2016 (7) TMI 925 - HC - Income Tax

Tribunal Decision Upheld: No Disallowance under Section 14A without Exempt Income

PR. COMMISSIONER OF INCOME -TAX Versus GUJARAT STATE PETRONET LTD

The High Court upheld the Tribunal's decision to delete the addition made by the Assessing Officer under Section 14A of the Income Tax Act. The Court ... Addition u/s 14A - CIT(A) deleted the addition - Held that:- The sole question arisen in this appeal is squarely covered by decision of this Court in case of Commissioner of Income Tax vs. Corrtech Energy P. Ltd. reported in [2014 (3) TMI 856 - GUJARAT HIGH COURT ] wherein held disallowance under section 14A of the Act could not be made as the assessee did not make any claim for exemption of any income from payment of tax - Decided in favour of assessee Issues Involved:Challenge to ITAT judgment on addition under Section 14A of the Income Tax Act.Analysis:1. Challenge to ITAT Judgment: The Revenue challenged the judgment of the Income Tax Appellate Tribunal (ITAT) dated 07.12.2015, which partially allowed the appeals of both the Revenue and the assessee. The Revenue proposed a substantial question of law regarding the deletion of an addition of Rs. 66,63,882/- made by the Assessing Officer under Section 14A of the Income Tax Act read with Rule 8D of the IT Rules.2. Background and Facts: The respondent-assessee operates a natural gas transportation network through pipelines on a project basis. The assessee filed its income tax return for the assessment year 2008-09, initially declaring a total income of Rs. 113,56,66,684/-, later revised to Rs. 114,32,03,874/-. The Assessing Officer assessed the income at Rs. 127,85,81,330/- after making certain additions.3. Appeals and Tribunal Decision: The assessee challenged the assessment order before the CIT (Appeals), who partly allowed the appeal. This led to cross-appeals, with the department challenging the partial relief granted to the assessee. The Tribunal, in its judgment dated 07.12.2015, partly allowed the appeals of both Revenue and the assessee. The Tribunal referred to the decision of the Hon'ble Gujarat High Court in a similar case and dismissed the Revenue's appeal.4. Legal Analysis: The Tribunal observed that under Section 14A of the Income Tax Act, no deduction is allowed for expenditure related to income not forming part of the total income. Since the assessee did not claim any exemption for income, the Tribunal held that no disallowance under Section 14A could be made. The Tribunal's decision was based on precedents and held that where there is no exempt income, disallowance under Section 14A is not applicable.5. Court's Decision: The High Court noted that the issue in the appeal was covered by its previous decision in a similar case. The Court referred to its earlier judgment and dismissed the Revenue's appeal, stating that no question of law arose for consideration. Therefore, the Court upheld the Tribunal's decision and dismissed the tax appeal.In conclusion, the High Court upheld the Tribunal's decision to delete the addition made by the Assessing Officer under Section 14A of the Income Tax Act, based on the principle that where there is no exempt income claimed, no disallowance can be made under Section 14A. The Court's decision was in line with established legal precedents and previous judgments on similar issues.