Case Law Details

Case Name : M/s. UB Infrastructure Projects Limited Vs. The Deputy Commissioner of Income Tax (ITAT Bangalore)
Appeal Number : ITA No. 2098/Bang/2016
Date of Judgement/Order : 22/12/2017
Related Assessment Year : 2012- 13
Courts : All ITAT (4765) ITAT Bangalore (230)

M/s. UB Infrastructure Projects Limited Vs. DCIT (ITAT Bangalore)

Undisputedly the assessee has not earned any exempted income. Now it is settled position of law that whenever assessee did not earn any exempt income, no dis allowance could be made u/s. 14A of the Act. The Hon’ble Delhi High Court in the case of Cheminvest Ltd. v. CIT, 378 ITR 33 (Del) has categorically held that section 14A envisages that there should be actual receipt of income which was not includible in the total income during the relevant previous year for the purpose of disallowing any expenditure in relation to the said income. Wherever there is no exempt income includible in the total income of the assessee, the provisions of section 14A cannot be invoked.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

This appeal is preferred by the assessee against the order of CIT(Appeals)-7, Bengaluru, inter alia, on the following grounds:

1. That the order of the assessing officer in so far as it is against the appellant is against the law, facts, circumstances, natural justice, equity, without jurisdiction, bad in law and all other known principles of law.

2. That the total income computed and the total tax computed is hereby disputed.

3. That the learned authorities below erred in disallowing Rs.2, 16,11,945/- u/s 14A r.w.r. 8D(2)(ii) of the Act and Rs. 15,00,000/- u/s 14A rwr 8D(2)(iii) of the Act.

4. That the learned authorities below erred in not appreciating that when there is no tax free income, there cannot be any expenditure incurred for earning exempt income.

5. That the learned authorities below erred in not following the binding/relevant decisions of the higher appellate authorities on the issue.

6. That the learned CIT-Appeals erred in relying on the CBDT circular date 11.02.2014, though the decision of the Hon’ble Delhi High Court in Cheminvest Ltd in ITA 749/2014 date 02.09.2015 clinches the issue in favour of the appellant.

7. The appellant denies the liability for interest u/s 234B of the Act. Further prays that interest if any should be levied only on the returned income.

8. No opportunity has been given before levy of interest u/s 234B of the IT Act.

9. Without prejudice to the appellant’s right of seeking waiver before appropriate authority the appellant begs for consequential relief in the levy of interest u/s. 234B of the Act.

2. During the course of hearing, the ld. counsel for the assessee has invited our attention to the fact that there was no exempt income earned by the assessee during the impugned assessment year. Therefore, the provisions of section 14A cannot be invoked. In support of this contention, he placed reliance upon the judgment of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. v . CIT as reported in 378 ITR 33 (Del) and also the order of the Tribunal in the assessee’s own case for assessment year 2010-11.

The ld. DR simply placed reliance upon the order of the AO.

3. Having carefully examined the orders of authorities below, we find that undisputedly the assessee has not earned any exempted income. Now it is settled position of law that whenever assessee did not earn any exempt income, no dis allowance could be made u/s. 14A of the Act. The Hon’ble Delhi High Court in the case of Cheminvest Ltd. v. CIT, 378 ITR 33 (Del) has categorically held that section 14A envisages that there should be actual receipt of income which was not includible in the total income during the relevant previous year for the purpose of disallowing any expenditure in relation to the said income. Wherever there is no exempt income includible in the total income of the assessee, the provisions of section 14A cannot be invoked. The relevant observations of the judgment of the Hon’ble Delhi High Court are extracted here under:-

“15. Turning to the central question that arises for consideration, the court finds that the complete answer is provided by the decision of this court in CIT v. Holcim India (P) Ltd. (decision dated 5th September 2014, in I. T. A. No. 486 of 2014). In that case, a similar question arose, viz., whether the Income-tax Appellate Tribunal was justified in deleting the dis allowance under section 14A of the Act when no dividend income had been earned by the assessee in the relevant assessment year ? The court referred to the decision of this court in Maxopp Investment Ltd. (supra) and to the decision of the Special Bench of the Income-tax Appellate Tribunal in this very case, i.e., Cheminvest Ltd. v. CIT [2009] 317 ITR (AT) 86 (Delhi) [SB]. The court also referred to three decisions of different High Courts which have decided the issue against Revenue. The first was the decision in CIT v. Lakhani Marketing Incl. (decision dated April 2, 2014, of the High Court of Punjab and Haryana in I. T. A. No. 970 of 2008)–since reported in [2015] 4 ITR-OL 246 (P&H)– which in turn referred to two earlier decisions of the same court in CIT v. Hero Cycles Ltd. [2010] 323 ITR 518 (P&H) and CIT v. Winsome Textile Industries Ltd. [2009] 319 ITR 204 (P&H). The second was of the Gujarat High Court in CIT v. Corrtech Energy (P.) Ltd. [2014] 223 Taxmann 130 (Guj) ; [2015] 372 ITR 97 (Guj) and the third of the Allahabad High Court in CIT v. Shivam Motors (P) Ltd. (decision dated 5th May, 2014, in I . T. A. No. 88 of ITA No. 1107/Bang/2016 2014). These three decisions reiterated the position that when an assessee had not earned any taxable income in the relevant assessment year in question “corresponding expenditure could not be worked out for dis allowance.”

4. This was also examined by the Tribunal in the assessee’s own case for assessment year 2010-11 and held that when there is no exempt income, provision of section 14 of the Act cannot be applied.

5. In the light of the aforesaid judgment, the provisions of section 14A cannot be invoked as there is no exempt income in the hands of the assessee. Accordingly, we find no infirmity in the order of the CIT(Appeals) who has rightly deleted the addition.

6. In the result, the appeal of the assessee is dismissed.

Pronounced in the open court on this 22nd day of December, 2017.

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Category : Income Tax (26731)
Type : Judiciary (10898)
Tags : ITAT Judgments (4947) rule 8D (93) Section 14A (255)

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