The DCIT., Circle-1(1)(1), Ahmedabad V. M/s,.Arvind Brands & Retail Ltd. , Ahmedabad

ITA 475/AHD/2020

AI Insights

The case involves an appeal by the revenue against the decision of the Commissioner of Income Tax (Appeals) who had deleted the addition made by the Assessing Officer under Section 14A of the Income Tax Act. The addition pertained to disallowance of Rs. 6,98,72,289 which was initially added to the income of the assessee, M/s Arvind Brands & Retail Limited, for the assessment year 2016-17. The Tribunal's decision was influenced by various High Court and Supreme Court judgments which established that disallowance under Section 14A is not applicable in the absence of any exempt income. The Tribunal also addressed the issue of adjustment in book profit under Section 115JB, agreeing that no such adjustment can be made in the absence of exempt income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135817 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-09-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 22-09-2020
• Other Referred Cases: CIT v. Corrtech Energy Pvt. Ltd., CIT v. Winsome Textile Industries Ltd., PCIT vs. Oil Industry Development Board, PCIT vs. GVK Project and Technical Services Ltd., Commissioner of Income Tax vs. Chettinad Logistics (P.) Ltd, Minda Sai Ltd vs. ITO, Aura Securities Private Ltd vs. ITO, Greenland Infraco Pvt. Ltd vs. ITO
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIKAMLESHMAKWANA
• Assessee Lawyers: SHRIBIRENSHAH

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’C’’BENCH,AHMEDABAD BEFOREMs.SUCHITRAKAMBLE,JUDICIALMEMBER And SHRIWASEEMAHMED,ACCOUNTANTMEMBER आयकरअपीलसं./ITANo.475/AHD/2020 With C.O.No.34/Ahd/2022 धििाधरणवरध / Asstt.Year:2016-17 D.C.I.T, Circle-1(1)(1), Ahmedabad. Vs. M/sArvindBrands&RetailLimited, ArvindMillsPremises, NarodaRoad, Ahmedabad. PAN:AALCS3536P (Applicant)(Respondent) Revenueby:ShriKamleshMakwana,Sr.DR Assesseeby:ShriBirenShah,AR सुिवाईकीतारीख /DateofHearing:14/09/2023 घोरणाकीतारीख /DateofPronouncement:27/09/2023 आदेश /ORDER PERWASEEMAHMED,ACCOUNTANTMEMBER: ThecaptionedappealandCOhavebeenfiledattheinstanceofthe RevenueandtheassesseeagainsttheorderoftheLearnedCommissionerof IncomeTax(Appeals)-1,Ahmedabad,dated09/07/2020(inshort“Ld.CIT(A)”) arisinginthematterofassessmentorderpassedunders.143(3)oftheIncome TaxAct1961(here-in-afterreferredtoas"theAct").Theassesseehasfiledthe ITAno.475/AHD/2020 With C.O.No.34/Ahd/2022 A.Y.2016-17 2 CrossObjectionintheRevenue’sappealbearingITANo.475/Ahd/2020forthe AssessmentYear2016-2017. 2.TheonlyissueraisedbytherevenueisthatthelearnedCIT(A)erredin deletingthedisallowancemadeundersection14AoftheActforRs.6,98,72,289/- andadjustmentmadeinthebookprofitonbasisofsuchdisallowance. 3.Thenecessaryfactsarethattheassesseeisapubliccompany,anditscase hasbeenselectedforscrutinyunderCASS.TheAOduringtheassessment proceedingsfoundthattheassesseehasmadeinvestmentinsharesandsecurities whichcanyieldexemptedincome.Thus,thequestionwasraisedregardingthe disallowancetobeattractedundersection14AoftheActr.w.r.8DofIncomeTax Rule. 3.1Theassesseerepliedthatduringtheyearithasnotearnedanyexempted income.However,theamountofRs.43,33,650/-hasbeendisallowedunder section14AoftheActonsuo-moto.Therefore,nofurtherdisallowanceisrequired tobemade. 3.2However,theAOfoundthatsuo-motodisallowancemadebytheassessee isnotinaccordancewithrule8DoftheIncomeTaxRule.Thus,theAOworked outtheamountofdisallowanceasperrule8DoftheIncometaxruleatRs. 7,42,05,939/-andmadenetadditiontotheincomeoftheassesseeforRs. 6,98,72,289/-onlyaftergivingcreditofsuomotodisallowance.TheAOalsomade anadditioninbooksprofitcalculatedundersection115JBoftheActbythe amountofadditionmadetothetotalincomeoftheassessee. 