Altimetrik India Private Limited, Bangalore V. Assistant Commissioner of Income Tax, circle -1(1)(1) , Bangalore

ITA 592/BANG/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6954 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 26-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARINDER KUMAR
• Assessee Lawyers: VAIDEHI G
• Keywords: Earning of tax free income; Revised return; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO. 592 /BANG/201 9 ASSESSMENT YEARS : 20 13 - 14 M/S. ALTIMETRIK INDIA PRIVATE LTD., (IN THE CASE OF ERSTWHILE SYNOVA INNOVATIVE TECHNOLOGIES PRIVATE LTD.,) SY. NO.7P AND 93P, ELECTRONIC CITY, INDUSTRIAL AREA, BEGUR HOBLI TALUK, BANGALORE 560 100. PAN : AAFCS 4915 A VS. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 1(1)(1), BMTC DEPOT BUILDING, 80 FEET ROAD, 6 TH BLOCK, KORAMANGALA, BANGALORE 560 095. APPELLANT RESPONDENT ASSESSEE BY : S MT. VAIDEHI. G. , CA REVENUE BY : SHRI. HARINDER KUMAR , CIT DATE OF HEARING : 15 .0 7 .2019 DATE OF PRONOUNCEMENT : 31 .0 7 .2019 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 12, BANGALORE, DATED 31.01.2019 FOR ASSESSMENT YEAR 2013-14.. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UNDER:- 2.1 THE ASSESSEE, A COMPANY ENGAGED IN DEPUTING PROFESSIONALS FOR COMPUTER RELATED SOFTWARE SERVICES, ITES AND PLACEMENT SERVICES, FILED ITS RETURN ITA NO. 592/BANG/2019 PAGE 2 OF 6 FOR ASSESSMENT YEAR 2013-14 ON 28.11.2013. SUBSEQUENTLY, A REVISED RETURN WAS FILED ON 28.11.2013 DECLARING A LOSS OF RS.(-) 2,89,68,291/-. THE CASE WAS TAKEN UP FOR SCRUTINY FOR THIS ASSESSMENT YEAR AND THE ASSESSMENT WAS CONCLUDED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) VIDE ORDER DATED 04.03.2016, WHEREIN THE ASSESSEES LOSS WAS DETERMINED AT RS.(-)2,58,52,654/-; IN VIEW OF, INTER ALIA, DISALLOWANCE UNDER SECTION 14A OF THE ACT R.W.RULE 6D OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES) OF AN AMOUNT OF RS.22,21,686/- [I.E., RS.10,04,359/- UNDER RULE 8D(2)(II) AND RS.12,17,327/- UNDER RULE 8D(2)(III)]. ON APPEAL, THE AFORESAID DISALLOWANCE UNDER SECTION 14A R.W.RULE 8D(2)(II) AND 8D(2)(III) OF THE RULES WAS UPHELD VIDE THE IMPUGNED ORDER DATED 31.01.2019. 3.1 AGGRIEVED BY THE ORDER OF CIT(A)-12, BANGALORE, DATED 30.01.2019 FOR ASSESSMENT YEAR 2013-14, THE ASSESSEE HAS PREFERRED THIS APPEAL WHEREIN IT HAS RAISING THE FOLLOWING GROUNDS:- 3.2 BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. IN THESE CIRCUMSTANCES, IT IS CONTENDED THAT THE PROVISIONS OF SECTION 14A OF THE ACT ARE ITA NO. 592/BANG/2019 PAGE 3 OF 6 NOT ATTRACTED AND THEREFORE NO DISALLOWANCE COULD HAVE BEEN MADE AS PER PROVISIONS OF SECTION 14A OF THE ACT. IN SUPPORT OF THIS PROPOSITION THE LD. AR FOR THE ASSESSEE PLACED RELIANCE, INTER ALIA, ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- (I) PCIT VS. GVK PROJECT AND TECHNICAL SERVICES LTD., (2019) 106 TAXMANN.COM 181 (SC); (II) M/S. CCI LTD., V JCIT, UDUPI, IN ITA NO. 359/2011(KARNATAKA HC); (III) CHEMINVEST LTD. V CIT (2015) 378 ITR 33 (DELHI HC); (IV) TANGLIN RETAIL REALITY DEVELOPMENTS PRIVATE LIMITED V DCIT IN ITA NO. 265/BANG/2016 DATED 31.03.2017; 3.3 PER CONTRA, THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW IN MAKING AND CONFIRMING THE DISALLOWANCE U/S. 14A R.W. RULE 8D(2)(III) OF THE ACT. 3.4.1 