The Principal Commissioner Of Income Tax (Central), Ludhiana v. M/S Cosmos Infra Engineering (India) Ltd., Delhi

ITA-213-2018 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-213-2018 (O&M) Date of Decision: 1.4.2019 The Principal Commissioner of Income Tax (Central), Ludhiana Versus ....Appellant. M/s Cosmos Infra Engineering (India) Ltd., Delhi ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Rajesh Katoch, Sr. Standing Counsel with Ms. Pridhi Jaswinder Sandhu, Junior Standing Counsel.*** AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the revenue under Section260A of the Income Tax Act, 1961 (in short “the Act”) against the orderdated 31.10.2017 (Annexure A-III) passed by the Income Tax AppellateTribunal, Chandigarh Bench, Chandigarh (hereinafter referred to as “theTribunal”) in ITA No. 486/CHD/2017, for the assessment year 2013-14,claiming the following substantial questions of law:- (i)Whether in the facts and circumstances of the case,the Hon'ble ITAT is correct in upholding the orderof the CIT(A) that no disallowance u/s 14A can bemade if there is no tax free income earned during the year ignoring the CBDT's Circular No. 5/2014dated February 11, 2014 which states thatdisallowance of expenses for earning exemptincome u/s 14A of the Income Tax Act, 1961 readwith Rule 8D of the Income Tax Rules, 1962,would be attracted even if corresponding incomehas not been earned during the year? (ii)Whether the impugned order dated 31.10.2017passed by the ITAT is sustainable in the eyes oflaw or maintainable in the facts and circumstancesof the case?passed by the ITAT is sustainable in the eyes oflaw or maintainable in the facts and circumstancesof the case? 2.Briefly stated, the facts necessary for adjudication of the instantappeal as narrated therein may be noticed. The Assessing Officer during thecourse of assessment proceedings had noticed that the assessee had declaredinvestment in shares amounting to ` 641.13 lakhs as against suchinvestment of ` 640.98 lakhs shown in the immediate preceding assessmentyear. Since the income earned, if any, from these investments, by way ofdividend etc. was exempt from taxation, as such the expenditure incurredrelating to such investments was not an allowable expenditure. TheAssessing Officer vide assessment order dated 5.6.2015 (Annexure A-1)passed under Section 143(3) of the Act disallowed the expenditureamounting to ` 2,07,14,800/- and added to the income of the assessee.Feeling aggrieved, the assessee filed an appeal before the Commissioner ofIncome Tax (Appeals) [for brevity “the CIT(A)”] challenging the additionof ` 2,07,14,800/- under Section 14A of the Act read with Rule 8D of the ITA-213-2018 dated 6.1.2017 (Annexure A-II) allowed the appeal and deleted the additionof ` 2,07,14,800/- under Section 14A of the Act read with Rule 8D of theRules. The revenue challenged the order, Annexure A-II, before theTribunal. The Tribunal vide order dated 31.10.2017 (Annexure A-III)upheld the order of the CIT(A) and dismissed the appeal of the revenue.Hence, the present appeal by the revenue. 3.We have heard learned counsel for the revenue. 4.It could not be disputed by the learned counsel for the revenuethat the aforesaid matter is covered by the judgment of this Court in ITA- 322-2016 (Principal Commissioner of Income Tax-I, Chandigarh v. M/sVardhman Chemtech Private Limited, Chandigarh) decided on28.8.2018, wherein the appeal filed by the revenue against the deletion ofdisallowance of ` 40,28,526/- under Section 14A of the Act read with Rule8D of the Rules, was dismissed. 5.Accordingly, the present appeal is also dismissed in terms ofITA-322-2016. (AJAY KUMAR MITTAL) JUDGE April 1, 2019gbs (MANJARI NEHRU KAUL)JUDGE Whether Speaking/ReasonedYes/NoWhether ReportableYes/No