ACIT Vs Penna Cement Industries Limited (ITAT Hyderabad)
No Section 14A Disallowance Without Exempt Income for Pre-2022 Years; Section 80IA Deduction Cannot Be Denied on Estimated Disallowance; Business Receipts Already Taxed Cannot Be Added Again Under Section 68; Section 14A Disallowance Invalid Without Recording Mandatory Dissatisfaction: ITAT Hyderabad
Summary: The Hyderabad ‘B’ Bench of the Income Tax Appellate Tribunal disposed of two Revenue appeals, ITA Nos. 1083/Hyd/2024 for Assessment Year 2017-18 and 1084/Hyd/2024 for Assessment Year 2018-19, by a consolidated order. The appeals challenged the CIT(Appeals)’s order dated 22.08.2024 arising from assessment orders under section 143(3) read with section 144B of the Income-tax Act, 1961. The assessee, Penna Cement Industries Limited, is engaged in manufacturing and sale of cement along with captive power generation.
For AY 2017-18, the Assessing Officer had made a disallowance of Rs. 74,92,000 under section 14A read with Rule 8D, disallowed Rs. 1,88,97,644 claimed under section 80G in respect of CSR donations, disallowed Rs. 24,35,05,411 under section 80IA relating to power-generation units, and added Rs. 1,29,91,000 under section 68 in respect of transactions with M/s Lakshin Infradev Pvt. Ltd. The CIT(A) deleted all these additions/disallowances. The Tribunal upheld those findings.
On section 14A for AY 2017-18, the Tribunal noted that the assessee had not earned any exempt income during the relevant year and that the investments in subsidiary and associate cement companies had been made from its own interest-free funds for business expansion. It held that, under the law applicable for the year, no disallowance under section 14A could be made in the absence of exempt income. It relied on the line of authorities referred to in the order, including NCC Infrastructure Holdings Limited, Era Infrastructure (India) Ltd., IL&FS Energy Development Co. Ltd., Chettinad Logistics Pvt. Ltd. and Oil Industry Development Board. The Tribunal also held that the pendency of Revenue appeals against earlier Tribunal orders in the assessee’s own case did not make those orders inoperative because they had not been stayed or set aside, referring to Union of India and Others Vs. Kamlakshmi Finance Corporation Limited. It further held that the Finance Act, 2022 amendment to section 14A was effective from 01.04.2022 and could not be applied retrospectively. The Revenue’s grounds on this issue were dismissed.
