Daspalla Investments Pvt.Ltd. v. Income-tax Officer, Ward-3(1), Visakhapatnam
[Citation -2019-LL-0821-40]

Citation 2019-LL-0821-40
Appellant Name Daspalla Investments Pvt.Ltd.
Respondent Name Income-tax Officer, Ward-3(1), Visakhapatnam
Court ITAT-Visakhapatnam
Relevant Act Income-tax
Date of Order 21/08/2019
Assessment Year 2014-15
Judgment View Judgment
Keyword Tags prejudicial to the interest of revenue • disallowance of expenditure • expenditure incurred • scrutiny assessment • interest receipt • dividend income • exempt income • investment in equity shares
Bot Summary: All the grounds of appeal are related to the order passed by the Ld.Pr.CIT u/s 263 of the Income Tax Act, 1961. Since the income that would accrue from the investments is exempt u/s 10(34) of the Act, the Ld.Pr.CIT viewed that disallowance required to be made u/s 14A of the Act relating to the expenditure incurred by the assessee pertaining to the investments made in Jubilee Hill Resorts Ltd. Since the AO has failed to disallow the expenditure relatable to the earning of exempt income, the Ld.Pr.CIT has taken up the case for revision u/s 263 and held that the assessment made u/s 143(3) was erroneous and prejudicial to the interest of the revenue and accordingly set aside the order of the AO and directed the AO to disallow the expenditure relatable to the earning the dividend income as per Rule 8D of I.T.Rules. The Ld.AR further argued that in the instant case, the assessee did not earn any dividend or exempt income, thus, there is no case for making the disallowance u/s 14A of the Act. A.Y.2014-15 M/s Daspalla Investments Pvt. Ltd., Visakhapatnam disallowance of expenditure u/s 14A in the absence of dividend income. From the break-up of the income account it is found that only income received by the assessee was interest receipt which was offered to tax. In the instant case, there is no dispute that there is no exempt income earned by the assessee, hence there is no case for disallowance of expenditure relatable to earning the dividend income. In the instant case, the assessee did not earn the exempt income and furnished the completed details before the AO. Therefore, we are of the view that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of revenue, hence the same is unsustainable.


IN INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER& SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER I.T.A.No.173/Viz/2019 (Assessment Year 2014-15) M/s Daspalla Investments Pvt.Ltd., Vs. Income Tax Officer D.No.28-02-48, Hotel Daspalla Ward-3(1) Suryabagh Visakhapatnam Visakhapatnam [PAN :AAECD8330K] (Appellant) (Respondent) Appellant by Shri I Kama Sastry, AR Respondent by Shri D.K.Sonowal, CIT DR Date of Hearing 18.07.2019 Date of Pronouncement 21.08.2019 ORDER Per Shri D.S.Sunder Singh, Accountant Member This appeal is filed by assessee against order of Pr.Commissioner of Income Tax [Pr.CIT], Visakhapatnam vide F.No.Pr.CIT-1/VSP/263/03/2018-19 dated 31.03.2019 for Assessment Year (A.Y.)2014-15. 2 I.T.A. No.173/Viz/2019. A.Y.2014-15 M/s Daspalla Investments Pvt. Ltd., Visakhapatnam 2. All grounds of appeal are related to order passed by Ld.Pr.CIT u/s 263 of Income Tax Act, 1961 (in short Act ). In this case, assessment was completed u/s 143(3) on total income of Rs.2,10,237/-. Subsequently, Pr.CIT noticed that assessee has made investments of Rs.2,02,50,000/- in equity shares of M/s Jubilee Hill Resorts Ltd., during Financial Year 2013-14 relevant to A.Y.2014-15 . Since income that would accrue from investments is exempt u/s 10(34) of Act, Ld.Pr.CIT viewed that disallowance required to be made u/s 14A of Act relating to expenditure incurred by assessee pertaining to investments made in Jubilee Hill Resorts Ltd. Since AO has failed to disallow expenditure relatable to earning of exempt income, Ld.Pr.CIT has taken up case for revision u/s 263 and held that assessment made u/s 143(3) was erroneous and prejudicial to interest of revenue and accordingly set aside order of AO and directed AO to disallow expenditure relatable to earning dividend income as per Rule 8D of I.T.Rules. Hence, assessee filed appeal before us. 3 I.T.A. No.173/Viz/2019. A.Y.2014-15 M/s Daspalla Investments Pvt. Ltd., Visakhapatnam 3. During appeal hearing Ld.A.R. submitted that during assessment proceedings, assessee has furnished balance sheet, profit and loss account and relevant details before AO at time of scrutiny assessment and AO had completed assessment after duly verifying details. Thus Ld.AR contended that assessment was completed u/s 143(3) in this case, after