2018 (9) TMI 1985 - AT - Income Tax

Tribunal Affirms No Disallowance for Exempt Income Earned in 2012-13 & 2013-14; Upholds CIT(A)'s Orders.

ACIT, Circle-4 (1), Visakhapatnam Versus M/s. Shri Girija Smelters Ltd.

The ITAT dismissed the Revenue's appeals and upheld the CIT(A)'s decision to delete the disallowance under section 14A r.w.r. 18D of the IT Rules, 1962, ... Addition u/s 14A - no exempt income reported - HELD THAT:- We find that ld. CIT(A) by following the decision of the coordinate bench of the tribunal in the case of Radha Krishna Automobiles [2017 (11) TMI 1689 - ITAT VISAKHAPATNAM], wherein the decisions of the Hon'ble Madras High Court in the case of Redington (India) Ltd [2017 (1) TMI 318 - MADRAS HIGH COURT] and case of Pr.CIT Vs. Sintex Industries Ltd. [2017 (6) TMI 601 - GUJARAT HIGH COURT] have been followed, and held that there is dividend income and section 14A r.w.r. 18D of the IT Rules, 1962 has no application and directed the Assessing Officer to delete the addition. Ld. Departmental Representative has not brought any decision of the jurisdictional or any other High Court which is contrary to the decision of the Hon'ble Madras High Court as well as Gujarat High Court (supra). Therefore, we find no infirmity in the order passed by the ld.CIT(A). - Decided against revenue. Issues:Appeal against orders of Commissioner of Income Tax (Appeals) for Assessment Years 2012-13 & 2013-14 regarding disallowance under section 14A r.w.r. 18D of the IT Rules, 1962.Detailed Analysis:1. The assessee challenged the orders of Commissioner of Income Tax (Appeals) regarding disallowance under section 14A r.w.r. 18D of the IT Rules, 1962. The Assessing Officer noted significant investments in shares of companies with exempt income. The assessee initially consented to disallowance under Rule 8D but later retracted citing no exempt income earned during the year. The Assessing Officer invoked section 14A r.w.r. 18D and disallowed expenditure of &8377; 1,21,76,456/- based on CBDT Circular No. 05/2014 and precedents.2. The ld. CIT(A) deleted the addition, relying on the ITAT, Visakhapatnam Bench's decision in DCIT Vs. Radha Krishna Automobiles, aligning with the view that no disallowance is warranted when there is no exempt income earned, as per the decision of the Hon'ble Madras High Court in the case of M/s. Redington (India) Ltd. and other precedents. The ld. Departmental Representative supported the Assessing Officer's order, while the assessee's counsel argued for upholding the ld. CIT(A)'s decision.3. The Tribunal analyzed the case, emphasizing that no disallowance under section 14A r.w.r. 18D is necessary when no exempt income is earned during the relevant assessment year. Citing the decisions of the Hon'ble Madras High Court and the ITAT, the Tribunal dismissed the Revenue's appeal, aligning with the principles established in previous judgments.4. In a similar case (ITA No. 307/VIZ/2018), the Tribunal applied the same reasoning and decision as in ITA No. 306/VIZ/2018 due to similar facts and circumstances. Additionally, Cross Objections filed by the assessee were supportive of the ld. CIT(A)'s orders and were consequently dismissed.5. Ultimately, the Tribunal upheld the ld. CIT(A)'s decision to delete the addition, following established legal precedents and dismissing the Revenue's appeals and the assessee's cross objections. The Tribunal's decision was based on the principle that no disallowance is warranted under section 14A r.w.r. 18D when no exempt income is earned, in accordance with relevant judicial pronouncements.This detailed analysis outlines the progression of the case, the arguments presented, and the Tribunal's decision based on legal principles and precedents cited during the proceedings.