ACIT, C-6(1), Mohali V. Sh. Lakhwinder Singh Panag, Mohali

MA 81/CHANDI/2019

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5663 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 7 month(s) 18 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-11-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-11-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 14-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect; Earning of tax free income; Tax effect; Rule 8D
• Section: 14A

Judgement Text

आयकर अपीलȣय अͬधकरण, चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘A’, CHANDIGARH BEFORE SHRI A.D. JAIN, VICE PRESIDENT & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER M.A.No. 81/Chd/2019 (Arising out of आयकर अपील सं./ITA No. 297/CHD/2018 Ǔनधा[रण वष[ / Assessment Year : 2014-15 The ACIT, Circle-6(1), Mohali बना म Shri Lakhwinder Singh Panag, Flat No. 824, HIG, Phase02, Mohali èथायीलेखासं./PAN NO: AMWPP5825A अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent (VIRTUAL HEARING ) Ǔनधा[ǐरतीकȧओरसे/Assessee by : Shri T.N. Singla, CA राजèवकȧओरसे/ Revenue by : Smt. Amanpreet Kaur, Sr. DR स ु नवाईकȧतारȣख/Date of Hearing : 03.11.2023 उदघोषणाकȧतारȣख/Date of Pronouncement : 03.11.2023 आदेश/Order Per A.D. Jain, Vice President: This is Departmental Application in ITA No. 297/Chd/2018, which was dismissed for tax effect vide order dated 03.10.2018. 2. The Department contends that the Tribunal has dismissed the appeal only due to low tax as per CBDT Circular No. 3/2018 dated MA. No.81/Chd/2019 in ITA 297/Chd/2018 - Shri Lakhwinder Singh Panag, Mohali 2 11.7.2018 without going into merits of the issue; that it is true that tax effect involved in this case is below the monetary limit but acceptance of the decision merely on monetary basis would tantamount to violation of CBDT Circular No. 5/2015 wherein, the CBDT has clarified that the disallowance of expenditure for earning exempt income u/s 14A read with Rule 8D would be attracted even if the corresponding exempt income has not been earned during the financial year under consideration; that, accordingly, this case is a fact case to invoke the provisions of seciton14A read with Rule 8D; and that the Department desires to contest the applicability of CBDT Circular No. 05/2014 on the basis of disallowance u/s 14A of the Income Tax Act, 1961 even when the tax effect is below the monetary limits as per aforesaid CBDT circular. A request has been made to recall the appeal and the matter needs to be contested on merits. 3. The ld. Counsel for the Assessee, on the other hand, has placed strong reliance on the Tribunal order dated 03.10.2018 (supra). 4. We have heard the parties and have perused the material on record. 4.1 It has been contended by the ld. Counsel for the Assessee that firstly, CBDT circulars are not binding on the Tribunal. Reliance, in this regard, has been placed on “Principal Commissioner of Income Tax-I vs. Vardhman Chemtech Private Limited”, 423 ITR 241 (P&H), MA. No.81/Chd/2019 in ITA 297/Chd/2018 - Shri Lakhwinder Singh Panag, Mohali 3 “Principal Commissioner of Income Tax vs. IL & FS Energy Development Company Ltd.”, 399 ITR 483(Del.), and “Principal Commissioner of Income Tax vs. Rattan India Infrastructure Ltd.”, (2019) 104 CCH 0053 ISCC, order dated 4.1.2019 passed by the Hon'ble Supreme Court. 4.2 Then, in “Vardhman Chemtech Private Limited” (supra), again, it was held by the Hon'ble jurisdictional High Court that the Tribunal was right in dismissing the Department’s appeal, holding that unless and until there is receipt of exempt income for the concerned assessment year, Section 14A of the Act is not attracted. A reference was made to “Redington (India) Ltd. Vs. Additional Commissioner of Income Tax”, 392 ITR 633 (Mad.), wherein it was held that no disallowance u/s 14A read with Rule 8D of the Income Tax Rules, 1962 can be made in respect of an assessment year in which no exempt income is earned. 4.3 Reference was also made to “Principal Commissioner of Income Tax vs. IL&FS Energy Development Company Limited”, (2017) 399 ITR 482 (Del.) (supra), wherein it was held that the CBDT Circular dated 11.2.2014 cannot override the express provisions of section 14A read with Rule 8D of the Rules. MA. No.81/Chd/2019 in ITA 297/Chd/2018 - Shri Lakhwinder Singh Panag, Mohali 4 5. It may be pointed out that the aforementioned CBDT Circular No. 5/2014 dated 11.2.2016 is the very Circular on which the Department seeks to place reliance in the present application. 6. Further, the ld. Counsel for the Assessee has sought to place reliance on “ACIT, C-4(1), Chandigarh vs. M/s Diamond Plastic Products”, and five other M.A.s, and all these six M.As. have been decided by the Chandigarh Bench of the Tribunal vide order dated 9.8.2019. Here, it is seen that in “M/s Diamond Plastic Products” (supra), it has been noted that the Department had been subsequently asked as to whether the CBDT Circular No. 5/2014 relating to disallowance of expenditure for earing exempt income u/s 14A of the Act has been held to be invalid or illegal / ultra vires by any Court; and that the Department had stated that the said Circular was still in force and had not been held to be illegal or ultra vires. 7. The aforesaid situation continues as such till date. The said CBDT Circular No. 5/2014 continues to be in force and it has not been held to be either illegal or ultra vires the law. 8. Therefore, considering all the above facts, we find that there is no force in the application filed by the Department and the same is liable to be rejected and dismissed. It is ordered so, accordingly. MA. No.81/Chd/2019 in ITA 297/Chd/2018 - Shri Lakhwinder Singh Panag, Mohali 5 9. In the result, the Application filed by the Department is dismissed. Order pronounced in the Open Court on 03.11.2023. Sd/- Sd/- (VIKRAM SINGH YADAV) ( A.D. JAIN ) Accountant Member Vice President Dated : 03.11.2023 “आर.के.” आदेशकȧĤǓतͧलͪपअĒेͪषत / Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकरआय ु Èत/ CIT 4. ͪवभागीयĤǓतǓनͬध, आयकरअपीलȣयआͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 5. गाड[फाईल/ Guard File आदेशान ु सार/ By order, सहायकपंजीकार/ Assistant Registrar