DCIT Circle-25(2), New Delhi V. Transcend Infrastructure Pvt. Ltd., Gurgaon

ITA 5178/DEL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1995 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 05-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Business expenditure; Earning of tax free income; Retrospective amendment; Question of law; Capital expenditure; Rule 8D
• Section: 10; 14A; 115JB; 192; 10(33); 10(33); 119

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’, NEW DELHI BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.5178/Del/2019 (Assessment Year : 2014-15) DCIT Circle – 25(2) New Delhi - 110002 PAN No. AACCT 7115 Q Vs. Transcend Infrastructure Pvt. Ltd. Plot No. B-15, FF, Sec-32, Gurgaon-122 001 (APPELLANT) (RESPONDENT) Assessee by --None-- Revenue by Shri Surender Pal, CIT-D.R. Date of hearing: 29.06.2022 Date of Pronouncement: 29.06.2022 ORDER PER ANIL CHATURVEDI, AM : The present appeal filed by the Revenue is directed against the order dated 29.03.2019 of the Commissioner of Income Tax (Appeals)-28, New Delhi relating to Assessment Year 2014-15. 2. The relevant facts as culled from the material on records are as under : 3. The assessee is a company stated to be engaged in the business of wireless communications site leasing business. 2 Assessee electronically filed its return of income for A.Y. 2014-15 on 29.11.2014 declaring Nil taxable income. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dated 31.12.2016 and the total taxable income was determined at Rs.8,83,89,435/- and Rs.12,39,27,096/- as Book Profit u/s 115JB of the Act. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 29.03.2019 granted substantial relief to the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal and has raised the following grounds: “1. On the facts and in the circumstances of the case and in law the Ld CIT(A) has erred in deleting the addition of Rs.11,37,85,368/- u/s 14A of the Act. 2. The appellant craves, leave or reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of appeal.” 4. On the date of hearing, none appeared on behalf of the assessee nor any adjournment application was filed. The case file further reveal that the notice of hearing was sent to the assessee at the address stated in Form No.36 but the same was returned undelivered by the postal authorities with remark “Left”. Assessee has not placed on record its current address. Considering the aforesaid facts and the fact that the issue has been decided by CIT(A) after considering the various decisions cited therein including the decision of Jurisdictional High Court, we proceed to dispose of the appeal ex parte qua the assessee and after considering the submissions made by the Learned DR. 3 5. During the course of assessment proceedings, AO noticed that assessee had made investment of Rs.2275,70,73,582/- in the equity shares of M/s. ATC Telecom Tower Corporation Private Ltd. The assessee was asked to justify about the applicability of the provision u/s 14A of the Act to which assessee made its submissions and inter alia stated that the investment have been made from non interest bearing funds and no exempt income has been earned by the assessee. The submissions of the assessee was not found acceptable to AO. AO thereafter by applying the provision of Rule 8D r.w.s 14A worked out the disallowance u/s 14A of the Act at Rs.11,37,85,368/-. 6. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who by following the various decisions cited in his order including the decision of Hon’ble Jurisdictional High Court noted that since the assessee has not earned any exempt income and therefore no disallowance u/s 14A of the Act is called for. He further noted that the legal requirements of Section 14A of the Act have not been fulfilled by the AO and he therefore deleted the disallowance made by AO. The relevant findings of CIT(A) reads as under: 3.2 I have considered the facts of the case, basis of disallowance made by the AO and submissions of appellant. As it is clear from the assessment order as well as submissions of appellant that the assessee has not earned any exempt income nor any expenditure against it has been claimed by it which can be made subject matter of Section 14A of the Act. However, AO has taken into consideration the investment by appellant during the year as well as the preceding year and by applying the provisions of Section 14A of the Act r.w. Rule 8D and mechanically worked out the disallowance at Rs. 11,37,85,368/-. During the 4 appellate proceedings, for not disallowing any expenditure, appellant has given its submissions. In such situation, when the issue has been decided by various Courts, firstly we have to go through the ratios of decisions of jurisdictional High Court which are binding on us. In the case CIT vs I.P. Support Services India (P) Ltd. reported in 378 ITR 240, while dealing this issue, Hon'ble jurisdictional High Court has held that it is erroneous premise that the invocation of Section 14A is automatic and comes into operation as soon as the dividend income is claimed as exempt. It is further held that for making disallowance u/s 14A, the pre- condition is satisfaction of assessing officer that voluntary disallowance made by assessee is unreasonable and unsatisfactory and in absence of such satisfaction, disallowance is not justified. It is further held by Hon'ble Court in another case namely CIT Vs Om Prakash Khaitan 376 ITR 390 that even if satisfaction is recorded, no disallowance can be made if no nexus between expenditure incurred and income not forming part of total income has been established by AO. In the case Cheminvest Ltd. vs. CIT 378 ITR 33, Hon’ble Court, after reversing the decision of Spl. Bench, opined that if no exempt income was earned by the assessee in the relevant assessment year and since the genuineness of expenditure incurred was not in doubt, no disallowance could be made u/s 14A of the Act. In a decision dated 16.08.2017 in the case of II & FS Energy Development Vs. Pr. CIT-04 ITA No. 520/2017, Jurisdictional High Court has again deliberated on the issue and after discussing the decision of CIT Vs. Rajendra Prasad Moody of Hon'ble Supreme Court & CBDT Circular No. 5/2014 dated 11.02.2014, along with the other decisions, has affirmed the findings of its earlier decision in the case of Cheminvest Vs. CIT 378 ITR 33 and held that no disallowance u/s 14A of the Act is called for in the year in which assessee has not earned income which was exempt. It is further held by Hon'ble Court that the CBDT Circular dated 11.02.2014 cannot override the express provision of Section 14A r.w. Rule 8D of the IT Act. There are several other decisions of different Courts and Tribunals, wherein it has been held that if there is no exempt income claimed by assessee, no disallowance of any expenditure can be made u/s 14A of the Act. Now, in the light of these decisions, the case of appellant has to be examined. First and foremost, the AO should have a given the details of any exempt income earned by appellant and expenditure incurred against it with cogent reasons by rejecting the claim of assessee before computing the disallowance u/s 14A of the Act. However, the same has not been done. He has given only a general observation 5 about the applicability of provisions of section 14A in the assessment order in the case of appellant and mechanically computed the disallowance on the basis of investment made by appellant in the shares during and preceding year. The AO has also not been able to establish any nexus between the exempt income, if any earned by appellant and any expenditure incurred to earn this income. He has simply computed the disallowance only on the ground that no expenditure had been disallowed by appellant in its computation against the receipts not forming part of total income whereas there are no such receipts which are part of total income. In such situation, the legal requirements of Section 14A of the Act are not fulfilled by the AO for making any disallowance as per this Section as held by Hon'ble Jurisdictional High Court in different cases, as mentioned above. Hence, the action of AO is not justified and sustainable. In view of this discussion, the disallowance of Rs. 11,37,85,368/- made by AO is hereby deleted and grounds taken by appellant are allowed.” 7. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 8. Before us, Learned DR supported the order of AO and further made following written submissions : “Submission in respect of Section 14A of the Income tax:- Section 14A of the Income-tax Act, 1961 ('Act’) was inserted into the Income Tax Act, 1961 vide Finance Act 2001, with retrospective application from 1.4.1962. It provides for disallowance of expenditure in relation to income not “includible” in total income. Over a period of time, there have been several cases decided