Income Tax Appellate Tribunal - Chandigarh
Dcit, Cc-I, Ludhiana vs M/S Cosmos Infra Engineering (India) ... on 26 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH 'A', CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA No.1636/Chd/2017 (Assessment Year : 2014-15) The D.C.I.T., Vs. M/s Cosmos Infra Engineering CC-1, (India)Ltd., 4-Battry Line, Civil Ludhiana. Lines, Delhi.
PAN: AAACC0017C
(Appellant) (Respondent)
Appellant by : Smt.Zeni a Handa, Addl .CI T Respondent by : Shri Sudhir Sehgal, Adv.
Date of hearing :16.04.2018
Date of Pronouncement :26.04.2018
O RDE R
PER ANNA PURNA GUPTA, A. M. :
Th i s a p p e a l h a s b e e n p r e f er r e d by t h e a s s es s e e ag a i n st t h e o r d e r of L d . C o m m i s s i on e r o f I n c o m e Ta x ( A p p e a l s ) -5 , Ludhiana ( h e re i n a f t e r r e f e r re d to as ( 'L d . CI T( A p p e a l s ) ' ) d a t e d 2 6 .9 . 2 0 1 7 r e l a t i n g t o a s se ss m e n t y e ar 2 0 1 4- 1 5 .
2. Th e sole issue in the pr e s e nt appeal pertains to d e l e t i o n o f d i s a l l o w a n c e m a d e t o e x p e n s es u / s 14 A o f t h e I n co m e Ta x A c t, 1961 (in s h or t 'the Ac t ' ) i nc u r r e d in r e l a t i o n t o e ar n i n g e x e m p t i n c om e a s p e r t h e pr o v i s i o n s of s e c t i o n 1 4 A o f th e A c t . Th e g r o u n d s r a i s e d b y th e R e v e n ue r e a d a s un d e r :
"1. The Ld. C1T(A) has erred both in law and on facts while holding that no disallowance u/s 14A can be made if there is no tax free income earned during the year by ignoring the CBDT circular no. 5/2014 st dated 1 Feb 2014 which states that disallowance of expense for earning exempt income u/s 14A read with rule 8D would be attracted even if 2 corresponding exempt income has not been earned during the year.
2. The Ld. CIT(A) has erred both in law and on facts in deleting the addition of Rs.1,67,95,000/- made u/s 14A r.w.r 8D of the Income Tax Act, 1961 ignoring the fact that the assessee has not maintained any separate account for interest free/interest bearing funds vis-à-vis exempted investments.
3. The C1T(A) has erred in re-storing the aforesaid issue/(s) ignoring that C1T(A) has no power u/s 251 of the I.T. Act,1961 to restore the issuers) under appeal.
4. The Appellant craves leave to add or amend the grounds of appeal on or before is heard and disposed off."
3. Brief facts re l ev a n t to the i ss u e are that du r i n g a s s e s s m e nt p r o ce e d i n g s t he A s s es s i n g O f fi c e r n ote d t h a t t he a s s e s s e e h ad s ho w n i n v e s tm e n t s i n s h a r e s a m ou n t i n g to Rs.641.14 lacs. Th e assessee was a s k ed as to w hy d i s a l l o w an c e u / s 1 4 A r . w . r . 8 D o f t h e I nc o m e Ta x R u l e s n ot be made in r el a t i o n to the income e a r n ed on t h e se i n v e s t m e nt s b y w a y o f d i vi d e n d w h i c h a r e e x em p t f r om t a x a t i o n . Du e re p l y w a s f i l e d b y t h e a s s e s s e e w h i c h i s r e p r o d u c ed a t pa g e 2 o f t h e a s se s s m e n t or d e r wh e r e i n t he assessee s ub m i t t e d and e s t abl i s h e d the n e xu s of the i n t e r e s t b ea r i n g f u n d s w i t h t h e b u s i n e s s o f t he a s s e s s ee r u l i n g o ut a n y e x p e n d i t u re i n c u rr e d b y w a y o f i nt e r e s t f or e a r n i n g t h e e x em p t i n c om e . I t w a s a l s o s u b mi tt e d t h a t n o exempt income had b ee n e ar n e d d u ri n g t he r e l e v ant a s s e s s m e nt y e a r a n d f u r t he r t h at i t h a d s uf f i c i en t i n t e r es t f r e e f u n d s a v a i l a b l e i n t h e f o r m o f s h a r e c a p i t al , r e s e r v e s a n d s u r pl u s fo r m a k i n g t h e i mp u g n e d i n v e s t me n t s . Th e A s s e s s i n g Of f i c er , h o w e v e r, w a s n o t s a t i s fi e d w i th t h e r e p l y o f t h e a s s e s se e a n d i n v ok i n g t he p r o v i si o n s o f se c t i o n 14 A r.w.r. 8D ca l cu l a t e d the d i sa l l o w a n c e to be made at 3 R s . 1 , 6 7 , 95 , 0 0 0 /- a n d a d d e d t h e s a m e t o t h e i n c om e o f t h e assessee.