4.TheaggrievedassesseepreferredanappealbeforetheleanedCIT(A)who deletedtheadditionmadebytheAObyobservingasunder: ITAno.475/AHD/2020 With C.O.No.34/Ahd/2022 A.Y.2016-17 3 (1)DecisionofGujaratHighCourtincaseofCITv.CorrtechEnergyPvt.Ltd.[45 Taxmann.com116] "[VidePara3].....TheId.ARsubmittedthatthisfindingofId.CIT(A)iscontainingto thelawsettledbyvariousjudicialpronouncements.Wehavegivenourthoughtful considerationtothefactsandthedecisionrelieduponbytheId.AR.TheHon'ble Punjab&HaryanaHighCourtinthecaseofCITv.WinsomeTextileIndustriesLtd. [2009]319ITR204hasholdthatinthepresentcase,admittedly,theappellantdid notmakeanyclaimforexemption.Insuchasituation,section14Acouldhaveno application,inthiscasealso,theappellanthasnotclaimedanyexemptincomeinthis year.Therefore,respectfullyfollowingthejudgementofHon'bleHighCourtofPunjab &HaryanainthecaseofWinsomeTextileIndustriesLtd.(supra),weherebyallowthis groundanddirecttheAOtodeletetheaddition.Therefore,groundNo.1to1.2raised bytheappellantinitscross-objectionisallowed." (ii)DecisionofHon'bleSupremeCourtofIndiaincaseofPCITVsOilIndustry DevelopmentBoard[2019]103taxmann.com326 Section14AoftheIncome-taxAct,1961-Expenditureincurredinrelationtoincome notincludibleintotalincome(Applicabilityof)Incourseofappellateproceedings, Tribunalheldthatinabsenceofanyexemptincome,disallowanceundersection14-A ofanyamountwasnotpermissible-HighCourtupheldorderpassedbyTribunal Whether,onfacts.SLPfiledagainstdecisionofHighCourtwastobedismissed-Held, yes[Para3][Infavourofassessee] (iii)DecisionofHon'bleSupremeCourtofIndiainthecaseofPCITVs.GVKProject andTechnicalServicesLtd.[2019]106taxmann.com 181"Section14AoftheIncome-taxAct,1961-Expenditureincurredinrelationto incomenotincludibleintotalincome(Applicabilityof)Assessmentyear2013-14In courseofassessment, AssessingOfficerproceededtocalculatedisallowanceundersection14Aonbasisof investmentsmadebyassesseeTribunalopinedthatinabsenceofanyexemptincome reportedbyassessee,disallowancecouldnotbemadeundersection14ATribunal thusdeleteddisallowancemadebyAssessingOfficerHighCourtupholdTribunal's order-Whether,onfacts,SLPfiledagainstorderofHighCourtwastobedismissed Held,yes[Para1][Infavourofassessee]" (iv)DecisionofMadrasHighCourtincaseofCommissionerofIncomeTax,v/s. ChettinadLogistics(P.)Ltd[2017]80taxmann.com221 Section14AoftheIncome-taxAct,1961,readwithrule8DoftheIncome-taxRules, 1962-Expenditureincurredinrelationtoincomenotincludibleintotalincome (Generalprinciple)-Assessmentyear2011-12Whethersection14Acanonlybe triggered,if,assesseeseekstosquareoffexpenditureagainstincomewhichdoesnot formpartoftotalincomeunderAct;rule8Donlyprovidesforamethodtodetermine amountofexpenditureincurredinrelationtoincome,whichdoesnotformpartof totalincomeofassesseeanditcannotgobeyondwhatisprovidedinsection14A- Heldyes-Whetherwherenoexempt.incomei.e.,dividend,wasearnedinrelevant ITAno.475/AHD/2020 With C.O.No.34/Ahd/2022 A.Y.2016-17 4 assessmentyearbyassessee,section14AcouldnotbeinvokedHeldyes[Para8] [Matterremanded] TheSLPfiledbyRevenueagainstthesaiddecisionisdismissedbySupremeCourton 02/07/2018[2018]95taxmann.com250(SC). ThusfollowingthedecisionsrenderedbyHon'bleSupremeCourtandJurisdictional HighCourtwhicharebindingincaseofAppellantaswellasundisputedfactthat appellanthasnotearnedanyexemptincomeinyearunderconsideration, disallowanceofRs.6,98,72,289/-madeundertheprovisionsofsection14A r.w.r8Disdeleted.Evenonthisground,disallowanceu/s14AmadebyAO whilecomputingbookprofitu/s115JBisalsodeleted. 4.7FurtherduringthecourseofappellateProceedings,theAppellanthasmade additionalclaimthatithasnotearnedanyexemptincomeandaccordinglyno disallowanceisrequiredtobemadeu/s14AoftheAct.WhilefilingReturnof IncometheAppellanthasmadedisallowanceofRs.43,33,650/-towardsexpenditure incurredinrespectofearningexemptincomeandaccordinglytheAppellantrequested toreducereturnedincomebysuchdisallowancemadeu/s14Aoftheact.This contentionofappellantcannotbeacceptedforthereasonthatappellanthasidentified certainexpendituredebitedinProfit&lossaccountasspecificallyattributableto earningofexemptincomehencesuchdisallowancecannotbeheldtobeincorrect evenappellanthasnotearnedanyexemptincome. 4.8Thusdisallowanceu/s14AoftheActamountingtoRs.6,98,72,289/-ishereby deleted.Thus,groundno7relatingtoadditionalclaimisrejectedandother groundsofappealrelevanttodisallowanceu/s14Aareallowed. 5.BeingaggrievedbytheorderofthelearnedCIT(A),therevenueisin appealbeforeusagainstthedeletingofadditionmadebytheAOwhereasthe assesseeisincrossobjectionagainstthefindingoftheld.CIT-Afornotallowing thealternateappealoftheassesseetoreducetheincomebytheamountofsuo motodisallowance.ThegroundofobjectionfiledbytheassesseeinCONo. 34/Ahd/2022readsasunder: InlawandonthefactsandinthecircumstancesLd.CIT(A)haserredinconfirmingsuo- motudisallowanceofRs.43,33,650/-u/s.14Awhilefilingreturnofincome,thoughno exemptincomewasearnedduringtheyearunderconsideration. 6.Attheoutset,wenotethattherewasadelayinfilingtheCObythe assesseefor769days.Aspertheassesseeoutof769days,thedelayof571days pertainstotheperiodwhentheHon’bleSupremeCourthasextendedthetimeto filetheappealagainsttheorderoftheconcernauthorityonaccountofCovidin SUOMotuWritPetition©No.3of2020.Thus,theeffectivedelayis198days ITAno.475/AHD/2020 With C.O.No.34/Ahd/2022 A.Y.2016-17 5 only.Itwasfurthersubmittedbytheassesseethatthepersonwhowashandling theappealmatterswassufferingfromthecovidandtherefore,hecouldnothand overtheappealpaperstotheconcernedcharteredaccountant.Therefore,the delayof198daysisattributedtotheill-healthofthestaff.Nevertheless,the learnedARbeforeuscontendedthattheassesseehasafairchancetosucceedin itscaseandthereforeameritoriouscaseshouldnotberejectedduetotechnical lapses.Ontheotherhand,thelearnedDRdidnotraiseanyseriousobjectionon thecondonationofthedelayinfilingtheappealbytheassessee.Consideringthe outbreakofthecovidandmeritoriouscaseoftheassessee,weareinclinedto condonethedelayinfilingtheCObytheassesseeandaccordingly,proceedto adjudicatetheissueonmerit. 7.ThelearnedDRbeforeuscontendedthatthedisallowanceunderthe provisionsofsection14AoftheActhastobemadeevenintheabsenceof exemptedincomeearnedbytheassesseeintheyearunderconsideration. 8.Ontheotherhand,thelearnedARbeforeuscontendedthattherecannot beanydisallowanceundertheprovisionsofsection14AoftheActintheabsence ofexemptedincome.Likewise,thedisallowancemadebytheassesseesuo-moto shouldalsobeallowedasdeduction. 9.BoththelearnedDRandtheARbeforeusvehementlysupportedtheorder oftheauthoritiesbelowtheextentfavourabletothem. 10.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Fromtheorderoftheauthoritiesbelow,itis undisputedthatnoexemptincomewasearnedbytheassesseeintheyearunder consideration.Thus,thequestionariseswhethertheprovisionofsection14Aof theActcanbeinvokedintheabsenceofexemptedincome.Thisquestionhas beenansweredbytheseveralHon’bleHighCourtsincludingtheJurisdictionalHigh ITAno.475/AHD/2020 With C.O.No.34/Ahd/2022 A.Y.2016-17 6 courtoftheGujaratinthecaseofCITvs.CorrtechEnergyPrivateLimited reportedin45taxmann.com116.TheHon’bleGujaratHighCourtintheabove- mentionedcaseheldthattheprovisionofsection14AoftheActcannotbeapplied intheabsenceofanyexemptedincome.TherelevantobservationoftheHon’ble Courtreadsasunder: Section14A(1)providesthatforthepurposeofcomputingtotalincomeunderchapterIV, nodeductionshallbeallowedinrespectofexpenditureincurredbytheassesseeinrelation toincomewhichdoesnotformpartofthetotalincomeundertheAct.Intheinstantcase, theTribunalhasrecordedthefindingoffactthattheassesseedidnotmakeanyclaimfor exemptionofanyincomefrompaymentoftax.ItwasonthisbasisthattheTribunalheld thatdisallowanceundersection14Acouldnotbemade.Intheprocesstribunalreliedon thedecisionofDivisionBenchofPunjabandHaryanaHighCourtincase ofCITv.WinsomeTextileIndustriesLtd.[2009]319ITR204inwhichalsotheCourthad observedthatwheretheassesseedidnotmakeanyclaimforexemption,section14A couldhavenoapplication. 10.1RespectfullyfollowingtheorderoftheJurisdictionalHighCourtas mentionedabove,weholdthatnodisallowanceundertheprovisionofsection14A oftheActisrequiredtomadeinthecaseofpresentassesseeasnoexempt incomewasearned/claimedduringtheyearunderconsideration.Thus,no disallowanceundersection14AoftheActwasrequiredtobemadeinthecaseof theassessee.Nevertheless,theassesseeonsuo-motobasishasmade disallowanceofRs.43,33,650/-undertheprovisionsofsection14AoftheAct. Nowthequestionarises,whethertheassesseecanclaimthebenefitofthe disallowancemadebytheassesseeintheincometaxreturnbeforethejudicial forum.Itisthetritelawthattheincometaxhastobeleviedontheincomewhich isdeterminedundertheprovisionsoftheAct.Theassesseeforanyreasonhas offeredanyincomewhichwasnotchargeabletotax,therevenueisnotexpected todenythebenefittotheassesseeforwhichitwasentitled.Thus,inour consideredopiniontheassesseecannotbedeprivedfromthebenefitsprovided undertheprovisionsoflawmoreparticularlyinasituationwheretheproceedings oftheassesseefortheyearunderconsiderationwerependingbeforethehigher authoritiesonsameissues.Inviewoftheaboveandafterconsideringthefactsin totality,weholdthatthedisallowanceundersection14Areadwithrule8Dof ITAno.475/AHD/2020 With C.O.No.34/Ahd/2022 A.Y.2016-17 7 IncomeTaxRulewasnotwarrantedandassesseeisentitledtothebenefitofsuo motodisallowancesmadebyit. 10.2Nowcomingtotheissueofadjustmentinbookprofitundersection115JB oftheAct.Theprovisionexplanation1(f)tosubsection2ofsection115JBstates thattheamountbookprofitshallbeincreasedbytheamountofexpenditure relatabletoexemptedincome.However,thereisnoexemptincomeclaimedby theassesseeduringtheyearunderconsideration.Therefore,inourconsidered opinionintheabsenceofexemptedincome,noadjustmentcanbemadeunder explanation1(f)tosection115JB(2)oftheAct.Inholdingso,wedrawsupport andguidancefromtheorderofcoordinatebenchofDelhiTribunalincaseof MindaSaiLtdvs.ITOreportedin89taxmann.316whereitwasheldasunder: 24.Inourconsideredview,thepleaofthelearnedcounselisindeedwelltaken.The assesseemayhaveacceptedthedisallowanceundersection14Abutonceitisasettled legalposition,inthelightofthelawlaiddownbyHon'blejurisdictionalHighCourt,that therecannotbeanydisallowanceundersection14Aunlessthereiscorrespondingexempt incomeandtheassesseehasnosuchexemptincome,adjustmentunderclause(f) ofExplanationtosection115JB(2)cannotindeedbemade.Theadjustmenthastomeet thetestsoflawandwhatcannotbeconsideredtobe'expenditurerelatabletoexempt income'underthelaw,cannotbesubjectedtotheadjustmenteither.Thereisnoestoppel againstthelaw.Themerefactthattheassesseehasacceptedthisdisallowanceaffects thatdisallowanceonlyandnothingmorethanthat;itdoesnotclothesuchanadjustment, incomputationofbookprofitundersection115JB,withlegality.Thereisnodisputethat thereisnocorrespondingtaxexemptincome.Therefore,theadjustmentinquestionis indeedunsustainableinlaw. 10.3Likewise,wealsofindthatAhmedabadTribunalintheidenticalfactsand circumstancesinthecaseofM/sAuraSecuritiesPrivateLtdversusITOinITANo. 