verifying details filed by assessee and there is no other income earned by assessee relatable to earning of dividend income as per Profit & Loss account. Since AO has completed assessment after examining Profit & Loss account and relevant details, Ld.AR argued that there is no error in order of AO, hence, Ld.Pr.CIT erred in taking action u/s 263. Ld.AR further argued that in instant case, assessee did not earn any dividend or exempt income, thus, there is no case for making disallowance u/s 14A of Act. Ld.AR further submitted that coordinate bench of this Tribunal in number of decisions on identical facts has taken similar view. Ld.AR relied on decision of this Tribunal in case of D.Veerabhadra Reddy (HUF) Vs. Deputy Commissioner of Income Tax vide I.T.A. No.263/Viz/2014 dated 23.06.2017 and submitted that on identical facts this Tribunal held that there is no case for 4 I.T.A. No.173/Viz/2019. A.Y.2014-15 M/s Daspalla Investments Pvt. Ltd., Visakhapatnam disallowance of expenditure u/s 14A in absence of dividend income. Ld.AR also relied on following decisions : (i) Income Tax Appellate Tribunal, Visakhapatnam Bench Order Dt. 30.04.2019 between Asst. Commissioner of Income Tax Vs. M/s.G M P Infrastructure Private Limited. (ii) Principal Commissioner of Income Tax Vs. IL & FS Energy Development Company Ltd.(2017) 99 CCH DEL HC (2017) 297 CTR 0452 (DEL): (2017) 399 ITR 0483 (DELHI (2017) 250 Taxman 0174 (DELHI) (iii) High Court of Punjab & Haryana Judgement Dt. 28.08.2018 between Principal Commissioner of Income Tax vs Vardhman Chemtech Private Limited (iv) Cheminvest Limited vs Commissioner of Income Tax ( 2015) 94 CCH 0002 DEL HC (2015) 281 CTR 0447 (DEL) (2015) 126 DTR (DEL) (2015) 378 ITR 0033 (DELHI) :(2015) 234 TAXMAN 0761 (DELHI) (v) Income Tax Appellate Tribunal, Delhi 'F' Bench Between M/s Parsvnath Developers Limited Vs Deputy Commissioner Of Income Tax Dt.22.04.2019 4. We have heard both parties and perused material placed on record. In instant case, assessment was completed u/s 143(3). As per Profit & Loss account placed in page No.2 of paper book assessee has received revenue from operations for which details were given in Annexure No.13 and same was interest earned and there is no other income. From break-up of income account it is found that only income received by assessee was interest receipt which was offered to tax. Therefore, it is evident from Profit & Loss account that 5 I.T.A. No.173/Viz/2019. A.Y.2014-15 M/s Daspalla Investments Pvt. Ltd., Visakhapatnam assessee has not earned any dividend income from investments made by assessee during impugned assessment year which is exempt. Ld.AR argued that AO had examined issue hence, there is no error in order passed by AO and accordingly argued that Ld.Pr.CIT erred in invoking jurisdiction. Ld.A.R further submitted that coordinate bench of this Tribunal on identical facts held that in absence of dividend income, there is no case for disallowance of expenditure u/s 14A of Act. In instant case, there is no dispute that there is no exempt income earned by assessee, hence there is no case for disallowance of expenditure relatable to earning dividend income. Therefore, we are of view that there is no error in order passed by AO for taking up case for revision u/s 263 of Act. Two conditions required to be satisfied for invoking jurisdiction u/s 263 i.,e. order passed should be erroneous and prejudicial to interest of revenue. In instant case, assessee did not earn exempt income and furnished completed details before AO. Therefore, we are of view that assessment order passed by AO is neither erroneous nor prejudicial to interest of revenue, hence same is unsustainable. Therefore, we set aside order of Ld.Pr.CIT 6 I.T.A. No.173/Viz/2019. A.Y.2014-15 M/s Daspalla Investments Pvt. Ltd., Visakhapatnam passed u/s 263 and restore assessment order. Accordingly, appeal of assessee is allowed. 5. In result, appeal of assessee is allowed. Order pronounced in open court on 21st August, 2019. Sd/- Sd/- (V. DURGA RAO) (D.S. SUNDER SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Visakhapatnam Dated 21.08.2019 L.Rama, SPS Copy of order forwarded to 1. Assessee- M/s Daspalla Investments Pvt.Ltd., D.No.28-02-48, Hotel Daspalla, Suryabagh, Visakhapatnam 2. Revenue - Income Tax Officer, Ward-3(1), Visakhapatnam 3. Pr.Commissioner of Income Tax-1, Visakhapatnam 4.DR, ITAT, Visakhapatnam 5. Guard file BY ORDER Sr. Private Secretary ITAT, Visakhapatnam Daspalla Investments Pvt.Ltd. v. Income-tax Officer, Ward-3(1), Visakhapatnam
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