THE PR. COMMISSIONER OF INCOME TAX ( CENTRAL), LUDHIANA V. M/S COSMOS INFRA ENGINEERING ( INDIA ) LTD.

ITA/213/2018

AI Insights

The case involves an appeal by the Principal Commissioner of Income Tax (Central), Ludhiana against M/s Cosmos Infra Engineering (India) Ltd., Delhi, concerning the disallowance of expenditure related to tax-exempt income under Section 14A of the Income Tax Act, 1961. The dispute originated from the Assessing Officer's decision to disallow certain expenditures amounting to \\u20b9 2,07,14,800/- which were linked to investments yielding tax-exempt income. The CIT(A) reversed this decision, leading to the revenue's appeal to the ITAT, which upheld the CIT(A)'s decision. The revenue's subsequent appeal to the High Court was dismissed, referencing a similar case (ITA-322-2016) where the court had dismissed a comparable appeal.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 699322 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 01-04-2019
• Assessment Year: misc
• Other Referred Cases: Principal Commissioner of Income Tax-I, Chandigarh v. M/s Vardhman Chemtech Private Limited, Chandigarh
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: RAJESH KATOCH; PRIDHI SANDHU
• Keywords: Disallowance; Exempt income; Tax-free income; CBDT's Circular No. 5/2014
• Section: 143(3); 14A; 260A; 8D

Judgement Text

"ITA-213-2018 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-213-2018 (O&M) Date of Decision: 1.4.2019 The Principal Commissioner of Income Tax (Central), Ludhiana ....Appellant. Versus M/s Cosmos Infra Engineering (India) Ltd., Delhi ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Rajesh Katoch, Sr. Standing Counsel with Ms. Pridhi Jaswinder Sandhu, Junior Standing Counsel. *** AJAY KUMAR MITTAL, J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 31.10.2017 (Annexure A-III) passed by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 486/CHD/2017, for the assessment year 2013-14, claiming the following substantial questions of law:- (i) Whether in the facts and circumstances of the case, the Hon'ble ITAT is correct in upholding the order of the CIT(A) that no disallowance u/s 14A can be made if there is no tax free income earned during GURBACHAN SINGH 2019.04.06 16:07 I attest to the accuracy and integrity of this document ITA-213-2018 -2- the year ignoring the CBDT's Circular No. 5/2014 dated February 11, 2014 which states that disallowance of expenses for earning exempt income u/s 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962, would be attracted even if corresponding income has not been earned during the year? (ii) Whether the impugned order dated 31.10.2017 passed by the ITAT is sustainable in the eyes of law or maintainable in the facts and circumstances of the case? 2. Briefly stated, the facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The Assessing Officer during the course of assessment proceedings had noticed that the assessee had declared investment in shares amounting to ` 641.13 lakhs as against such investment of ` 640.98 lakhs shown in the immediate preceding assessment year. Since the income earned, if any, from these investments, by way of dividend etc. was exempt from taxation, as such the expenditure incurred relating to such investments was not an allowable expenditure. The Assessing Officer vide assessment order dated 5.6.2015 (Annexure A-1) passed under Section 143(3) of the Act disallowed the expenditure amounting to ` 2,07,14,800/- and added to the income of the assessee. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”] challenging the addition of ` 2,07,14,800/- under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (in short “the Rules”). The CIT(A) vide order GURBACHAN SINGH 2019.04.06 16:07 I attest to the accuracy and integrity of this document ITA-213-2018 -3- dated 6.1.2017 (Annexure A-II) allowed the appeal and deleted the addition of ` 2,07,14,800/- under Section 14A of the Act read with Rule 8D of the Rules. The revenue challenged the order, Annexure A-II, before the Tribunal. The Tribunal vide order dated 31.10.2017 (Annexure A-III) upheld the order of the CIT(A) and dismissed the appeal of the revenue. Hence, the present appeal by the revenue. 3. We have heard learned counsel for the revenue. 4. It could not be disputed by the learned counsel for the revenue that the aforesaid matter is covered by the judgment of this Court in ITA- 322-2016 (Principal Commissioner of Income Tax-I, Chandigarh v. M/s Vardhman Chemtech Private Limited, Chandigarh) decided on 28.8.2018, wherein the appeal filed by the revenue against the deletion of disallowance of ` 40,28,526/- under Section 14A of the Act read with Rule 8D of the Rules, was dismissed. 5. Accordingly, the present appeal is also dismissed in terms of ITA-322-2016. (AJAY KUMAR MITTAL) JUDGE April 1, 2019 (MANJARI NEHRU KAUL) gbs JUDGE Whether Speaking/Reasoned Yes/No Whether Reportable Yes/No GURBACHAN SINGH 2019.04.06 16:07 I attest to the accuracy and integrity of this document "