Income Tax Appeal Case: ITA 1340/DEL/2022
In a pertinent case before the Income Tax Appellate Tribunal, Delhi Bench ‘C’, New Delhi, ITA No.1340/Del/2022, the matter under scrutiny was an appeal filed by Kalamkari Designs Pvt. Ltd., against the order of the Commissioner of Income Tax (Appeals) -23, New Delhi. The focus of this appeal lay on the disallowances made under various sections of the Income Tax Act, 1961, and its implications on the appellant, a company based in New Delhi, for the Assessment Year 2014-15.
Background
Kalamkari Designs Pvt. Ltd. found itself embroiled in a tax dispute following the assessment order dated 16/12/2016 under Section 143(3) of the Income Tax Act, 1961, passed by the Deputy Commissioner of Income Tax, Circle-11(1), Kolkata. The primary contention revolved around several disallowances including the disallowance of employees’ contributions to Provident Fund/Employee State Insurance Funds, interest on delayed payment of TDS, and disallowance u/s 14A read with Rule 8D.
Arguments and Proceedings
The hearing, conducted on 23.01.2023, saw representations from both sides. The appellant, represented by Sh. Nishchay Khandelwal, CA, argued against the order passed by the Ld. Commissioner of Income Tax (appeals), which was defended by Sh. Anuj Garg, Sr. DR, on behalf of the revenue.
During the proceedings, it was clarified that the appellant was not contesting the first two grounds of appeal but emphasized the disallowance under Section 14A. They argued that despite having no exempt income during the year in question, disallowance under Section 14A was made, which was against the principles laid down by the jurisdictional high courts in similar matters.
Judgment and Conclusion
The Tribunal, after hearing both sides and considering the submissions, directed its attention towards the disallowance under Section 14A. In light of the appellant’s arguments and the judgments cited, including the landmark decisions by the Hon’ble Delhi High Court, it was concluded that the disallowance made was indeed unjustified as there was no exempt income earned during the year.
Therefore, the Tribunal, led by Sh. Shamim Yahya, Accountant Member and Sh. Anubhav Sharma, Judicial Member, allowed the appeal partly in favor of the assessee, marking a significant ruling on the applicability of Section 14A in cases where no exempt income is earned.
Implications and Analysis
The verdict in ITA No.1340/Del/2022 serves as a crucial reference point for similar disputes, emphasizing the need for a thorough examination of the facts and the law before making disallowances under Section 14A. It underscores the importance of adhering to judicial precedents and the principles of natural justice in tax adjudication.
For Kalamkari Designs P.Ltd. and other taxpayers, the judgment offers clarity on the disallowance provisions, particularly concerning exempt income and its interpretation under the Income Tax Act. It further highlights the judiciary’s role in ensuring that tax laws are applied equitably and justly, safeguarding the interests of both the taxpayers and the revenue.
