KANYAKUMARI BUILDERS P.LTD, MUMBAI V. DCIT CC 4(2), MUMBAI

ITA 498/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3778 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2013-2014
• Appeal Filed On: 23-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABIRAM KARTIKEYAN
• Keywords: Earning of tax free income; Question of law
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI N.K. PRADHAN , HON'BLE ACCOUNTANT MEMBER ITA NO. 498 /MUM/201 7 (A.Y: 2013 - 14 ) M/S. KANYAKUMARI BUILDERS PVT. LTD., RAHEJA CHAMBER, LINKING ROAD, MAIN AVENUE, 23 - 25 M.G. ROAD, SANTACRUZE (W). MUMBAI - 400 054 PAN: AAACK 2833 N V. DCIT CENTRAL CIRCLE 4(2) MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NISHIT GANDHI DEPARTMENT BY : SHRI ABIRAM KARTIKEYAN DATE OF HEARING : 01.08.2018 DATE OF PRONOUNCEMENT : 10 .08 .2018 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 52, MUMBAI DATED 02.11.2016 FOR THE ASSESSMENT YEAR 2013 - 14 IN SUSTAINING THE DISALLOWANCE U/S. 14A R.W. RULE 8D(2)(II) AT .65,38,912/ - . 2. AT THE O UTSET, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME FROM INVESTMENTS AND 2 ITA NO.498/MUM/2017 (A.Y: 2013 - 14) M/S. KANYAKUMARI BUILDERS PVT. LTD ., T HEREFORE NO DISALLOWANCE CAN BE MADE U/S. 14A OF THE ACT. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTION: - A. CIT V. M/S DELITE INDUSTRIES LTD. [ ITA.NO.110 OF 2009 (BOM.)] B. CIT V. CORRTECH ENERGY (P.) LTD. [372ITR 97 (GUJARAT)] C. CIT V. M/S. SHIVAM MOTORS (P) LTD. [230 TAXMAN 0063 (ALL. )] D. CHEMINVEST LIMITED V. CIT [ 378 ITR 33 (DELHI) ] E. CIT V. WI NSOME TEXTILE IND USTRIES LTD. [ 319 ITR 204 ( P&H) ] F. M/S. SIVA INDUSTRIES & HOLDINGS LTD. V. ACIT [ 145 TTJ (CHENNAI) 530] 3. LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO PARA NO. 5 OF THE ASSESSMENT ORDER AND SUBMITTED THAT ASSESSEE FURNISHED LETTER DATED 11.01.2016 STATING THAT IT HAD NOT RECEIVED ANY EXEMPT INCOME AND ALSO MADE SUOMOTU DISALLOWANCE OF .13,12,161/ - IN THE COMPUTATION OF INCOME AND T HEREFORE NO DISALLOWANCE U/S. 14A SHOULD BE MADE. HOWEVER, THE ASSESSING OFFICER IGNORING THE SUBMISSION OF THE ASSESSE E MADE DISALLOWANCE U/S. 14A OF THE ACT. 4. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS AN UNDISPUTED FACT THAT DURING TH IS ASSESSMENT YEAR ASSESSEE DID NOT RECEIVE ANY EXEMPT INCOME . WHEN NO EXEMPT INCOME IS RECEIVED BY THE ASSESSEE , WHETHER THERE CAN BE ANY DISALLOWANCE U/S. 14A HAS BEEN CONSIDERED BY THE COORDINATE BENCHES OF THIS TRIBUNAL AND IT HAS BEEN CONSISTENTLY HOLDING THAT IF THERE IS NO EX EMPT INCOME THERE SHOULD NOT BE ANY DISALLOWANCE U/S. 14A OF THE ACT . 3 ITA NO.498/MUM/2017 (A.Y: 2013 - 14) M/S. KANYAKUMARI BUILDERS PVT. LTD ., IN THE CASE OF ACIT V. M/S. BALLARPUR INDUSTRIES LTD., IN ITA.NO. 346 TO 379/NAG/2014 DATED 04.12.2015 THE NAGPUR BENCH OF THE TRIBUNAL FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST V. CIT (SUPRA) HELD AS UNDER: - 6. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH AND CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE PRECEDENCE CITED. AS FAR AS THE EXEMPTION FOR THE YEARS UNDER CONSIDERATION WERE CONCERNED, IT WAS AN ADMITTED FACTUAL POSITION THAT T HE AO HAS NOT MENTIONED ANY SUCH AMOUNT. MEANING THEREBY, THERE WAS NO EXEMPT INCOME EARNED BY THE ASSESSEE FOR THE YEARS UNDER CONSIDERATION. IN REPLY TO ONE OF OUR QUESTIONS, THE LEARNED AR, MR. K. P. DEWANI HAS ALSO MADE A STATEMENT AT BAR THAT NO DIVID END WAS DECLARED, HENCE, THERE WAS NO EARNING OF EXEMPTED DIVIDEND INCOME. HE HAS ALSO CLARIFIED THAT FOR THE PURPOSE OF INVOCATION OF THE PROVISIONS OF SECTION 14A OF THE IT ACT, THE AO HAS APPLIED THE FORMULA ONLY IN RESPECT OF DISALLOWANCE OF PROPORTION ATE INTEREST EXPENDITURE. THERE WAS NO ALLEGATION OF THE AO THAT THE EXEMPT INCOME WAS EARNED BY THE ASSESSEE. IN THE LIGHT OF THE UNDISPUTED FINDING ON FACTS, WE HAVE PERUSED THE DECISION OF THE HONBLE COURTS. WE MAY LIKE TO MENTION THAT A VIEW HAS BEEN EXPRESSED CONSISTENTLY