ACIT, Circle- 6(1), New Delhi V. Clix Finance India Unlimited, New Delhi

ITA 6843/DEL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3752 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 15-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANGEETA YADAV
• Keywords: Transfer pricing; International transaction; Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘B’: NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER ITA No.6843/DEL/2019 [Assessment Year: 2015-16] Asst. Commissioner of Income Tax, Circle-6(1), Room No.390, 3 rd Floor, C.R. Building, I.P. Estate, New Delhi-110001 Vs M/s Clix Finance India Pvt. Ltd. 4 th Floor, Kailash Building, K.G. Marg, Connaught Place, New Delhi-110001 PAN-AAACG0239L Revenue Assessee Revenue by Ms. Sangeeta Yadav, Sr.DR Assessee by Sh. Rohit Garg, Adv. Date of Hearing 12.08.2022 Date of Pronouncement 24.08.2022 ORDER PER SHAMIM YAHYA, AM, This appeal by the Revenue is directed against the order of the Ld. CIT(A)-2, New Delhi, dated 15.05.2019 pertaining to Assessment Year 2015-16. 2. Grounds of appeal reads as under:- 1. Whether, on the facts & Circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance u/s 14A of the I.T. Act, 1961 in accordance with Rule 8D of the I.T. Rules. 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.” 2 ITA NO.6843/DEL/2019 3. Brief facts of the case are that the assessee company is stated to be engaged in the business of providing finance to industry, trade etc through hire purchase, lease and loans. The assessee company is Non Banking Financial Company (NBFC) registered with the Reserve Bank of India (RBI). During the year under consideration, the assessee had undertaken transaction with its associated enterprises. The international transactions entered into by the assessee with the associates enterprises were referred to the Transfer pricing officer after taking prior approval from the PCIT-02, Delhi vide letter dated 24.11.2017, for determining the Arm’s length price. The TPO has passed order u/s 92CA(3) on 30.10.2018, wherein, no adverse inference has been drawn in respect of international transactions. 4. The Assessing Officer further observed that that the perusal of the assessee’s Profit & Loss Account and balance sheet reveals that the assessee company has investment of Rs.63,66,00,000/- in shares as on 31.03.2015 and as on 31.03.2014 for the purpose of earning dividend income and Long Term Capital Gain. The Assessing Officer enquired about the disallowance u/s 14A of the Act. The assessee’s response in nutshell was as under:- 1. Disallowance under section 14A cannot be made in absence of any exempt income. 2. Similar disallowance made in the past by the Assessing Officer has been deleted by appellate authorities including the Tribunal in assessee’s own case and relief by Hon'ble Commissioner of Income tax 3 ITA NO.6843/DEL/2019 (Appeals) post Rule 8D. Refer details provided below. 3. It is an admitted fact that no expenditure has been incurred in relation to the investments made by the assessee and in view thereof the provisions of section 14A (2) cannot be invoked. 4. Without prejudice to the above, we wish to submit that the Assessing Officer is required to record his satisfaction why the upfront disallowance made by the Assessee is incorrect/inadequate before invoking the provision of section 14A and that he cannot apply the provisions of section 14A read with Rule 8D without absence of the same. 5. No disallowance of any expenditure including interest under section 14A read with Rule 8D can be made where, on facts, the investments have been made earlier and out of own funds. 5. The assessee further relied upon the decisions in support of the proposition that no disallowance is required when no exempt income has been earned by referring the decision of the Hon’ble Delhi High Court in the case of ChemInvest Ltd. vs CIT (378 ITR 033). This submission regarding no disallowance when no exempt income is earned was rejected by the Assessing Officer, by inter alia referring to the decision of the ITAT Special Bench in the case of M/s Daga Capital Investments Pvt. 312 ITR (AT) 01 (Mumbai), vide order 20.10.2008. He also rejected the other contentions. 6. Upon assessee’s appeal, the Ld. CIT(A) found that this issue was covered in favour of the assessee and held as under:- 4 ITA NO.6843/DEL/2019 “6. Decision:- I have gone through the assessment order, grounds of appeal and the submission filed by the appellant. Grounds of appeal are adjudicated as under: 6.1 Ground no. 1&2:- These grounds are directed against addition of Rs. 3,01,85,017/- u/s 14A r.w.r 8D. During the year, the appellant has not earned any exempt income as is clear from the assessment order. 6.2 As per the latest judicial pronouncements of the Apex Court in the cases of CIT Vs Chettinad Logistics Pvt. Ltd.(SC) dt. 02.07.2018 and Maxopp Investments Pvt. Ltd. Vs CIT (SC) dt. 12.02.2018, it was clearly held that disallowance u/s 14A will apply where exempt income is earned. 6.3 Keeping in view all the facts and circumstances and the prevailing law and judicial pronouncements, the addition u/s 14A r.w.r 8D is deleted.” 7. Against the above order, the Revenue is in appeal before us. 8. We have heard both the parties and perused the records. Ld. Counsel for the assessee submitted that the issue is squarely covered in favour of the assessee. He submitted that it is undisputed fact that the assessee has not earned any exempt income. That Hon’ble jurisdictional High Court in such a case in Chem Invest Ltd. vs CIT (378 ITR 033) had held that no disallowance u/s 14A is required when no exempt income has been earned. That however, the Assessing Officer chooses to ignore it by referring ITAT Special Bench decision, which stood over turned by the Hon’ble jurisdictional High Court decision. 9. The Ld. DR could not dispute this proposition. No contrary decision from higher courts was also cited. 5 ITA NO.6843/DEL/2019 10. We find considerable cogency in these submissions. In this view of the matter, in our considered opinion, the issue is squarely covered in favour of the assessee by the decision of the Hon’ble jurisdictional High Court as above and the decision of the Hon’ble Apex Court cited by the assessee and referred by the Ld. CIT(A) in his order above. Moreover, the Hon’ble jurisdiction High Court in the case of PCIT vs Era Infrastructure (India) Ltd. vide order dated 20.07.2022 has held as under:- “8. Consequently, this Court is of the view that the amendment of Section 14A, which is “for removal of doubts” cannot be presumed to be retrospective even where such language is used, if it alters or changes the law as it earlier stood.” 11. Accordingly, we do not find any infirmity in the order of the Ld. CIT(A). Hence, we uphold the same. 12. In the result, the Revenue’s appeal stands dismissed. Order pronounced in the open court on 24.08.2022. Sd/- Sd/ [NARENDER KUMAR CHOUDHRY] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Delhi; Dated: 24 th August, 2022. f{x~{tÜ? f{x~{tÜ?f{x~{tÜ? f{x~{tÜ? Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi