Income Tax Appellate Tribunal - Ahmedabad
The Dcit, Circle-4(1)(1),, Ahmedabad vs Suzlon Energy Ltd.,, Ahmedabad on 18 November, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "A" BENCH
Before: Shri Rajpal Yadav, Judicial Member
And Shri Amarjit Singh, Accountant Member
ITA No. 972 /Ahd/2018
Assessment Year 2014-15
The DCIT, Suzlan Energy Ltd.
Circle-4(1)(1), Suzlan-5, Shrimali
Ahmedabad Vs Society, Nr. Shri
(Appellant) Krishna Centre,
Navrangpura,
Ahmedabad-380015
PAN: AADCS0472N
(Respondent)
Revenue by: Shri N.R. Soni, CIT-D.R.
Assessee by: Shri Tushar P. Hemani, A.R.
Date of hearing : 16-10-2019
Date of pronounce ment : 18-11-2019
आदेश /ORDER
PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This assessee's appeal for A.Y. 2014-15, arises from order of the CIT(A)-8, Ahmedabad dated 16-02-2018, in proceedings under section 143(3) of the Income Tax Act, 1961; in short "the Act".
2. The assessee has raised following grounds of appeal:-
"1. "that the Id. CIT(Appeal) has erred in law and on facts in reducing an amount of Rs.12,38,24,693/- from the returned loss which was disallowed by the assessee company suo motu u/s. 14A of the Income Tax Act, 1961, while filing of the returned of income."I.T.A No. 972/Ahd/2018 A.Y. 2014-15 Page No 2
2. "that the Id, ClT(Appeal) has erred in law and on facts in deleting the addition amounting to Rs.12,38,24,693/- made on account of disallowance u/s. 14A of the Income Tax Act, 1961 in book profit u/s. 115JB of the Income tax Act, 1961"
3. "that the Id. CIT(A) failed to appreciate CBDT's Circular No. 5 of 2014, in which the Board has clarified that disallowance under section 14A of the Income Tax Act, 1961 read with rule 8D of the Income Tax Act, 1962 needs to be made even in a case where the assessee did not earn exempt income during the particular year."
3. The fact in brief is that assessee has suo motu disallowed a sum of Rs.12,38,24,639/- u/s. 14A r.w. Rule 8D of the I.T. Rule, 1962 in the computation of income attached to the return of income. During the course of assessment, the assessee has pleaded before the assessing officer that it has not claimed any exempt income, therefore, as per the decision of Hon'ble Gujarat High Court in the case of Corrtech Energy Pvt. Ltd., no disallowance u/s. 14A is warranted. The assessee has also submitted that disallowance u/s. 14A cannot be made to the book profits computed u/s. 115JB(2) of the act. The assessing officer has not agreed with the submission of the assessee and also added the sum of Rs. 12,38,24,639/- to the book profit computed u/s. 115JB of the act.
4. The assessee has preferred appeal before the ld. CIT(A). The ld. CIT(A) after following judgment of Jurisdictional High Court in the case of CIT vs. Corrtech Energy Pvt. Ltd. and other judgments reported at page no. 9 of the CIT(A) order deleted the suo motu disallowance of Rs. 12,38,24,639/- made by the assessing officer u/s. 14A of the act. The ld. CIT(A) after following the judgment of Jurisdictional High Court in the case of Alembic Ltd. in ITA No. 1249 of 2014 has also held that the disallowance u/s. 14A of the act cannot be added to book profit calculated u/s. 115JB of the act.