THAT IF THERE IS NO EXEMPTED PROFIT THEN THERE IS NO QUESTION OF INVOCATION OF THE PROVISIONS OF SECTION 14A OF THE IT ACT BUT, WE HAVE ALSO CAREFULLY PERUSED THAT VERY DECISION OF THE TRIBUNAL NAMELY CHEMINVEST LTD. (SUPRA) WAS REVE RSED BY THE HONBLE DELHI HIGH COURT, COPY PLACED IN THE COMPILATION. THE HONBLE DELHI HIGH COURT IN ITA NO.749/2014 VIDE ORDER DATED 02 - 09 - 2015 TITLED AS CHEMINVEST LTD. VS CIT HAS DECIDED THE SUBSTANTIAL QUESTION OF LAW THAT WHETHER DISALLOWANCE U/S 1 4A OF THE ACT CAN BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAS BEEN EARNED OR RECEIVED BY THE ASSESSEE. THE FINAL VERDICT WAS AS UNDER: - 23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINBEFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDI TURE 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. 7. IN SHORT, IN A SITUATION WHEN THAT VERY ORDER OF THE TRIBUNAL WHICH WAS THE BASIS FOR INVOCATION OF THE PROVISIONS OF SECTION 14A OF THE IT ACT GOT REVERSED BY THE HONBLE DELHI HIGH COURT, HENCE, THE VERY SAID BASIS DO NOT SURVIVE ANY MORE. AS A RESULT, WE HEREBY CONFIRM THE FINDINGS OF THE LEARNED CIT (A) ON THIS ISSUE. WE HEREBY ALSO HOLD THAT IN VIEW OF THE NUMBERS OF DECISIONS ON THIS ISSUE IN FAVOUR OF THE TAX PAYERS, WE FIND NO FORCE IN THIS GROUND OF APPEAL OF THE REVENUE. THE SAME IS DISMISSED. 6. THIS DECISION OF THE TRIBUNAL HAS BEEN AFFIRMED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PR.CIT V. M/S. BALLARPUR INDUSTRIES LIMITED IN ITA.NO. 51 OF 2016 DATED 13.10.216 BY REJECTING THE APPEAL OF THE REVENUE AND HELD THAT NO SUBSTANTIAL QUESTION OF LAW ARISES. WHILE HOLDING SO THE HON'BLE HIGH COURT OBSERVED AS UNDER: - 4 ITA NO.498/MUM/2017 (A.Y: 2013 - 14) M/S. KANYAKUMARI BUILDERS PVT. LTD ., ON HEAR ING THE LEARNED COUNSEL FOR THE DEPARTMENT AND ON A PERUSAL OF THE IMPUGNED ORDERS, IT APPEARS THAT BOTH THE AUTHORITIES HAVE RECORDED A CLEAR FINDING OF FACT THAT THERE WAS NO EXEMPT INCOME EARNED BY THE ASSESSEE. WHILE HOLDING SO, THE AUTHORITIES RELIED ON THE JUDGMENT OF THE DELHI HIGH COURT IN INCOME TAX APPEAL NO. 749/2014, WHICH HOLDS THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE INCOME TAX ACT, 1961 ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF THE INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. THE INCOME TAX APPELLATE TRIBUNAL HELD THAT THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 WOULD NOT APPLY TO THE FACTS OF THIS CASE AS NO EXEMPT INCOME WAS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY ACTUAL INCOME WAS RECEIVED BY THE ASSESSEE AND THE SAME WAS INCLU DIBLE IN THE TOTAL INCOME. IN THE FACTS OF THE CASE, THE AUTHORITIES HELD THAT SINCE THE INVESTMENTS MADE BY THE ASSESSEE IN THE SISTER CONCERNS WERE NOT THE ACTUAL INCOME RECEIVED BY THE ASSESSEE, THEY COULD NOT HAVE BEEN INCLUDED IN THE TOTAL INCOME. THE FINDINGS OF FACTS RECORDED BY BOTH THE AUTHORITIES DO NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. SINCE NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS INCOME TAX APPEAL, THE INCOME TAX APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. 7. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THIS ASSESSMENT YEAR, THEREFORE IN THE ABSENCE OF ANY EXEMPT INCOME THERE SHALL NOT BE ANY DISALLOWANCE U/S. 14A OF THE ACT. THUS, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON'BLE J URISDICTIONAL HIGH COURT IN THE CASE OF PR.CIT V. M/S. BALLARPUR INDUSTRIES LIMITED (SUPRA), WE DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE U/S. 14A OF THE ACT. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . IN ORDER PRONOUNCED IN THE OPEN COURT ON THE 10 TH AUGUST , 2018 SD/ - SD/ - ( N.K. PRADHAN ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED / 0 8 / 2018 GIRIDHAR , S R. PS 5 ITA NO.498/MUM/2017 (A.Y: 2013 - 14) M/S. KANYAKUMARI BUILDERS PVT. LTD ., COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUM BAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM