M/s Assetz Infrastructure Private Limited , Bangalore V. Deputy Commissioner of Income Tax Circle-1(1)(1), Bangalore

ITA 563/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2283 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 29-10-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 20-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: B SUDHEENDRA
• Keywords: Question of law; Deemed dividend; Set aside
• Section: 2(22)(e); 14A

Judgement Text

ITA NO.563&983/BANG/2019 ASSETZ INFRASTRUCTURE PVT. LTD., BENGALURU IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.563/BANG/2019 ASSESSMENT YEAR: 2014-15 M/S. ASSETZ INFRASTRUCTURE PVT. LTD. 2/1, SECOND FLOOR, EMBASSY ICON ANNEXE INFANTRY ROAD BENGALURU-560 001 PAN NO : AAGCA7614K VS. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-1(1)(1) BENGALURU APPELLANT RESPONDENT ITA NO.983/BANG/2019 ASSESSMENT YEAR: 2014-15 DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-2(2) BENGALURU VS. M/S. ASSETZ INFRASTRUCTURE PVT. LTD. 2/1, SECOND FLOOR, EMBASSY ICON ANNEXE INFANTRY ROAD BENGALURU-560 001 APPELLANT RESPONDENT APPELLANT BY : SHRI B. SUDHEENDRA, A.R. RESPONDENT BY : SHRI SUNIL KUMAR AGARWAL, D.R. DATE OF HEARING : 29.10.2020 DATE OF PRONOUNCEMENT : 02.12.2020 ITA NO.563&983/BANG/2019 ASSETZ INFRASTRUCTURE PVT. LTD., BENGALURU PAGE 2 OF 11 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 28- 01-2019 PASSED BY LD CIT(A)-1, BENGALURU AND THEY R ELATE TO THE ASSESSMENT YEAR 2014-15. 2. THE ASSESSEE IS IN APPEAL IN RESPECT OF THE FOLLOWING ISSUES:- (A) DISALLOWANCE OF INTEREST EXPENSES U/S 36(1)(I II) OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT]. (B) ADDITION OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT PARTIALLY SUSTAINED BY LD CIT(A). REMAINING GROUNDS ARE EITHER GENERAL IN NATURE OR C ONSEQUENTIAL IN NATURE. 3. THE REVENUE IS IN APPEAL IN RESPECT OF THE F OLLOWING ISSUES: - (A) DISALLOWANCE MADE U/S 14A OF THE ACT. (B) PARTIAL RELIEF GRANTED IN RESPECT OF ADDITION OF DEEMED DIVIDEND U/ 2(22)(E) OF THE ACT. 4. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSIN ESS OF CONSTRUCTION, DEVELOPMENT AND SALE OF ALL TYPES OF HOUSING PROJECTS, COMMERCIAL PROJECTS AND RELATED ACTIVITIES. 5. THE FIRST ISSUE CONTESTED BY THE ASSESSEE R ELATES TO THE DISALLOWANCE OF INTEREST EXPENDITURE U/S 36(1)(III) OF THE ACT. THE AO NOTICED THAT THE ASSESSEE HAS TAKEN INTEREST BEARIN G LOANS FROM VARIOUS PERSONS TO THE TUNE OF RS.29.16 CRORES. IT WAS ALSO NOTICED THAT THE ASSESSEE HAS GIVEN INTEREST FREE LOANS TO RELATED CONCERNS TO THE TUNE OF RS.10.26 CRORES. FURTHER, HE ASSESSEE HAD ALSO CLAIMED INTEREST EXPENDITURE OF RS.1,54,10,932/-. HENCE T HE AO PROPOSED ITA NO.563&983/BANG/2019 ASSETZ INFRASTRUCTURE PVT. LTD., BENGALURU PAGE 3 OF 11 TO DISALLOWED A PART OF INTEREST EXPENDITURE. WHEN QUESTIONED, THE ASSESSEE OFFERED