Pr. Commissioner of Income-tax-6 v. Kohinoor Project Pvt. Ltd
[Citation -2020-LL-0127-250]

Citation 2020-LL-0127-250
Appellant Name Pr. Commissioner of Income-tax-6
Respondent Name Kohinoor Project Pvt. Ltd.
Court HIGH COURT OF BOMBAY
Relevant Act Income-tax
Date of Order 27/01/2020
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags actual receipt of income • quantum of disallowance • expenditure incurred • exempt income • total income • no deduction
Bot Summary: In the appeal proceedings the frst appellate authority held that the Assessing Ofcer was justifed in invoking Section 14A of the Act by taking the view that the assessee had made investments that would give rise to exempt income and Section 14A of the Act was applicable. The Tribunal considered the contention of the assessee that no exempt income was claimed by the assessee under Section 14A of the Act and no disallowance could have been made by the Assessing Ofcer by invoking Section 14A together with Rule 8D(2)(ii) of the Income Tax Rules, 1962. Shivam Motors Pvt. Ltd., 2015 55 taxman.com 262(Allahabad) and observed that there is uniformity in the view that in case there is no exempt income claimed by the assessee in the return of income, no disallowance can be made by the revenue. Section 14A of the Act deals with expenditure incurred in relation to income not includible in total income. As per sub- Section of Section 14A, for the purpose of computing the total income, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income. In Cheminvest Ltd. Delhi High Court examined the expression does not form part of the total income as appearing in sub-Section of Section 14A of the Act. Delhi High Court held that the said expression envisages that there should be an actual receipt of income which is not includible in the total income during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income.


Sonali Kilaje 10-ITXA-1124-17.doc IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1124 OF 2017 Pr. Commissioner of Income Tax-6 .. Appellant v/s. M/s. Kohinoor Project Pvt. Ltd. Respondent Mr. A.R.Malhotra for Appellant. Mr. Mihir C. Naniwadekar a/w. Mr. Ruturaj Gurjar for Respondent. CORAM: UJJAL BHUYAN, & MILIND N. JADHAV, JJ. DATE : JANUARY 27, 2020. P. C. :- . Heard Mr.A.R.Malhotra, learned standing counsel revenue for appellant and Mr. Mihir C. Naniwadekar, learned counsel for respondent - assessee. 2. This appeal has been fled by revenue under Section 260A of Income Tax Act, 1961 ( Act for short) against order dated 18.10.2016 passed by Income Tax Appellate Tribunal Bench, Mumbai ("Tribunal" for short) in Income Tax 1 of 6 ::: Uploaded on - 30/01/2020 ::: Downloaded on - 01/02/2020 09:58:52 ::: Sonali Kilaje 10-ITXA-1124-17.doc Appeal No. 5241/Mum/2013 for Assessment Year 2008-09. 3. appeal has been preferred projecting following two questions as substantial questions of law : (i) Whether on facts and in circumstances of case and in law, Hon ble ITAT was justifed in deleting addition of Rs.5,79,95,481/- on ground that when there is no exempt income declared during year, there cannot be any disallowance u/s. 14A of Income Tax Act, 1961 read with Rule 8D of Income Tax Rules, 1962 while confrming order of Ld. CIT(A) restricting disallowance to Rs.1,16,03,269/- under Rule 8D(2)(ii) of I.T. Rules, 1962 ? (ii) Whether on facts and in circumstances of case and in law, Hon ble ITAT was justifed in confrming order of Ld. CIT(A) to restrict disallowance to Rs.1.16 crore without appreciating fact that by doing this, Hon ble ITAT has allowed application of Rule 8D(2) (ii) of I.T. Rules, 1962 in case of assessee even when it has not earned any exempt income ? 2 of 6 ::: Uploaded on - 30/01/2020 ::: Downloaded on - 01/02/2020 09:58:52 ::: Sonali Kilaje 10-ITXA-1124-17.doc 4. Respondent in its return of income for assessment year under consideration declared total loss of Rs.(-) 10,16,33,795/-. case was selected for scrutiny and thereafter subjected to scrutiny assessment. Assessing Ofcer noted that assessee had made investment of Rs.7.90 Crores in shares of Kohinor CTNL Infrastructure Co. Ltd. which was held to be strategic investment for which assessee would receive future benefts. Notwithstanding fact that assessee had earned no exempt income for relevant previous year, Assessing Ofcer made disallowance to extent of Rs.6,95,98,750/- under Section 14A of Act. 5. Aggrieved by aforesaid, assessee preferred appeal before Commissioner of Income Tax (Appeals)-12, Mumbai. In appeal proceedings frst appellate authority held that Assessing Ofcer was justifed in invoking Section 14A of Act by taking view that assessee had made investments that would give rise to exempt income and, therefore, Section 14A of Act was applicable. Accordingly, vide order dated 08.05.2013, frst appellate authority afrmed action of 3 of 6 ::: Uploaded on - 30/01/2020 ::: Downloaded on - 01/02/2020 09:58:52 ::: Sonali Kilaje 10-ITXA-1124-17.doc Assessing Ofcer in invoking Section 14A of Act but reduced quantum of disallowance to Rs.1,16,03,269/- for grounds and reasons mentioned in appellate order. 6. Aggrieved by reduction in quantum of disallowance revenue preferred appeal before Tribunal. Tribunal considered contention of assessee that no exempt income was claimed by assessee under Section 14A of Act and, therefore, no disallowance could have been made by Assessing Ofcer by invoking Section 14A together with Rule 8D(2)(ii) of Income Tax Rules, 1962. Tribunal relied upon decision of Delhi High Court in case of Cheminvest Limited v/s. Commissioner of Income Tax, 378 ITR 33(Delhi); decision of Punjab and Haryana High Court in CIT v/s. Lakhani Marketing Incl., [2014], 49 taxman.com 257; and decision of Allahabad High Court in case of CIT v/s. Shivam Motors Pvt. Ltd., [2015] 55 taxman.com 262(Allahabad) and observed that there is uniformity in view that in case there is no exempt income claimed by assessee in return of income, no disallowance can be made by revenue. Consequently, vide order dated 18.10.2016 Tribunal 4 of 6 ::: Uploaded on - 30/01/2020 ::: Downloaded on - 01/02/2020 09:58:52 ::: Sonali Kilaje 10-ITXA-1124-17.doc dismissed appeal of revenue. 7. Submissions made by learned counsel for parties have been considered. 8. Section 14A of Act deals with expenditure incurred in relation to income not includible in total income. As per sub- Section (1) of Section 14A, for purpose of computing total income, no deduction shall be allowed in respect of expenditure incurred by assessee in relation to income which does not form part of total income. In Cheminvest Ltd. (supra) Delhi High Court examined expression "does not form part of total income" as appearing in sub-Section (1) of Section 14A of Act. Delhi High Court held that said expression envisages that there should be actual receipt of income which is not includible in total income during relevant previous year for purpose of disallowing any expenditure incurred in relation to said income. It was clarifed that Section 14A will not apply if no exempt income is received or receivable during relevant previous year. 5 of 6 ::: Uploaded on - 30/01/2020 ::: Downloaded on - 01/02/2020 09:58:52 ::: Sonali Kilaje 10-ITXA-1124-17.doc 9. This view has been followed in several decisions by this Court. In fact in Income Tax Appeal No. 259 of 2017, Principal Commissioner of Income Tax, Mumbai v/s. MAN Infraprojects Ltd., decided on 09.04.2019, this Court followed decision of Delhi High Court in Cheminvest Ltd. (supra). It was further noted in MAN Infraprojects Ltd. that decision of Delhi High Court was challenged by revenue before Supreme Court by fling SLP but SLP was dismissed. 10. In light of above, we hold that no substantial question of law arises from order of Tribunal. appeal is devoid of merit and is accordingly, dismissed. (MILIND N. JADHAV, J.) (UJJAL BHUYAN,J.) 6 of 6 ::: Uploaded on - 30/01/2020 ::: Downloaded on - 01/02/2020 09:58:52 ::: Pr. Commissioner of Income-tax-6 v. Kohinoor Project Pvt. Ltd
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