4. Th e matter was carried in appeal b e f o re the L d . CI T( A p p e a l s ) w h e r e i n t h e as s es s e e f i l e d c op i e s o f v a ri o u s judgments on the i s su e i nc l u d i n g th e c opy of the C I T( A p p e al s ) ' s o rd e r i n a s s e ss e e ' s c a s e i t s e l f g r a nt i n g r el i ef t o t h e a s s e s s ee a n d p e r t a i n i n g to a s s e s s m e n t yea r 2 0 1 1 - 1 2 . F u r t h e r i t w a s po i n t e d o u t t h a t th e I TA T C h a n d i ga r h B e n ch had decided t he issue in f a vo u r of the a ss e s s e e in a s s e s s e e 's c a se i t s e l f pe r t a i ni n g t o a s s e ss m e n t ye a r s 2 0 11 - 12, 2 0 1 2 -1 3 in I TA N o s. 4 0 9 & 4 0 6 / 2 0 15 and I TA N o . 4 6 7 / C hd / 2 0 16 . Th e L d . C I T( A pp e a l s ) t a k i n g i n to a c c o u n t t h e a b o v e a n d fo l l o w i n g t h e d e ci s i o n o f th e I . T.A . T. i n t h e c a s e o f a s s es s e e i t s e l f i n e a r l i e r a s s e s sm e n t y e ar s d i r ec t e d t h e A s s e ss i n g Of f i c e r t o c a r r y ou t t h e s a me e x er c i s e w i th r e s p e c t t o t a x f re e i n c o m e a n d he l d t h a t i f t h e r e w a s n o t a x f r e e i n c o m e du r i n g t h e y e a r , t he A s s e s s i n g Of f i c er n e e d n ot m a k e a n y d i s al l o w a n c e u /s 1 4 A of t h e Ac t a nd o th e r w i s e h e m a y d e c i de t h e i s s u e a s pe r l a w . Th e r e l e v a n t f i n d i n g s o f t h e L d . CI T( A p p eal s ) a t pa r a 4 . 2 o f t h e o r d er a r e a s u n d e r :
"The facts of the case, the order passed by the A.O. and the arguments of the AR during the appellate proceedings have been considered. The orders passed by the CIT(A) and the ITAT for earlier years have also been perused. There is merit in the arguments of the AR that the facts of the present case under consideration are similar to the facts of assessment year 2011-12 & 2012-13 decided by the Hon'ble ITAT vide order dated 21/12/2016 mentioned above and hence the disallowance made by the AO is liable to be deleted. Therefore, respectfully following the above mentioned order passed by the Hon'ble ITAT, Chandigarh Bench, in the case of the assessee itself for assessment year 2011-12 & 2012-13, the present appeal is decided in the same manner as per the decision of the 4 Hon'ble ITAT referred above. The AO is directed to carry out the same exercise w.r.t. tax free income and if there is no tax free income during the year, the Assessing Officer is directed not to make disallowance under section 14A of the Act, otherwise, the Assessing Officer has to decide the case As per law."
5. A g g r i e v e d b y t he s a m e t he R e ve n u e h a s c o m e u p i n a s s e s s m e nt p r o ce e d i n g s be f o r e us .