FOLLOWING EXPLANATIONS:- (A) THE INTEREST FREE LOANS WERE GIVEN TO SUBSIDIA RY COMPANIES, WHICH ARE ALSO ENGAGED IN THE REAL ESTATE DEVELOPME NT ACTIVITIES ONLY. HENCE IT IS IN FURTHERANCE OF BUSINESS ACTIV ITIES OF THE ASSESSEE. (B) THE ASSESSEE HAS GOT INTEREST FEE FUNDS IN TH E FORM OF ADVANCES FROM CUSTOMERS AND IT HAS BEEN USED TO G IVE INTEREST FEE LOANS. HENCE IT SHOULD BE PRESUMED TH AT INTEREST FREE FUNDS HAVE BEEN USED TO GIVE INTEREST FREE LOA NS. THE AO HELD THAT THAT LOAN GIVEN TO/INVESTMENT MADE IN SUBSIDIARIES CANNOT BE TERMED AS A BUSINESS ACTIVITY OF THE ASSE SSEE. THE ASSESSEE COULD NOT PROVE THE NEXUS BETWEEN THE BUSINESS PURP OSE AND ADVANCING OF LOANS. ACCORDINGLY, THE AO REJECTED T HE CONTENTIONS OF THE ASSESSEE. ACCORDINGLY, HE DISALLOWED PROPORTIO NATE INTEREST EXPENSES OF RS.43,13,634/-. 5.1 THE LD CIT(A) ALSO HELD THAT THERE IS NO BU SINESS PURPOSE IN GIVEN INTEREST FREE ADVANCES TO THE SUBSIDIARIES. HE ALSO NOTICED THAT THE ASSESSEE HAS INVESTED FUNDS IN JDA PROJECTS, IN PURCHASE OF LANDS ETC., AND HENCE THE INTEREST FREE ADVANCES FROM CUS TOMERS COULD HAVE BEEN USED FOR THE ABOVE SAID PURPOSES. SINCE THE A SSESSEE WAS HAVING SMALL AMOUNT OF SHARE CAPITAL, THE LD CIT(A) TOOK THE VIEW THAT THE INTEREST BEARING LOANS HAVE BEEN DIVERTED TO THE SUBSIDIARY COMPANIES IN THE FORM OF INTEREST FREE LOANS. ACCO RDINGLY, HE CONFIRMED THE ADDITION MADE BY THE AO. 5.2 WE HEARD THE PARTIES ON THIS ISSUE AND PERU SED THE RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E INTEREST FREE ADVANCES RECEIVED FROM CUSTOMERS WAS AVAILABLE WITH THE ASSESSEE TO ITA NO.563&983/BANG/2019 ASSETZ INFRASTRUCTURE PVT. LTD., BENGALURU PAGE 4 OF 11 THE TUNE OF RS.16.96 CRORES AS NOTICED BY LD CIT(A) AT PAGE 28 OF HIS ORDER, I.E., RS.14.22 CRORES UNDER SCHEDULE V AND R S.2.74 CRORES UNDER SCHEDULE X, BOTH AGGREGATING TO RS.16.96 CROR ES. THE INTEREST FREE LOANS GIVEN TO SUBSIDIARY COMPANIES STAND AT R S.10.26 CRORES. HENCE THE ASSESSEE HAS CONTENDED THAT THE INTEREST FREE FUNDS AVAILABLE WITH IT HAS BEEN USED TO MAKE INTEREST FR EE LOANS TO THE SUBSIDIARIES. THE LD A.R PLACED HIS RELIANCE ON TH E DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD (2014)(49 TAXMANN.COM 335)(BOM). FOLLOWING OBSERVA TIONS MADE BY THE HONBLE HIGH COURT WOULD SHOW THAT, IF THE OWN FUNDS AND INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE I S MORE THAN THE INVESTMENT IN TAX FREE SECURITIES, THEN IT SHOULD B E PRESUMED THAT THE SAID INVESTMENTS HAVE BEEN MADE OUT OF INTEREST FRE E FUNDS AVAILABLE WITH THE ASSESSEE:- 5. WE FIND THAT THE FACTS OF THE PRESENT CASE ARE SQUA RELY COVERED BY THE JUDGMENT IN THE CASE OF RELIANCE UTI LITIES & POWER LTD. (SUPRA)**. THE FINDING OF FACT GIVEN BY THE IT AT IN THE PRESENT CASE IS THAT THE ASSESSEE'S OWN FUNDS AND OTHER NON -INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENT IN THE TAX-FREE SECURITIES. THIS FACTUAL POSITION IS NOT ONE THAT I S DISPUTED. IN THE PRESENT CASE, UNDISPUTEDLY THE ASSESSEE'S CAPITAL, PROFIT RESERVES, SURPLUS AND CURRENT ACCOUNT DEPOSITS WERE HIGHER THAN THE INVESTMENT IN THE TAX-FREE SECURITIES. IN VIEW OF THIS FACTUAL POSITION, AS PER THE JUDGMENT OF THIS COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. (SUPRA), IT WOULD HAVE TO BE PRESUMED THAT THE INVESTMENT MADE BY THE ASSESSEE WOULD BE OUT OF THE INTEREST-FREE FUNDS AVAILABLE WITH THE ASSESSEE. WE THEREFORE, ARE UNABLE TO AGREE WITH THE SUBMISSION OF MR SURES H KUMAR THAT THE TRIBUNAL HAD ERRED IN DISMISSING THE APPEA L OF THE REVENUE ON THIS GROUND. WE DO NOT FIND THAT QUESTIO N (A) GIVES RISE TO ANY SUBSTANTIAL QUESTION OF LAW AND IS THER EFORE REJECTED. ITA NO.563&983/BANG/2019 ASSETZ INFRASTRUCTURE PVT. LTD., BENGALURU PAGE 5 OF 11 (** 313 ITR 340) IT MAY BE NOTICED THAT THE ABOVE SAID DECISION WAS MADE IN THE CONTEXT OF THE DISALLOWANCE MADE U/S 14A OF THE ACT . HOWEVER, THE HONBLE BOMBAY HIGH COURT HAS FOLLOWED THE DECISION RENDERED BY IT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD, WH EREIN THE QUESTION WAS DISALLOWANCE MADE U/S 36(1)(III) OF THE ACT. IT MAY ALSO BE NOTICED THAT THE DECISION RENDERED IN THE CASE OF H DFC BANK LTD (SUPRA) HAS BEEN FOLLOWED BY THE JURISDICTIONAL HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MICRO LABS LTD (2 017)(79 TAXMANN.COM 365)(KAR). THE DECISION RENDERED BY HON BLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES POWER LTD (SUPRA) HAS BEEN FOLLOWED BY THE HONBLE KARNATAKA HIGH COURT I N THE CASE OF CIT VS. BRINDAVAN BEVERAGES (P) LTD (2017)(88 TAXMANN.C OM 477)(KAR.) IN THE CONTEXT OF DISALLOWANCE MADE U/S 36(1)(III) OF THE ACT. 5.3 SINCE THE INTEREST FREE FUNDS AVAILABLE WI TH THE ASSESSEE IS MORE THAN THE INTEREST FREE LOANS GIVEN TO SUBSIDIA RIES, IT SHOULD HAVE TO BE PRESUMED THAT THE LOANS HAVE BEEN GIVEN OUT O F INTEREST FREE FUNDS. ACCORDINGLY, FOLLOWING THE DECISION RENDERE D BY THE HONBLE JURISDICTIONAL KARNATAKA HIGH COURT (REFERRED SUPRA ), WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THIS DISALLOWANCE. 6. THE NEXT ISSUE RELATES TO THE ADDITION MADE BY THE AO U/S 2(22)(E) OF THE ACT. SINCE THE LD CIT(A) HAS GIVEN PARTIAL RELIEF IN RESPECT OF THIS ADDITION, BOTH THE PARTIES ARE IN A PPEAL BEFORE US ON THIS ISSUE. 6.1 THE AO NOTICED THAT THE ASSESSEE HAS RECEI VED LOAN OF RS.8,99,11,142/- FROM ITS SUBSIDIARY NAMED M/S ASSE TZ PROPERTY SERVICES P LTD, IN WHICH THE ASSESSEE HELD 99.99% O F SHARES. THE AO ITA NO.563&983/BANG/2019 ASSETZ INFRASTRUCTURE PVT. LTD., BENGALURU PAGE 6 OF 11 NOTICED THAT M/S ASSETZ PROPERTY SERVICES P LTD HAD RESERVES TO THE TUNE OF RS.22,66,94,775/- AS AT THE BEGINNING OF TH E YEAR, WHICH INCLUDED SURPLUS P & L BALANCE OF RS.4,42,41,971/ -. HENCE THE AO TOOK THE VIEW THAT THE PROVISIONS OF SEC.2(22)(E ) RELATING TO DEEMED DIVIDEND IS APPLICABLE TO THE LOAN TAKEN BY THE ASS ESSEE. 6.2 THE ASSESSEE SUBMITTED THAT IT IS HAVING RU NNING ACCOUNT WITH ITS SUBSIDIARY COMPANY (REFERRED TO BY THE ASSESSEE AS ASSETZ PROPERTY MANAGEMENT SERVICES P LTD (APMS).). THE L D A.R SUBMITTED THAT THIS SUBSIDIARY COMPANY WAS EARLIER KNOWN AS BEARING POINT PROPERTY SERVICES P LTD. HENCE ALL THE THREE NAMES REFER TO THE SAME SUBSIDIARY. THERE WERE FINANCIAL TRANSACTIONS OF B OTH DEPOSITS AND RECEIPTS IN THE RUNNING ACCOUNT. THE ASSESSEE HAD R ECEIVED ADVANCES OF RS.5,11,38,000/- AND PAID ADVANCES OF RS.5,20,91 ,533/-. IT WAS SUBMITTED THAT THESE TRANSACTIONS WERE IN FURTHERAN CE OF BUSINESS OBJECTIVE AND BUSINESS NEEDS OF BOTH THE COMPANIES. ACCORDINGLY, IT WAS SUBMITTED THAT THE PROVISIONS OF SEC.2(22)(E) A RE NOT ATTRACTED. THE ASSESSEE PLACED ITS RELIANCE ON THE DECISION RE NDERED BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF BAGMANE CONSTRU CTIONS (P) LTD (2015)(57 TAXMANN.COM 120)(KAR) AND CIT VS. M/S SHR EE BALAJI GLASS MANUFACTURING P LTD (2016)(72 TAXMANN.COM 118)(CAL. ) 6.3 THE AO DID NOT ACCEPT THE CONTENTIONS OF TH E ASSESSEE. AS NOTICED EARLIER, THE RESERVES & SURPLUS OF RS.22. 66 CRORES INCLUDED SURPLUS IN P & L A/C OF RS.4,42,41,971/-. ACCORD INGLY, THE AO HELD THAT THE LOAN TO THE EXTENT OF RS.4,42,41,971/- IS ASSESSABLE AS DEEMED DIVIDEND INCOME U/S 2(22)(E) OF THE ACT. AC CORDINGLY HE ASSESSED THE SAME AS DEEMED DIVIDEND. 6.4 THE LD CIT(A) NOTICED THAT THE ASSESSEE HAS RECEIVED LOANS FROM APMS TO THE EXTENT OF RS.5,11,38,000/- AND REPAID A SUM OF ITA NO.563&983/BANG/2019 ASSETZ INFRASTRUCTURE PVT. LTD., BENGALURU PAGE 7 OF 11 RS.4,99,88,354/-. ACCORDINGLY, THE LD CIT(A) HELD THAT THE NET AMOUNT OF RS.11,49,646/- ONLY AS DEEMED DIVIDEND U/ S 2(22)(E) OF THE ACT. AGGRIEVED, BY THE DECISION SO RENDERED BY LD CIT(A), BOTH THE PARTIES ARE IN APPEAL BEFORE US. 6.5 WE NOTICE THAT THE DECISION TAKEN BY LD CI T(A) TO GIVE SET OFF AMOUNTS REPAID IS AGAINST THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF MISS P SARADA VS. CIT (229 ITR 444)(SC). IN THE ABOVE SAID CASE, HONBLE SUPREME COURT HELD THAT T HE LOAN OR ADVANCE TAKEN FROM THE COMPANY MAY HAVE BEEN ULTIMA TELY REPAID OR ADJUSTED BUT THAT WILL NOT ALTER THE FACT THAT THE ASSESSEE, IN THE EYE OF LAW, HAD RECEIVED DIVIDEND FROM THE COMPANY DURI NG THE RELEVANT ACCOUNTING PERIOD. HENCE THE ORDER PASSED BY LD C IT(A) ON THIS ISSUE REQUIRES TO BE SET ASIDE. 6.6 THE LD A.R CONTENDED THAT THE RESERVES & SU RPLUS OF M/S ASSETZ PROPERTY MANAGEMENT SERVICES P LTD INCLUDED SHARE PREMIUM ACCOUNT AND THE SHARE PREMIUM AMOUNT SHALL NOT FALL UNDER THE DEFINITION OF ACCUMULATED PROFITS. HOWEVER, WE H AVE NOTICED EARLIER THAT THE AO HAS ASSESSED THE SURPLUS IN P & L A/C OF RS.4,42,41,971/- ONLY AS DEEMED DIVIDEND U/S 2(22)( E) OF THE ACT, I.E., THE AO HIMSELF HAS NOT TAKEN SHARE PREMIUM AC COUNT AS PART OF ACCUMULATED PROFITS. 6.7 THE LD A.R SUBMITTED THAT THE OPENING BALAN CE OF SURPLUS IN P & L A/C WAS RS.4,42,41,971/-. DURING THE YEAR E NDING 31.3.2013, I.E., IN THE IMMEDIATELY PRECEDING PREVIOUS YEAR, T HE ASSESSEE HAS CREDITED PROFIT AND LOSS ACCOUNT WITH DEFERRED TAX LIABILITY REVERSAL AMOUNT OF RS.8,59,35,099/-. HE SUBMITTED THAT DE FERRED TAX LIABILITY AMOUNT IS A NOTIONAL RESERVE, WHICH IS C REATED IN COMPLIANCE WITH THE REQUIREMENTS OF ACCOUNTING STANDARDS. ACC ORDINGLY, HE ITA NO.563&983/BANG/2019 ASSETZ INFRASTRUCTURE PVT. LTD., BENGALURU PAGE 8 OF 11 SUBMITTED THAT THE DEFERRED TAX LIABILITY AMOUNT AND ITS REVERSAL SHOULD BE IGNORED FOR DETERMINING ACCUMULATED PROF ITS. HE SUBMITTED THAT THE MUMBAI BENCH OF TRIBUNAL HAS HEL D IN THE CASE OF ACIT VS. SHRI NARAYAN J PAGRANI (ITA NO.7480/MUM /2011 DATED 13-08-2014) THAT THE DEFERRED TAX LIABILITY AMOUNT IS A NOTIONAL RESERVE AND IT NEED NOT BE DEDUCTED FROM THE PROFI TS OF THE YEAR AND HENCE COULD NOT BE ALLOWED TO BE DEDUCTED FROM ACC UMULATED RESERVES. ACCORDINGLY, IF RS.8,59,35,009/- IS EXC LUDED FROM THE SURPLUS IN P & L A/C AS ON 31.3.2013, THE ABOVE S AID COMPANY SHALL NOT HAVE ANY ACCUMULATED PROFITS. HENCE THE ADDI TION MADE BY AO U/S 2(22)(E) OF THE ACT IS LIABLE TO BE DELETED. 6.8 ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE TERM ACCUMULATED PROFITS HAVE BEEN DEFINED UNDER EXPLA NATION 2 TO SEC.2(22)(E) OF THE ACT. THE SAID DEFINITION DOES NOT ALLOW DEDUCTION OF ANY AMOUNT FROM ACCUMULATED PROFITS AS CONTENDED BY LD A.R. 6.9 ON A CAREFUL CONSIDERATION OF THE ARGUMEN TS OF LD A.R, WE ARE OF THE VIEW THAT THE SAME IS LIABLE TO BE REJECTED ON TWO GROUNDS, VIZ., (A) THE EXPRESSION ACCUMULATED PROFITS WOULD RE FER TO THE RESERVES AND SURPLUS ACCUMULATED OVER THE YEARS A S PER THE ACCOUNTS PREPARED UNDER THE COMPANIES ACT. FURTHER, THE TERM ACCUMULATED PROFITS HAS BEEN DEFINED UNDER EXPLANATION 2 TO SEC.2(22)(E) OF THE ACT. AS SUBMI TTED BY LD D.R, THE SAID DEFINITION DOES NOT PROVIDE FOR EXCLU SION OF ANY AMOUNT FROM THE ACCUMULATED PROFITS. (B) REVERSAL OF DEFERRED TAX LIABILITY IS NULLIFY ING THE EFFECT OF PROVISION CREATED EARLIER, MEANING THEREBY, THE NET MONETARY EFFECT WOULD BE NIL, WHEN IT IS REVERSED. FOR EXAM PLE, IF RS.100/- IS TRANSFERRED TO DEFERRED TAX LIABILITY I N ANY OF THE EARLIER YEARS AND IF THE SAME IS REVERSED NOW, THEN BOTH THE ITA NO.563&983/BANG/2019 ASSETZ INFRASTRUCTURE PVT. LTD., BENGALURU PAGE 9 OF 11 TRANSACTIONS GET NEUTRALISED AND HENCE THE SAME SHA LL NOT HAVE ANY EFFECT ON ACCUMULATED PROFITS. ACCORDINGLY , NO ADJUSTMENT NEED BE MADE IN THE YEAR OF REVERSAL. 6.10 ACCORDINGLY, THE ACCUMULATED PROFIT AMOUNT DETERMINED BY THE AO AT RS.4,42,41,971/- IS JUSTIFIED AND ACCORDI NGLY WE HOLD THAT THE AO WAS JUSTIFIED IN ASSESSING THE SAME AS DEEME D DIVIDEND U/S 2(22)(E) OF THE ACT. ACCORDINGLY, WE REVERSE THE O RDER PASSED BY LD CIT(A) ON THIS ISSUE. 7. THE REMAINING ISSUE CONTESTED BY THE REVENUE RELATES TO THE ADDITION MADE U/S 14A OF THE ACT. 7.1 THE AO NOTICED THAT THE ASSESSEE HAS MADE I NVESTMENT OF RS.14,72,66,000/-. HOWEVER, IT DID NOT DISALLOW AN Y AMOUNT IN TERMS OF SEC.14A OF THE ACT R.W.R 8D OF IT RULES. THE AS SESSEE SUBMITTED THAT IT DID NOT EARN ANY DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION AND HENCE NO EXEMPTION WAS CLAIMED. ACCORDINGLY IT SUBMITTED THAT NO DISALLOWANCE U/S 14A IS CALLED FO R. THE ASSESSEE PLACED ITS RELIANCE ON THE DECISION RENDERED BY CO- ORDINATE BENCH IN THE CASE OF M/S KINGFISHER FINVEST INDIA LTD VS. AD DL CIT (ITA NO.1368/B/2012 DATED 17.10.2014), CIT VS. M/S SHIVA M MOTORS (P) LTD (2014)(272 CTR 277)(ALL). THE AO DID NOT ACCEP T THE CONTENTIONS OF THE ASSESSEE AND DISALLOWED A SUM OF RS.44,89,93 4/- U/S 14A OF THE ACT. 7.2 HOWEVER, THE LD CIT(A) ACCEPTED THE CONTENT IONS OF THE ASSESSEE AND ACCORDINGLY, HE DELETED THE DISALLOWANCE MADE U /S 14A OF THE ACT BY FOLLOWING THE DECISION RENDERED BY CO-ORDINA TE BENCH IN THE CASE OF M/S KINGFISHER FINVEST INDIA LTD (SUPRA). REVENUE IS AGGRIEVED. ITA NO.563&983/BANG/2019 ASSETZ INFRASTRUCTURE PVT. LTD., BENGALURU PAGE 10 OF 11 7.3 WE HEARD THE PARTIES ON THIS ISSUE. WE NOT ICE THAT THE HONBLE DELHI HIGH COURT, IN THE CASE OF CHEMINVEST LTD VS. CIT (2015)(61 TAXMANN.COM 118)(DELHI), HELD AS UNDER:- 23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREI NBEFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT T HE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE ACT ENVISAGES THAT THERE SHOULD BE AN AC TUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INC OME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISAL LOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME . IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCO ME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. IDENTICAL VIEW HAS BEEN EXPRESSED BY HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CHETTINAD LOGISTICS (P) LTD (20 17)(80 TAXMANN.COM 221)(MAD). WE ALSO NOTICE THAT THE APPEAL FILED BE FORE THE HONBLE SUPREME COURT BY THE REVENUE IN THE CASE OF CHETTIN AD LOGISTICS (P) LTD HAS BEEN DISMISSED ON THE GROUND OF DELAY AS WE LL AS ON MERITS. IT IS REPORTED IN (2018)(95 TAXMANN.COM 250)(SC). 7.4 IN VIEW OF THE ABOVE, WE DO NOT FIND ANY I NFIRMITY IN THE DECISION TAKEN BY LD CIT(A) ON THIS ISSUE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE AND REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND DEC, 2020. SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 2 ND DEC, 2020. VG/SPS ITA NO.563&983/BANG/2019 ASSETZ INFRASTRUCTURE PVT. LTD., BENGALURU PAGE 11 OF 11 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.