C/TAXAP/66/2020 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 66 of 2020 PRINCIPAL COMMISSIONER OF INCOME TAX-1 Versus M/S ADANI INFRASTRUCTURE AND DEVELOPERS PVT. LTD. Appearance: MRS MAUNA M BHATT(174) for Appellant(s) No. 1 for Opponent(s) No. 1 CORAM: HONOURABLE MR. JUSTICE J. B. PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 17/02/2020 ORAL ORDER (PER : HONOURABLE MR. JUSTICE J. B. PARDIWALA) 1 This Tax Appeal under Section 260A of Income Tax Act, 1961 [for short, 'the Act, 1961'] is at instance of Revenue and is directed against order passed by Income Tax Appellate Tribunal, Ahmedabad Bench 'B', Ahmedabad dated 15th May 2019 in ITA No.2211/Ahd/2017 for A.Y. 2013 14. 2 Revenue has proposed following solitary substantial question of law for consideration of this Court: Whether Appellate Tribunal has erred in law and on facts in deleting disallowance of Rs.4,72,00,565/ made under Section 14A of Act read with Rule 8D of Income Tax Rules? 3 It appears from materials on record that in course of Page 1 of 4 Downloaded on : Thu Feb 20 15:05:46 IST 2020 C/TAXAP/66/2020 ORDER assessment proceedings, Assessing Officer noticed that assessee had made investment to tune of Rs.27,78,87,305/ on 31st March 2012 and same was enhanced to Rs.1,57,04,32,421/ as on 31st March 2013. Assessing Officer noticed that assessee had not made any disallowance under Section 14A read with Rule 8D of Income Tax Rules in respect of any expenditure incurred for aforesaid investment. case of assessee before Assessing Officer was that interest free funds were used for investing in equity shares and in such circumstances, no disallowance was required to be made under Section 14A read with Rule 8D of Income Tax Rules. asessee also declared that no exempt income has been claimed and therefore disallowance under Section 14A should not be made. Assessing Officer rejected case put up by assessee and after referring to CBDT circular No.5/2014 held that disallowance can be made by invoking Section 14A of Act, 1961 though no income had been earned by assessee claimed as exempt during year under consideration. 4 In such circumstances referred to above, Assessing Officer computed disallowance under Section 14A read with Rule 8D of Income Tax Rules to amount of Rs.4,72,00,565/ and added to total income of assessee. 5 assessee being dissatisfied with assessment order went in appeal before CIT(A). CIT(A) deleted addition relying upon decision of this Court in case of CIT vs. Corrtech Energy P. Ltd [2014] 45 taxmann.com 116. 6 Revenue being dissatisfied with order passed by CIT(A) went in appeal before Tribunal. Page 2 of 4 Downloaded on : Thu Feb 20 15:05:46 IST 2020 C/TAXAP/66/2020 ORDER 7 Tribunal dismissed appeal thereby affirming order passed by CIT(A). 8 In such circumstances, Revenue is here before this Court with present appeal. 9 We take notice of following findings recorded by Tribunal in its impugned order: 5 We have heard both issues and perused material on record carefully. We have noticed that it is undisputed fact that assessee has not earned any exempt income during year under consideration. V de number of judicial pronouncements Co ordinate Benches of ITAT Ahmedabad have held that no disallowance shall be made under section 14A of act if assessee has not earned any exempt income otherwise disallowance shall be restricted to exempt income. Section 14A(1) provides that for purpose of computing total income under chapter IV, no deduction shall be allowed in respect of expenditure incurred by assessee in relation to income which does not form part of other total income under act. We have noticed that Id. CIT(A) has followed decision of Co ordinate Bench of ITAT in case of Shah Alloys Ltd. (2315/Ahd/2010 dated 27 03 2015 and decision of Honble Gujarat High Court in case of CIT vs. Corretech Energy Pvt. Ltd. (45 Taxmann.com 116) on identical issue of d sallowance u/s. 14A when no dividend income is earned by assessee. judicial findings of Honble jurisdictional High Court and decision of Co ordinate Bench of ITAT have been elaborated In decision of Ld. CIT(A) V de which similar issue on identical facts have been decided in favour of assessee. We have also perused judicial pronouncement in case of CIT v Corrtech Energy (p) Ltd (2014) 45 taxmann.com. 116 of Hon ble High Court of Gujarat wherein it is held that in case assessee did not make any claim for exemption of any income from payment of taxes, in that case disallowance u/s 14A of act could not be made. It is crystal clear that jurisdictional High Court has decided that to attract provision of section 14A it is required that assessee should have earned exempt income, if assessee has not earned exempt income and not claimed so in return of income then provision of section 14A are not applicable. We find that during year under consideration assessee company has not earned any exempt income and has not claimed any such exempt income in return of income therefore as per our considered opinion provision of section 14A are not applicable. Page 3 of 4 Downloaded on : Thu Feb 20 15:05:46 IST 2020 C/TAXAP/66/2020 ORDER In view of above mentioned facts and circumstances and following decision of Honble jurisdictional High Court of Gujarat, we consider that disallowance u/s. 14A r.w.s Rule 8D cannot be made as assessee has not earned any exempt income. Accordingly, appeal of Revenue is dismissed. 10 In our opinion, CIT(A) as well as Appellate Tribunal rightly applied dictum as laid by this Court in case of Corrtech Energy (supra). In Corrtech Energy (supra), this Court held that assessee did not make any claim for exemption of any income from payment of tax. disallowance under Section 14A of Act cannot be made. To attract provisions of Section 14A of Act, 1961, it is necessary that assessee should have earned any exempt income. If assessee has not earned exempt income and has not claimed so in return of income, then provision of Section 14A is not applicable. 11 concurring findings of fact recorded by two authorities is that in year under consideration, assessee company had not earned any exempt income and had not claimed any such exempt income in return of income. 12 In view of aforesaid, this Tax Appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) CHANDRESH Page 4 of 4 Downloaded on : Thu Feb 20 15:05:46 IST 2020 Principal Commissioner of Income-tax-1 v. Adani Infrastructure And Developers Pvt. Ltd