Case Number: ITA 668/DEL/2021
Appellant: Remarkable Consumer Electronics Private Limited, New Delhi
Respondent: Pr. CIT-7, New Delhi
Assessment Year: 2017-18
Case Filed On: 2021-06-09
Order Type: Final Tribunal Order
Date of Order: 2022-08-17
Pronounced On: 2022-08-17
The case of Remarkable Consumer Electronics Pvt. Ltd. vs. Pr. CIT focused on the disallowance made under Section 14A of the Income Tax Act, 1961 by the Assessing Officer (AO) and subsequently upheld by the National Faceless Appeal Centre (NFAC) for the assessment year 2017-18. The appellant challenged this disallowance, arguing that no exempt income was earned during the relevant year.
Appellant: Remarkable Consumer Electronics Private Limited, located at Flat No. 305, 3rd Floor, Bakshi House, 40-41, Nehru Place, New Delhi-110019. The company operates in the consumer electronics sector and had significant investments reflected in its balance sheet.
Respondent: Principal Commissioner of Income Tax (Pr. CIT)-7, New Delhi.
The appeal was filed by Remarkable Consumer Electronics Pvt. Ltd. challenging the order passed by the NFAC confirming the disallowance of Rs. 59,392/- made by the AO under Section 14A of the Income Tax Act. The disallowance was related to expenses claimed by the company, which the AO argued should be disallowed under Section 14A as they were incurred in relation to earning exempt income.
The appeal, registered as ITA No. 668/DEL/2021, was heard before the Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘H’ on August 17, 2022. The bench consisted of Shri N. K. Billaiya, Accountant Member, and Shri Anubhav Sharma, Judicial Member.
The appellant was represented by Sh. Pancham Sethi, CA. The primary argument presented was that no exempt income was earned during the assessment year 2017-18, and therefore, the disallowance under Section 14A was not justified.
The respondent, represented by Sh. M. Baranwal, CIT (DR), maintained that the disallowance was in accordance with the provisions of Section 14A read with Rule 8D of the Income Tax Rules, 1962, and should be upheld.
The ITAT considered the arguments from both sides and reviewed the relevant legal precedents. The tribunal referred to the judgment of the Hon’ble High Court of Delhi in the case of Era Infrastructure India Limited (ITA No. 204/2022) and IF & FS Energy Development Company Limited (2017 SCC Online Del 9893), where it was held that no disallowance under Section 14A could be made if no exempt income was earned during the relevant year.
The ITAT noted:
“This issue is no more res integra and has been decided by the Hon’ble High Court of Delhi in the case of Era Infrastructure India Limited in ITA No. 204/2022 vide order dated 20.07.2022, wherein the Hon’ble High Court had considered the decision in the case of IF & FS Energy Development Company Limited 2017 SCC Online Del 9893 and held that no disallowance under Section 14A of the Act can be made if the assessee had not earned any exempt income.”
The tribunal directed the AO to delete the disallowance of Rs. 59,392/-, allowing the appeal of the assessee.
The appeal filed by Remarkable Consumer Electronics Pvt. Ltd. against the order of Pr. CIT-7, New Delhi, for the assessment year 2017-18, was allowed. The tribunal directed the deletion of the disallowance made under Section 14A, considering that no exempt income was earned during the relevant year. This case reaffirms the principle that disallowance under Section 14A cannot be made in the absence of exempt income.
Income Tax Appellate Tribunal, Delhi Bench ‘H’, New Delhi
Before: Shri N. K. Billaiya, Accountant Member, and Shri Anubhav Sharma, Judicial Member
Order:
This appeal by the assessee is preferred against the order dated 15.04.2021 framed by National Faceless Appeal Centre (NFAC), Delhi.
The solitary grievance of the assessee is that the CIT(A)/NFAC erred in confirming the disallowance of Rs. 59,392/- made by the AO under Section 14A of the Act.
Briefly stated the facts of the case are that during the course of the scrutiny assessment proceedings, the AO noticed that the assessee has shown total investments of Rs. 64.74 crores in its balance sheet. The AO further found that the assessee has claimed expenses to the extent of Rs. 59,392/-.
Invoking the provisions of Section 14A read with Rule 8D, the AO asked the assessee to show cause why disallowance under Section 14A should not be made. On receiving no plausible reply, the AO computed the disallowance and made an addition of Rs. 59,392/-.
This issue is no more res integra and has been decided by the Hon’ble High Court of Delhi in the case of Era Infrastructure India Limited in ITA No. 204/2022 vide order dated 20.07.2022 wherein the Hon’ble High Court had considered the decision of Hon’ble High Court in the case of IF & FS Energy Development Company Limited 2017 SCC Online Del 9893, wherein it has been held that no disallowance under Section 14A of the Act can be made if the assessee had not earned any exempt income.
Considering the amendment brought in the statute by the Finance Act, 2022, the Hon’ble High Court held as under:
In the light of the above, the AO is directed to delete the impugned addition. The appeal of the assessee is allowed.
Decision announced in the open court on 17.08.2022.
Signed:
N. K. Billaiya, Accountant Member
Anubhav Sharma, Judicial MemberNEHA, Sr. Private Secretary
Date:- 17.08.2022
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
Assistant Registrar, ITAT New DelhiDate of dictation: 17.08.2022
Date on which the typed draft is placed before the dictating Member: 17.08.2022
Date on which the typed draft is placed before the Other Member: 17.08.2022
Date on which the approved draft comes to the Sr.PS/PS: 17.08.2022
Date on which the fair order is placed before the Dictating Member for Pronouncement: 17.08.2022
Date on which the fair order comes back to the Sr. PS/PS: 17.08.2022
Date on which the final order is uploaded on the website of ITAT: 17.08.2022
Date on which the file goes to the Bench Clerk: 17.08.2022
Date on which file goes to the Head Clerk: 17.08.2022
The date on which file goes to the Assistant Registrar for signature on the order
Date of dispatch of the Order: 17.08.2022Remarkable Consumer Electronics Pvt. Ltd. vs. Pr. CIT: Disallowance under Section 14A, 2022
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