOWANCE TO BE TRIGGERED. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT (A) ERRED ON GIVING RELIEF TO THE ASSESSEE BY IGNORING THE FACTS THAT SECTION 14A DOES NOT USE THE WORD INCOME OF THE YEAR BUT INCOME UNDER THE ACT WHICH CLEARLY INDICATES THAT FOR INVOKING DISALLOWANCE U/S 14A, IT IS NOT NECESSARY THAT ASSESSEE SHOULD HAVE EARNED SUCH EXEMPT INCOME DURING THE FINANCIAL YEAR UNDER CONSIDERATION. 3. BRIEFLY STATED, THE FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER (AO) INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT. IN REPLY, THE ASSESSEE SUBMITTED VIDE LETTER DATED 10.08.2016 THE FOLLOWING : THE COMPANY HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR. HENCE, DISALLOWANCE U/S 14A SHOULD NOT BE MADE. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE REPLY OF THE ASSESSEE AND THEREAFTER RELYING ON THE CBDT CIRCULAR NO. 5/2014 DATED 11.02.2014 MADE A DISALLOWANCE OF RS.2,04,17,998/ - U/S 14A OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE F ILED AN APPEAL BEFORE THE LD. CIT(A). DURING THE COURSE OF HEARING, THE ASSESSEE SUBMITTED THAT RS.1,99,95,316/ - WAS NOT CLAIMED AS AN EXPENDITURE IN THE P&L ACCOUNT AND P A G E | 3 ITA NO.3451/MUM/2018 AY. 2014 - 15 THE INCOME TAX OFFICER - 11(1)(3) VS. M/S SAICHARAN CONSULTANCY PVT. LTD. IN FACT THE SAID AMOUNT WAS CAPITALIZED TO INVESTMENT ACCOUNT. FURTHER, IT WAS SUBMITT ED THAT THE ASSESSEE HAD SUO MOTU ADDED BACK THE ENTIRE FINANCE COSTS OF RS.7,90,159/ - IN THE COMPUTATION OF INCOME. ALSO IT WAS STATED THAT THE ASSESSEE HAD CLAIMED IN THE P&L ACCOUNT AN AMOUNT OF RS.31,355/ - WHICH IS BARE MINIMUM EXPENDITURE REQUIRED TO RUN THE COMPANY. THE LD. CIT(A) F OUND THE ABOVE CONTENTIONS OF THE ASSESSEE AS CORRECT. THEREAFTER, RELYING ON CATENA OF DECISIONS LIKE PCIT V. BALLARPUR INDUSTRIES LTD. (ITA NO. 51/2016) (BOMBAY HIGH COURT, NAGPUR BENCH), ZEE NEWS LTD. (2018 - TIOL - 263) ( BOMBAY HIGH COURT ) , CHEMINVEST LTD. V. ITO (2009) 378 ITR 33(DELHI HIGH COURT) , DELETED THE DISALLOWANCE OF RS.2,04,17,998/ - MADE BY THE AO U/S 14A OF THE ACT. 5. BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE AO. 6. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE FACT REMAIN THAT THE ASSESSEE - COMPANY HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. WE ARE OF THE CONSIDERED VIEW THAT THE LEGISLATIVE INTENT IS MORE DISCERNABLE IN THE JUDICIAL DECISIONS. IN CIT VS. CHETTINAD LOGISTICS (P) LTD . (2017) 80 TAXMANN.COM 221 (MAD), THE HONBLE MADRAS HIGH COURT HAS HELD THAT SECTION 14A CANNOT BE INVOKED WHERE NO EXEMPT INCOME WAS EARNED BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR. IN THE CASE OF CIT V. SHIVAM MOTORS (P) LTD. (2015) 55 TAXMANN.C OM 262 (ALL), IT HAS BEEN HELD THAT IN ABSENCE OF ANY TAX FREE INCOME EARNED BY THE ASSESSEE, DISALLOWANCE U/S 14A COULD NOT BE MADE. IN A SIMILAR VEIN, IT HAS BEEN HELD IN BALLARPUR INDUSTRIES LTD. (SUPRA) THAT SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. P A G E | 4 ITA NO.3451/MUM/2018 AY. 2014 - 15 THE INCOME TAX OFFICER - 11(1)(3) VS. M/S SAICHARAN CONSULTANCY PVT. LTD. FOLLOWING THE ABOVE DECISIONS, WE CONFIRM THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE O PEN COURT ON 28/08/2019. SD/ - SD/ - (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 28/08/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI