Observations v. Ssp 2/3

18 ITXA 597 OF 2017.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.597 OF 2017 Pr. Commissioner of Income Tax, Central – 2 …Appellant versusM/s. Red Chillies Entertainment Pvt. Ltd. …Respondent Mr. Suresh Kumar, for Appellant. Mr. Subhash S. Shetty, for Respondent CORAM: AKIL KURESHI & S.J. KATHAWALLA, JJ. th JUNE, 2019 DATE: 11 P.C.: 1. This Appeal is filed by the Revenue to challenge the Judgment of the Income Tax Appeallate Tribunal (“the Tribunal” for short). The following question is presented for our consideration : (i)Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is justified in holding that no disallowance should be made u/s. 14A r.w.r. 8D, if exempt income had not beenearned for the year under scrutiny ? 2.The question is self-explanatory and the issue involved is squarely covered by the decision of the Division Bench of this Court dated 30-01-2019 in Income Tax Appeal No.1619 of 2016. Revenue's appeal was dismissed making the following SSP 1/3 observations : “5.This question relates to disallowance made by the Assessing Officerunder Section 14A of the Income Tax Act, 1961 r/w Rule 8D of the Rulesof the Expenditure incurred by the assessee for earning exempt income.The Tribunal by the judgment which is impugned in this appeal held thatthe assessee had not earned any exempt income during the year underconsideration. The Tribunal, therefore, followed the decision of DelhiHigh Court in the case of CIT Vs/ Holcim India (Pvt.) Ltd. (2014) 272CTR 282.In such decision, the Delhi High Court ruled that when thereis no exempt income earned by the assessee, no disallowance under Section14A of the Act, can be made. It is pointed out to us that this Court inIncome Tax Appeal No.693 of 2015 in case of Principal CIT Vs. M/s.Rivian International (P) Ltd., by order dated 21.11.217, following thejudgment of Delhi High Court in case of Holcim India (P) Ltd. (supra),has adopted the same principle making following observations :-“3. We have given careful consideration to the submissions. Onfacts, it appears from the impugned judgment that the assessee had madeinvestment in hares of closely held companies which did not declare anydividend. On fact, there is no dispute that the assessee has not earned anyexempt income during the year under consideration. After considerationof Section 14A, the Delhi High Court followed decisions of certain otherHigh Courts. Section 14A of the said Act provides that for the purpose ofcomputing the total income, no deduction shall be allowed in respect ofexpenditure incurred by the assessee in relation to income which does notform part of the total income under the said Act. In other words, Section14A provides that if there is an income which does not form a part of the SSP 2/3 total income under the said Act, the expenditure which is incurred forearning the income is not an allowable deduction. Therefore, during therelevant year,if the assessee has not earned any tax free income, thecorresponding expenditure incurred cannot be taken into considerationfor disallowance. 4. We respectfully concur with the view taken by the Delhi High Court asthe said view can always be taken on fair reading of Section 14A of thesaid Act. A Division Bench of Allahabad High Court has also taken asimilar view in the case of Commissioner of Income Tax V/s. ShivamMotors (P) Ltd. (supra). Hence, in our view, no fault can be found withthe impugned judgment of the Appellate Tribunal whereby dis-allowanceunder Section 14A was ordered to be deleted. No subtantial question oflaw arises. Appeal is, accordingly, dismissed.” 4. We respectfully concur with the view taken by the Delhi High Court asthe said view can always be taken on fair reading of Section 14A of thesaid Act. A Division Bench of Allahabad High Court has also taken asimilar view in the case of Commissioner of Income Tax V/s. ShivamMotors (P) Ltd. (supra). Hence, in our view, no fault can be found withthe impugned judgment of the Appellate Tribunal whereby dis-allowanceunder Section 14A was ordered to be deleted. No subtantial question oflaw arises. Appeal is, accordingly, dismissed.” 6.Counsel for the assessee also brought to our notice the fact that theSupreme Court in case of CIT Vs.Chettinad Logistics (P) Ltd. 95taxmann.com 250 has dismissed the Revenue's SLP against thejudgment of the Delhi High Court in Holcim India (P) Ltd. (supra),taking a similar view. This additional question is, therefore, notentertained.” 3. In the result, the Income Tax Appeal is dismissed. ( S.J.KATHAWALLA, J. ) ( AKIL KURESHI, J. ) SSP 3/3