532/AHD/2020videorderdated15July2022hasdecidedtheissueinfavourof theassessee.Therelevantextractoftheorderisreproducedasunder: 4.Wehaveheardtheargumentsofboththesidesandalsoperusedtherelevant materialavailableonrecord.Asagreedbythelearnedrepresentativesofboththesides, thesolitaryissueinvolvedinthisappealoftheassesseeissquarelycoveredbythe decisionofCoordinateBenchofthisTribunalrenderedinthecaseofDCITVs.Greenland InfracoiiPvt.Ltd,videitsorderdated14.11.2018passedinITANos.2039and 2040/Ahd/2016whereinasimilarissuehasbeendecidedbytheTribunalinfavourofthe assesseevideparagraphNos.8to10whichreadasunder:- ITAno.475/AHD/2020 With C.O.No.34/Ahd/2022 A.Y.2016-17 8 "8.WeshallnowturntothesecondissueraisedonbehalfoftheRevenue regardingproprietyoftheactionoftheCIT(A)ingrantingreliefonHie disallowance(suomotomadebytin.'assesses)beyondthe.returnofincomeand intheabsenceofair,/formalrevisedreturn.The'CIT(A)hasdiscussedthisaspect inverygreatdetailinpara2.5to2.2Sofitsorder.Wefirenotinclinedloreiterate thefindingsofthe.CIT(A).However,wefullyendorsetheobservationsofthe CIT(A)whichessentiallyholdsthatthemistakeorinadvertenceonthepartofthe assessedwherebyanincomenottaxablehasbeenwronglyofferedfortax,willnot operateastinykindofestoppelagainsttheassesseeandregardlessofwhether therevisedreturnwasfiledornot.Oncetheassesseeisinapositiontoshowthat ithasbeenoverassessedundertheprovisionsoftheActevenonaccountof assessee'sownmistakeorotherwise,theRevenueisunderdutytoassesscorrect income. 9.ItistritethattheauthoritiesundertheActareundersacrosanctobligationto actinaccordance,withlaw.TaxcanbecollectedonlyasprovidedundertheAct. Ifanassessee,underamistake,mis-conceptionornotbeingproperlyinstructed, isoverassessed,theauthoritiesundertheActarerequiredtoensurethatonly legitimatetaxduesarecollected.Thusistheviewwhichflawsfrontinnumerable judgmentsincludingC1Tvs.ShellyProducts(2003)2611TR367(SC),5.R.Koshli vs.GIT(2005)2761TR365(Guj),EsterIndustriesvs.C1T(2009)185TAXMAN 266(Delhi)andCITvs.PruthviBrokers&Shareholders(P.)Ltd.[2012]34911R 336(Bom).Theessenceofthesedecisionstirethatmereadmissiononthepartof theassessseewithrespecttoanaddition/disallowance-initsoriginalreturnorin revisedreturnwouldnotipsobaranassesseefrontclaiminganexpenseor disputinganadditionifitisotherwisepermissiblewiderlaw.Itisthuswellsettled thatifuparticularincomeisnottaxableundertheAct,itcannotbetaxedonthe basisofestoppelorcan/otherequitabledoctrine.TheRevenueauthoritiescannot enforceuntenableactionsoftheassesseeagainstitwhichledtodeclarationof incomeofhigheramountincorrectly.Itistintsopentoassess??toshowthatit wasoverassessedincorrectlyowingloitsownmistake. 10.Soviewed,wedonotseeanypotencyintheargumentlaidonbehalfofthe RevenuethattheCIT(A)allegedlycommittederroringrantingtotalreliefinthe mutterofdisallowanceunderS.14AoftheAct.Inourconsideredview,theaction oftheCIT(A)ingrantingreliefunders.~14AoftheActonaccountsuomoto disallowancebytheassessesandtherebygrantingreliefhigherthanclaimedin thereturnofincomecannotdefaultedinlaw." 5.Astheissueinvolvedinthepresentcaseaswellasallthematerialsfactsrelevant theretoaresimilartothecaseofGreenlandInfrcoP.Ltd.(supra),werespectfullyfollow thedecisionrenderedbytheCo-ordinateBenchofthisTribunalinthesaidcaseanddelete thedisallowanceofRs.68,06,152/-madebytheAssessingOfficerandconfirmedbythe learnedCIT(A). 10.4Inviewoftheabovedetaileddiscussion,thegroundofappealofthe revenueisherebydismissedwhereasgroundofobjectionoftheassesseeis herebyallowed. ITAno.475/AHD/2020 With C.O.No.34/Ahd/2022 A.Y.2016-17 9 11.IntheresultappealoftherevenueisdismissedandCOoftheassesseeis allowed. OrderpronouncedintheCourton27/09/2023atAhmedabad. Sd/-Sd/- (SUCHITRAKAMBLE)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated27/09/2023 Manish