I.T.A No. 972/Ahd/2018 A.Y. 2014-15 Page No 35. During the course of appellate proceedings before us, the ld. counsel has contended that the identical issue has been adjudicated by the Hon'ble Jurisdictional High Court in favour of the assessee vide Tax Appeal No. 553 & 554 of 2017 in the case of Pr. CIT vs. Alembic Ltd. dated 28-08-2017. The ld. counsel has also contended that the Co-ordinate Bench of the ITAT in the case of Greenland Pvt. Ltd. vs. DCIT dated 04-06.2019 has decided the similar issue in favour of the assessee. The ld. departmental representative is fair enough not to contradict the aforesaid submissions made by the ld. counsel. With the assistance of ld. representatives, we have gone through the aforesaid judicial pronouncements referred by the ld. counsel and it is noticed that Co-ordinate Bench in the decision of Greenland Pvt. Ltd. has adjudicated the similar issue on identical facts in favour of the assessee. The relevant part of decision is reproduced as under:-
"2. When the appeal was called out for hearing, learned representatives fairly agreed that the above issues are fully covered, in favour of the assessee, by the decision dated 14.11.2018 of the co-ordinate bench in assessee's own cases for the two immediately preceding assessment years. Vide the aforesaid order, the co-ordinate bench has, inter alia, observed as follows:-
"6. We have carefully considered the rival submissions and perused the orders of the authorities below. The substantive question arises in the Revenue's appeal is to ascertain the correctness of the action of the CIT(A) in refusing to endorse the action of the AO for resorting to disallowance under s.14A of the Act. Two broad issues emerges in the context of the case; (i) whether the disallowance under s.14A is maintainable where admittedly no exempt income i.e. dividend was earned by the assessee in the relevant assessment year and (ii) whether the CIT(A) was justified in going beyond the return of income and remove the disallowance which the assessee itself has made while filing the return of income. In other words, whether the action of the CIT(A) in bringing down the income returned by the assessee and granting relief on the issues not raised at the time of filing original return of income or by way of revised return at a subsequent stage is justified in law or not.
7. The first issue framed above appears quite simple as we see. While adjudicating the issue, we take note of CBDT Circular No. 5/2014 dated 11/02/2014 which seeks to emphasize that all expenses pertaining to an exempt income is required to be disallowed notwithstanding the fact that no corresponding tax free income has been earned during the financial year. Notwithstanding the aforesaid circular, various Courts have held that Section 14A of the Act disallowance cannot be kicked when there was no exempt income earned by the assessee as is the case in the present appeals. Hon'ble Delhi High I.T.A No. 972/Ahd/2018 A.Y. 2014-15 Page No 4 DCIT vs. Suzlan Energy Ltd.
Court in PCIT vs IL&FS Energy Development Company Ltd. (2017) 84 Taxman.com 186(Delhi) and the Hon'ble Madras High Court in CIT v. Chettinad Logistics (P.) Limited (2017) 80 taxmann.com 221(Madras) have expressed a clear disagreement with CBDT Circular and held that where there is no exempt income in relevant year there cannot be a disallowance of expenditure under s.14A of the Act. Similar proposition has been laid down by the Hon'ble Gujarat High Court in the case of Corrtech Energy (P.) Ltd (2014) 45 taxmann.com. 116 (Guj) and Pr.CIT vs. India Gelatine and Chemicals Ltd. (2016) 66 taxmann.com 356 (Guj). The aforesaid judicial fiat was reiterated by the Hon'ble Delhi High Court in the case of Joint Investments Pvt. Ltd. vs. CIT reported in 372 ITR 692 (Delhi) wherein Hon'ble Delhi High Court has categorically ruled that disallowance under s.14A of the Act cannot exceed the amount of tax exempt income. Notably, the SLP filed against the decision of Hon'ble Madras High Court in Chettinad Logistics (supra) has been dismissed by Hon'ble Supreme Court in CIT vs. Chettinad Logistics (P.) Ltd. (2018) 95 taxmann.com 250 (SC). Hence, in conformity with the judicial precedents, we find substantial merit in the conclusion drawn by the CIT(A) which essentially holds that Section 14A of the Act can be triggered only if assessee seeks to square off expenditure against the income which does not form part of total income under the Act and Section 14A of the Act cannot be invoked where no exempt income was earned in the relevant assessment years. In consonance with the judicial precedents, we do not see any infirmity in the conclusion drawn by the CIT(A) for non-applicability of Section 14A of the Act in the facts of the case.
