Case Number: ITA 1421/DEL/2019
Appellant: ACIT, Circle-11(2), New Delhi
Respondent: Hindustan EPC Company Ltd., New Delhi
Assessment Year: 2015-16
Case Filed On: February 20, 2019
Order Type: Final Tribunal Order
Date of Order: July 29, 2022
Pronounced On: July 29, 2022
The appeal was filed by the ACIT, Circle-11(2), New Delhi, against the order of the Commissioner of Income Tax (Appeals)-IV, New Delhi, dated December 4, 2018, concerning the assessment year 2015-16. The case revolves around the tax arrears dispute under Section 14A, involving disallowances amounting to Rs.1,65,16,139/- made by the Assessing Officer (AO).
The appellant, represented by Shri A.T. Panda, contended that the CIT(A) erred in reversing the disallowances made by the AO under Section 14A of the Income Tax Act, 1961. The AO had disallowed the expenditure related to the investment in optionally convertible preference shares of M/s Hindustan Clean Energy Ltd., despite the fact that no exempt income was received during the year under consideration.
The respondent, Hindustan EPC Company Ltd., represented by Shri Gurpreet Shah Singh, argued that since no exempt income was earned during the year, the provisions of Section 14A could not be invoked. The respondent cited various judicial precedents supporting their stance that disallowance under Section 14A is not applicable in the absence of exempt income.
The case was heard by Shri Kul Bharat, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member, of the Income Tax Appellate Tribunal, Delhi Bench “C”. The Tribunal examined the merits of the case and referred to several judicial decisions that clarified the applicability of Section 14A.
The Tribunal noted that the jurisdictional Hon’ble Delhi High Court, in cases such as Chemnivest Ltd. vs. CIT-IV [378 ITR 33] (2015) and Holcim India Pvt. Ltd. 57 Taxmann.com 28 (2015), has held that Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. Similar rulings were observed in the cases of PCIT vs IL&FS Energy Development Company Ltd. [2017] 84 taxmann.com 186 (Delhi) and CIT vs. Chettinad Logistics (P) Ltd. [2017] 80 taxmann.com 221 (Mad.), where it was concluded that disallowance under Section 14A cannot be invoked without actual receipt of exempt income.
The Tribunal found substantial merit in the respondent’s argument and upheld the CIT(A)’s order. The Tribunal agreed that no disallowance under Section 14A is warranted in the absence of exempt income, as supported by various judicial precedents. Therefore, the addition made by the AO amounting to Rs 1,65,16,139/- under Section 14A r.w. Rule 8D was deleted.
In the result, the appeal of the Revenue was dismissed. The order was pronounced in the open Court on July 29, 2022.
Signatories:
(KUL BHARAT) JUDICIAL MEMBER
(PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER
Date: 29th July, 2022
Assistant Registrar: Prabhat
Copy of the Order is forwarded to:
BY ORDER
Assistant Registrar, ITAT, New Delhi
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