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRECENDENTS CITED (SUPRA). IT IS A MATTER OF RECORD AND NOT DISPUTED THAT THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME IN THE YEAR UNDER CONSIDERATION AND THIS FACT IS ADMITTED BY THE LEARNED CIT(A) IN THE IMPUGNED ORDER. THE APPLICABILITY OF THE PROVISIONS OF SECTION 14A OF THE ACT IS IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO THE EARNING OF INCOME NOT INCLUDIBLE IN TOTAL INCOME. A PLAIN READING OF THE PROVISIONS OF SECTION 14A OF THE ACT ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME. THEREFORE, THE PROVISIONS OF SECTION 14A OF THE ACT WILL NOT APPLY WHERE NO EXEMPT INCOME IS ITA NO. 592/BANG/2019 PAGE 4 OF 6 RECEIVED OR RECEIVABLE BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. THIS PROPOSITION WAS UPHELD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT [(2015) 378 ITR 33 (DEL) VIDE ORDER DATED 02.09.2015; WHEREIN AT PARA 23 THEREOF THEIR LORDSHIPS HAVE HELD 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 OF THE PURPOSE OF DISALLOWING ANY EXPENDITURE 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. 3.4.2 IN THE CASE ON HAND ADMITTEDLY, THE FACTUAL POSITION WAS THAT THE ASSESSEE HAD NOT EARNED OR RECEIVED ANY EXEMPT INCOME IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2013-14. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, THE RATIO OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. (SUPRA) WOULD APPLY SQUARELY IN THE CASE ON HAND. THE HONBLE HIGH COURT IN THE AFORESAID JUDGEMENT HELD THAT NO DISALLOWANCE UNDER SECTION 14A OF THE ACT COULD BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAD BEEN EARNED OR RECEIVED BY THE ASSESSEE. IT WAS HELD THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE ACT ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME DURING THE ITA NO. 592/BANG/2019 PAGE 5 OF 6 RELEVANT PREVIOUS YEARS FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID EXEMPT INCOME. A SIMILAR VIEW HAS BEEN TAKEN BY A CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF TANGLIN RETAIL REALITY DEVELOPMENTS PRIVATE LIMITED V DCIT IN ITA NO. 265/BANG/2016 DATED 31.03.2017, CONSIDERING THE DECISIONS OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CCI LTD. (SUPRA) AND OF ITAT, MUMBAI IN FAIR EXPORTS (INDIA) P. LTD.(SUPRA). THEREFORE, IN THE FACTUAL MATRIX OF THE CASE ON HAND, AS DISCUSSED ABOVE, WE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE HONBLE DELHI HIGH COURT IN THE CASE CHEMINVEST LTD. (SUPRA) AND THE CO-ORDINATE BENCH IN TANGLIN RETAIL REALITY DEVELOPMENTS PRIVATE LIMITED (SUPRA), HOLD THAT NO DISALLOWANCE UNDER SECTION 14A OF THE ACT CAN BE MADE IN THE CASE ON HAND FOR THE ASSESSMENT YEAR 2013-14 SINCE THE ASSESSEE HAD NOT EARNED OR RECEIVED ANY EXEMPT INCOME IN THIS YEAR AND THEREFORE DIRECT THE AO TO DELETE THE DISALLOWANCE OF EXPENDITURE MADE UNDER SECTION 14A OF THE ACT. CONSEQUENTLY, THE ASSESSEES GROUNDS AT S.NOS. 1 TO 5 ARE ALLOWED. 12. IN THE RESULT, THE ASSESSEES APPEALS FOR ASSESSMENT YEAR 2013-14 IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2019. SD/- SD/- (N. V. VASUDEVAN) (JASON P. BOAZ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE. DATED: 31 ST JULY, 2019. /NS/* ITA NO. 592/BANG/2019 PAGE 6 OF 6 COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.