8. We shall now turn to the second issue raised on behalf of the Revenue regarding propriety of the action of the CIT(A) in granting relief on the disallowance (suo moto made by the assessee) beyond the return of income and in the absence of any formal revised return. The CIT(A) has discussed this aspect in very great detail in para 2.5 to 2.28 of its order. We are not inclined to reiterate the findings of the CIT(A). However, we fully endorse the observations of the CIT(A) which essentially holds that the mistake or inadvertence on the part of the assessee whereby an income not taxable has been wrongly offered for tax, will not operate as any kind of estoppel against the assessee and regardless of whether the revised return was filed or not. Once the assessee is in a position to show that it has been over assessed under the provisions of the Act even on account of assessee's own mistake or otherwise, the Revenue is under duty to assess correct income.
9. It is trite that the authorities under the Act are under sacrosanct obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, mis-conception or not being properly instructed, is over assessed, the authorities under the Act are required to ensure that only legitimate tax dues are collected. This is the view which flows from innumerable judgments including CIT vs. Shelly Products (2003) 261 ITR 367 (SC), S. R. Koshti vs. CIT (2005) 276 ITR 165 (Guj), Ester Industries vs. CIT (2009) 185 TAXMAN 266 (Delhi) and CIT vs. Pruthvi Brokers & Shareholders (P.) Ltd. [2012] 349 ITR 336 (Bom). The essence of these decisions are that mere admission on the part of the assessee with respect to an addition/disallowance in its original return or in revised return would not ipso facto bar an assessee from claiming an expense or disputing an addition if it is otherwise permissible under law. It is thus well settled that if a particular income is not taxable under the Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. The Revenue authorities cannot enforce untenable actions of the assessee against it which led to declaration of income of higher amount incorrectly. It is thus open to assessee to show that it was over assessed in correctly owing to its own mistake.
10. So viewed, we do not see any potency in the argument laid on behalf of the Revenue that the CIT(A) allegedly committed error in granting total relief in the matter of I.T.A No. 972/Ahd/2018 A.Y. 2014-15 Page No 5 DCIT vs. Suzlan Energy Ltd.
disallowance under s.14A of the Act. In our considered view, the action of the CIT(A) in granting relief under s.14A of the Act on account suo moto disallowance by the assessee and thereby granting relief higher than claimed in the return of income cannot be faulted in law."
3. We see no reasons to take any other view of the matter than the view so taken by the co- ordinate bench. Respectfully following the coordinate bench decision in assessee's own case for the earlier assessment years, we uphold the plea of the assessee. The assessee gets the relief accordingly."
Considering the facts, findings and decision of the Co-ordinate Bench as cited above, we do not find any substance in the appeal of the Revenue. Accordingly, this ground of appeal of the Revenue is rejected. Regarding other ground of appeal, after considering the decision of Co-ordinate Bench of the ITAT in the case of the assessee for A.Y. 2010-11 vide ITA No. 2791 & 2530/Ahd/2014 and the decision of the Special Bench Delhi ITAT in the case of ACIT Vs. Vineet Investment Pvt. Ltd. we observe that expenditure incurred to earn exempt income not to be added for computing book profit u/s. 115JB of the Act. Therefore, we do not find any infirmity in the decision of ld. CIT(A) holding that the disallowance u/s. 14A cannot be added to book profit calculated u/s. 115JB of the Act.
6. In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 18-11-2019
Sd/- Sd/-
(RAJPAL YADAV) (AMARJIT SINGH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad : Dated 18/11/2019
आदेश क त ल प अ े षत / Copy of Order Forwarded to:-
1. Assessee
I.T.A No. 972/Ahd/2018 A.Y. 2014-15 Page No 6
DCIT vs. Suzlan Energy Ltd.
2. Revenue
3. Concerned CIT
4. CIT (A)
5. DR, ITAT, Ahmedabad
6. Guard file.
By order/आदेश से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण,
अहमदाबाद