6. D u r i n g t h e c o u r se o f h e a r i n g t h e L d . D R r e i t e r a ted t h e c o n t e n t i on s r a i se d i n i t s g r ou n ds t h a t t h e d i r e c ti o n s o f t h e L d . CI T( A p p e a l s ) t o m a k e n o d i s a l l o w a n c e o f e xp e nd i t u r e u /s 1 4 A i n t h e a b s en c e o f a n y t a x fr e e i n c o m e w a s a g a i n s t t he d i r e c t i o ns g i ve n b y t h e C B D T i n i t s C i r c u l a r N o .5 o f 2 01 4 which c a t e go r i ca l l y stated th a t even in the ab s e n c e of e a r n i n g a n y e x em p t i n co m e di s al l o w a n c e u / s 1 4A i s to b e made.
7. Th e L d . c o u n s e l f o r a s s e s s e e, o n t h e o t h e r h a n d , r e l i e d u p o n t he o rd e r of t h e CI T( A p p e a l s ) r e i t e r a t i n g t he f a c t t h a t i d e n t i c a l i ss u e ha d b e e n d e c i d e d i n f a v o u r o f t h e a s s e s s e e i n e a r l i e r y e a r s i . e . a s s e s sm e n t ye a r s 2 0 1 1 -1 2 a nd 2 0 1 2 - 13 b y t h e I . T. A . T. i n i t s a f o r em e n t i o n e d o r d e r an d fu r t h e r t h at i t w a s s e t tl e d l a w t h a t i n t h e abs e n c e o f a n y e x em p t i n c o m e n o d i s a l l o w a n c e u / s 1 4 A of t h e Ac t w a s wa r r a n t ed.
8. We have h e a rd the rival c o n te n t i o n s , p e r us ed the orders of the authorities b el o w and go n e thr o u g h t he d o c u m e n t s p l a c ed b e f o r e u s . W e h a v e a l s o g o n e th r o u g h t h e o r d e r o f t h e I TAT i n t h e c a s e of t h e a s s es s e e for p r e c e d i n g y e a r s i . e . A . Y . 2 01 1 - 1 2 a n d 2 01 2 -1 3 . W e f i n d n o i n f i r m i t y i n t h e o r d e r o f t he L d . CI T( A p p e a l s ) , c o n s i d e r i n g t ha t h e h a s d e c i d e d t h e i ss ue f o l l o wi n g th e d e c i s i o n o f th e I TA T i n t h e 5 a s s e s s e e s o w n ca s e i n e a r l i er y ea r s o n i d e n ti c a l f a c t s a n d c i r c u m s t an c e s wherein the di s a l l o w a nc e w as d e l e t ed f o l l o w i ng t h e d ec i s i o n o f th e J ur i s d i c t i o n a l H i gh C o u r t i n t h e c a se o f CI T V s . L a k ha n i M a rk e t i n g I n c l . ( 2 0 14 ) 2 7 2 C TR 2 6 5 , l a y i ng down the p r o p os i t i on that w h er e no exempt i n c o m e ha d b e en e a r n e d d u r i ng t h e y ea r n o d i s a l l o w a n ce u / s 1 4 A i s w a rr a n t e d . N o di s t i n g u i s h i n g fa c t s h a v e b e en b r o u g h t t o o ur no t i c e b y t h e Ld .D R i n t h e p r e s en t c a s e a s c o m p a r e d t o t h e e a r l i e r y e a r s de ci d e d b y th e I TA T. Th e r e f o r e t h e o r d e r o f t h e C I T( A ) w a r r a nt s n o i n t e r f e r e n ce . M o r e o v e r t h e r e l i a n ce p l ac e d b y t h e L d .D R o n t h e C B D T C i r c u l a r m e r i t s n o c o n s i de r a t i o n s i n ce t he s a m e a r e n o t b i n d i n g o n c o u r t s b u t on l y o n a u t h o r i t i e s un d e r t h e r e sp e c t i v e s t a t u t es a s h e l d b y t h e ap e x c o u r t i n Co mm i s s i o n e r o f C e nt r a l E x c i se v s R a t an M el t i ng a n d W i r e I n d us t r i e s r e p o r te d i n 2 2 0 C TR
98.
9. I n v i e w o f t h e a b o v e , t h e g r o u nd s o f a p p e a l r a i s e d b y t h e R e v e nu e a r e d i s m i s s e d.
10. I n t h e r es u l t , t h e a p p e a l of t h e R ev e n u e i s d i s m i sse d .
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 26 t h April, 2018
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR Assistant Registrar,
ITAT, Chandigarh