DCIT, New Delhi V. M/s. GVK Project and Technical Services Ltd., Secunderabad

ITA 4216/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2783 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 01-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

ITA NOS. 4216 & 4217/DEL/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NOS.-4216 & 4217/DEL/2016 ( ASSESSMENT YEARS: 2012-13 & 2013-14 ) DCIT CIRCLE 10(2), NEW DELHI. VS GVK PROJECT & TECHNICAL SERVICES LTD. 156-159, PAIGAH HOUSE, SARDAR PATEL ROAD, SECUNDERABAD, SECUNDERABAD AAACU9200F ASSESSEE BY SH. PRASHANT MEHARCHANDANI, ADV. REVENUE BY SH. ARUN KUMAR YADAV, SR. DR ORDER PER K. NARSIMHA CHARY, J.M. THESE TWO APPEALS RELATING TO THE YEARS 2012-13 AN D 2013- 14 ARE PREFERRED BY THE REVENUE CHALLENGING THE DEL ETION OF ADDITION MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 14A OF THE INCOME TAX ACT, 1961 (FOR SHORT CALLED AS THE ACT) READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (FOR SHORT T HE RULES)BY THE LD. CIT (A)-IV, NEW DELHI (FOR SHORT HEREINAFTE R REFERRED TO AS LD. CIT(A)) BY WAY OF ORDER DATED 11.05.2016 IN A PPEAL NO. 609/14-15/CIT (A)-IV AND APPEAL NO. 254/15-16/CIT ( A)-IV. DATE OF HEARING 19.12.2017 DATE OF PRONOUNCEMENT 22.12.2017 ITA NOS. 4216 & 4217/DEL/2016 2 2. BRIEFLY STATED FACTS, INSOFAR AS THEY ARE RELEVA NT FOR THE DISPOSAL OF THIS APPEAL ARE THAT THE ASSESSEE IS A COMPANY AND IT MADE CERTAIN INVESTMENTS DURING THE YEARS UNDER CON SIDERATION. WHEN THEY HAVE FILED THEIR RETURNS OF INCOME FOR TH E ASSESSMENT YEARS 2012-13 & 2013-14, AO PROPOSED TO MAKE ADDITI ON BY INVOKING SECTION 14A OF THE ACT READ WITH RULE 8D O F THE RULES. ASSESSEE CONTENDED BEFORE THE LD. AO THAT THEY HAVE NOT EARNED ANY EXEMPT INCOME DURING THE YEAR, AS SUCH, NO DISA LLOWANCE COULD BE MADE. HOWEVER, AO BRUSHED ASIDE SUCH A CO NTENTION AND REFERRING TO CBDT CIRCULAR NO. 5 OF 2014 DATED 11.02.2014 AND HELD THAT ALTHOUGH THE ASSESSEE COMPANY HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR, DISALLOWANCE IS BEIN G MADE AS THE INCOME AS AND WHEN RECEIVED WOULD BE EXEMPTED. IN APPEAL LD. CIT (A) WHILE FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN CHEMINVEST LTD. VS. CIT (2015) 378 IT R 33 (DEL) HELD THAT IF THERE IS NO EXEMPT INCOME THERE CAN BE NO QUESTION OF MAKING ANY DISALLOWANCE. HE, THEREFORE, DELETED TH E ADDITION MADE ON THIS ACCOUNT FOR BOTH THE ASSESSMENT YEARS. HENCE, REVENUE IS IN THIS APPEAL. 3. LD. DR ARGUED THAT LD. CIT (A) WAS NOT RIGHT IN IGNORING THE BOARD CIRCULAR NO. 5 OF 2014 DATED 11.02.2014 WHILE DELETING THE ITA NOS. 4216 & 4217/DEL/2016 3 ADDITION MADE ON ACCOUNT OF SECTION 14A OF THE ACT AND AS A MATTER OF FACT DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE RULES CAN BE MADE EVEN WHERE THE TAX PAYER HAS NOT EARNED ANY EXEMPT INCOME IN A PARTICULAR YEAR. PER CONTRA, PL ACING RELIANCE ON THE DECISIONS REPORTED IN PCIT VS. IL & FS ENERG Y DEVELOPMENT COMPANY LTD. (2017) 84 TAXMAN.COM 186 (DEL), CHEMIN VEST (SUPRA) AND CIT VS. WHOLESOME INDIA PVT. LTD. (2014 ) 90 CCH 81 (DEL). LD. AR SUBMITTED THAT WHERE THERE IS NO EXE MPT INCOME THERE IS NO QUESTION OF MAKING ANY DISALLOWANCE U/S 14A OF THE ACT. 4. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AND ALSO THE DECISION RELIED UPON BY THE ASSESSEE. THE HONBLE JURISDICTIONAL HIGH COURT, REFERRING THE ENTIRE CAS E LAW ON THIS ASPECT AND ALSO WHILE NOTICING THE CBDT CIRCULAR NO . 5 OF 2014 DATED 11.02.2014, WAS PLEASED TO HOLD THAT THE CBDT CIRCULAR CANNOT OVER RIDE THE EXPRESS PROVISIONS OF SECTION 14A OF THE ACT AND RULE 8D OF THE RULES AND WHERE NO EXEMPT INCOME WAS EARNED IN RELEVANT ASSESSMENT YEAR THERE COULD BE N O DISALLOWANCE IN TERMS OF SECTION 14A OF THE ACT REA D WITH RULE 8D OF THE RULES. IN VIEW OF THIS CLEAR AND ESTABLISHE D LEGAL POSITION, WE DO NOT FIND ANY ILLEGALITY OR IRREGULARITY IN TH E IMPUGNED ITA NOS. 4216 & 4217/DEL/2016 4 ORDERS, AS SUCH, WE UPHOLD THE SAME. CONSEQUENTLY, WE DISMISS THE APPEALS OF THE REVENUE. 5. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.12.2017 SD/- SD/- (N.K. SAINI) (K. NARSIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 22.12.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI