The Principal Commissioner Of Income Tax (Central), Ludhiana v. M/S Vardhman Industries Ltd., New Delhi

ITA-254-2018 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-254-2018 (O&M) Date of Decision: 3.5.2019 The Principal Commissioner of Income Tax (Central), Ludhiana Versus ....Appellant. M/s Vardhman Industries Ltd., New Delhi ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Rajesh Katoch, Sr. Standing Counsel for the appellant.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 12.12.2017 (Annexure A-III) passed by the Income Tax AppellateTribunal, Chandigarh Bench 'B', Chandigarh (hereinafter referred to as “theTribunal”) in ITA No. 1179/Chd/2017, for the assessment year 2012-13,claiming the following substantial questions of law:- (i)Whether on the facts and in the circumstances ofthe case and in law, the Hon'ble ITAT has erred inupholding the order of the Ld. CIT(A), deleting theaddition of ` 32,17,309/- made on account ofdisallowance u/s 14A of the Income Tax Act, 1961read with Rule 8D of the Income Tax Rules, 1962by ignoring the Circular No. 5/2014 dated11.02.2014 issued by the CBDT which providesfor disallowance of expenditure even where taxpayer in particular year has not earned any exemptthe case and in law, the Hon'ble ITAT has erred inupholding the order of the Ld. CIT(A), deleting theaddition of ` 32,17,309/- made on account ofdisallowance u/s 14A of the Income Tax Act, 1961read with Rule 8D of the Income Tax Rules, 1962by ignoring the Circular No. 5/2014 dated11.02.2014 issued by the CBDT which providesfor disallowance of expenditure even where taxpayer in particular year has not earned any exempt ITA-254-2018 income? (ii)Whether the impugned order dated 12.12.2017passed by the Hon'ble ITAT is sustainable in theeyes of law and maintainable in the facts andcircumstances of the case when the assessee hasclaimed interest expenditure in P&L account andhas made investments, income arising on which isnot includible in taxable income u/s 14A of theIncome Tax Act, 1961?passed by the Hon'ble ITAT is sustainable in theeyes of law and maintainable in the facts andcircumstances of the case when the assessee hasclaimed interest expenditure in P&L account andhas made investments, income arising on which isnot includible in taxable income u/s 14A of theIncome Tax Act, 1961? 2.Put shortly, the facts necessary for adjudication of the instantappeal as narrated therein may be noticed. The assessee is engaged in thebusiness of manufacturing of Steel Ingots, GP Sheets/Coils, GC Sheets,CCL Sheets and generation of power. During the course of assessmentproceedings, the Assessing Officer noticed that on 31.3.2011, theinvestments of ` 8,33,38,000/- were made by the assessee. The investmentsof ` 1,31,00,000/- were made during the year under consideration. Thus,the total investments of ` 9,64,38,000/- were made. The investments asdeclared were capital in nature and the income, if any, arising by way ofdividend, out of such investment was exempt from taxation. The assesseehad not offered any disallowance of expenditure in this regard. TheAssessing Officer vide assessment order dated 18.3.2015 (Annexure A-I)made a disallowance of ` 32,17,309/- under Section 14A of the Act readwith Rule 8D of the Income Tax Rules, 1962 (in short “the Rules”) andadded the same to the returned income of the assessee. Feeling aggrieved,the assessee filed an appeal before the Commissioner of Income Tax(Appeals) [in short “the CIT(A)”] challenging the addition of ` 32,17,309/- ITA-254-2018 ITA-254-2018 on account of disallowance of expenses under Section 14A of the Act readwith Rule 8D of the Rules. The CIT(A) vide order dated 1.5.2017(Annexure A-II) allowed the appeal and deleted the said addition by relyingupon the judgment of the Tribunal in the case of the same assessee for theassessment year 2007-08. The revenue challenged the order, Annexure A-II, before the Tribunal. The Tribunal vide order dated 12.12.2017(Annexure A-III) upheld the order of the CIT(A) and dismissed the appealof the revenue in view of its own judgment in the case of the same assesseefor the assessment year 2007-08 and also relying upon the judgment of this Court in CIT v. Winsome Textiles (2009) 319 ITR 204 (P&H) andjudgments of other High Courts. Hence, the present appeal by the revenueagainst the deletion of disallowance made under Section 14A of the Act. 3.We have heard learned counsel for the revenue. 4.It was not disputed by the learned counsel for the revenue thatthe aforesaid matter is covered by the judgment of this Court in ITA No.322 of 2016 (Principal Commissioner of Income Tax-I, Chandigarh v. M/s Vardhman Chemtech Private Limited, Chandigarh) decided on28.8.2018, wherein the appeal filed by the revenue was dismissed. 5.Accordingly, the appeal is dismissed in terms of ITA No. 322of 2016 decided on 28.8.2018. (AJAY KUMAR MITTAL) JUDGE May 3, 2019gbs (MANJARI NEHRU KAUL)JUDGE Whether Speaking/ReasonedWhether Reportable Yes/NoYes/No