OJAS Industries Private Limited, New Delhi V. ACIT, Circle-19(1), New Delhi

ITA 790/DEL/2023

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 116328 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 22-08-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 21-03-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI BEFORE SH. SAKTIJIT DEY, VICE-PRESIDENT AND SH. PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA No.790/Del/2023 (Assessment Year : 2017-18) OJAS Industries Pvt. Ltd. 1/27, Office No.2, Lalita Park Laxmi Nagar, New Delhi-110 092 PAN No. AAACO 6016 B Vs. ACIT Circle – 19(1) New Delhi (APPELLANT) (RESPONDENT) Assessee by --None-- Revenue by Ms. Smita Singh, Sr. D.R. Date of hearing: 23.08.2023 Date of Pronouncement: 23.08.2023 ORDER PER SAKTIJIT DEY, VICE-PRESIDENT : Captioned appeal has been filed by the assessee against the order dated 02.02.2023 passed by National Faceless Appeal Centre (NFAC), Delhi pertaining to Assessment Year 2017-18. 2. At the time of call, none appeared on behalf of the assessee to represent the case despite issuance of notice of hearing through postal mode. Considering the nature of grievance raised by assessee, we proceed to dispose of the appeal ex parte qua the assessee after hearing Learned Departmental Representative and based on material available on record. ITA No.790/Del/2023 OJAS Industries Pvt. Ltd. vs. ACIT 2 3. The solitary issue arising for consideration is in relation to disallowance made of Rs.92,94,564/- under Section 14A of the Income-tax Act, 1961 read with Rule 8D. 4. Briefly the facts relating to the issue in dispute are, the assessee is a residential corporate entity. For the assessment year under dispute, assessee filed its return of income on 31.10.2017 declaring loss of Rs.56,52,05,458/- under normal provision and book loss of Rs.56,58,08,629/- under Section 115JB of the Act. In course of assessment proceedings, the Assessing Officer, on perusing the Balance Sheet of the assessee for the year ending 31.03.2017, noticed that the assessee had made noncurrent investments of Rs.535,41,99,707/- as on 31.03.2016 and Rs.537,23,64,665/- as on 31.03.2017. After calling for the details of the investments and examining them, the Assessing Officer was of the view that such investments have the potential of yielding exempt income in future. Therefore, he issued a show-cause notice to the assessee seeking an explanation as to why the disallowance under Section 14A r.w.r 8D should not be made in respect of the investments made, which may in future give rise to exempt income. Though, the assessee furnished its reply objecting to the proposed disallowance, however, rejecting the submissions of the assessee, the Assessing Officer proceeded to compute disallowance in terms of Rule 8D(2)(iii) for an amount of Rs.92,94,564/-. Though, the assessee contesting the aforesaid disallowance by filing an appeal before the first appellate authority however, it was unsuccessful. 5. We have heard Learned Departmental Representative and perused material on record. On a reading of the respective orders of ITA No.790/Del/2023 OJAS Industries Pvt. Ltd. vs. ACIT 3 the Departmental authorities, it is a patent obvious, while contesting the decision of the departmental authorities to make disallowance under Section 14A r.w.r 8D, the assessee had categorically submitted that in the previous year relevant to assessment year under dispute, the assessee had not earned any exempt income, whatsoever. Though, the departmental authorities have not disputed the aforesaid factual position claimed by the assessee, however, only on the reasoning that certain investments made by assessee are capable of yielding exempt income in future, disallowance under Section 14A r.w. Rule 8D has been made. It is trite law, in case, an assessee has not earned any exempt income in a particular assessment year, no disallowance under Section 14A r.w. Rule 8D can be made merely because certain investments made by assessee may give rise to exempt income in future. Since, there are plethora of judicial precedents propounding the aforesaid legal position, there is no need to specifically refer to any such judicial precedents here. Considering the fact that in the year under consideration, the assessee had not earned any exempt income, we hold that the disallowance made under Section 14A r.w. Rule 8D is unsustainable. Accordingly, we direct the Assessing Officer to delete the disallowance. 6. In the result, appeal is allowed. Order pronounced in the open court on 23.08.2023 Sd/- Sd/- (PRADIP KUMAR KEDIA) (SAKTIJIT DEY) ACCOUNTANT MEMBER VICE-PRESIDENT Date:- 23.08.2023 Priti Yadav* ITA No.790/Del/2023 OJAS Industries Pvt. Ltd. vs. ACIT 4 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI