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2015 (6) TMI 1 - ITAT HYDERABAD

2015 (6) TMI 1 - ITAT HYDERABAD - TMI - Disallowance of expenditure u/s 14A - Held that:- For the limited purpose of verifying assessee’s claim that it has not earned/claimed any exempt income in the concerned assessment years and deciding the issue in terms with the ratio laid down by CIT Vs. Corrtech Engergy Pvt. Ltd., [2014 (3) TMI 856 - GUJARAT HIGH COURT], Quality Engineering and Software Technologies Pvt Ltd. Vs. DCIT, [2015 (1) TMI 869 - ITAT BANGALORE] and CIT Vs. Shivam Motors (P) Ltd. .....

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hin the due date - Held that:- Keeping in view the proposition of law and following the decision of CIT Vs. Nipso Polyfabriks Ltd. (2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT) we hold that employees contribution to PF & ESI remitted before the due date of filing of return u/s 139(1), will be allowable as deduction - Decided in favour of assesse. - ITA No. 1143/H/13, 144/H/13, 61/H/14, 120/H/13, 121/H/13 2009, 18/H/14 2010 - Dated:- 8-5-2015 - Shri P. M. Jagtap And Shri Saktijit Dey,JJ. For .....

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sessee in its appeals which also corresponds to the common issue raised in the departmental appeals relate to disallowance of expenditure u/s 14A of the Act. 3. Briefly the facts, as taken from the appeal folder relating to AY 2008-09 are, assessee a company is engaged in the business of manufacture of ferro silicon. Assessee filed its return of income for AY under dispute on 20/09/2008 declaring loss of ₹ 4,62,38,541. In course of assessment proceeding, AO on verifying the balance sheet n .....

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8D(2) worked out the expenditure to be disallowed for earning exempt income at ₹ 1,41,69,526. Similar disallowances were also made in AYs 2009-10 and 2010-11. Being aggrieved of the disallowance, so made, assessee preferred appeals before ld. CIT(A) for the aforesaid assessment years. 4. Ld. CIT(A) while disposing of appeals in a common order passed for AYs 2008-09 and 2009-10 observed that in an order passed u/s 263 of the Act in case of M/s Bharat Alloys and Energy Ltd for AY 2005-06, ld .....

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le with assessee and have no nexus with interest bearing loans, no disallowance u/s 14A could be made Further, ld. CIT(A) also upheld disallowance of administrative expenses @ 0.5% of total investment. Similar view was also taken by ld. CIT(A) for AY 2010-11. Being aggrieved of the appeal orders passed by ld. CIT(A), both assessee and revenue are before us. 5. While the department has objected to the relief granted by ld. CIT(A), assessee in course of hearing requested for admission of additiona .....

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Corrtech Engergy Pvt. Ltd., 45 Taxman.com 116 (Guj) and a decision of the ITAT Bangalore C Bench in case of Quality Engineering and Software Technologies Pvt Ltd. Vs. DCIT, 52 Taxman.com 515. 7. Ld. DR, on the other hand, submitted before us, ld. CIT(A) was not correct in restricting the disallowance u/s 14A to an amount of ₹ 3.84 crores claimed to have been made out of interest bearing funds. Ld. DR referring to the provisions of section 14A of the Act submitted before us, language employ .....

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ue authorities as well as other materials on record. As far as admission of additional ground raised by assessee is concerned, it is seen from the record that in the statement of facts and grounds of appeal filed before ld. CIT(A), a copy of which is also placed on record, assessee has specifically raised the issue that no disallowance u/s 14A can be made when assessee has not claimed any exempt income in the assessment year under consideration. However, as it appears, ld. CIT(A) has not at all .....

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ee is during the relevant AYs assessee has not claimed/earned any income, which is exempt u/s 10(34), hence, no disallowance can be made by invoking section 14A of the Act. In support of such contention, ld. AR has placed reliance on two judicial precedents. On careful reading of the decision of the Hon ble Gujarat High Court in case of CIT Vs. Corrtech Engergy Pvt. Ltd. (supra), it is seen that the Hon ble Gujarat High Court following a decision of the Hon ble P&H High court in case of CIT .....

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5.4 There are many other decisions of other Hon ble High Courts as well, wherein it has been held that where the assessee has not earned any income exempt u/s 10(38) of the Act, disallowance of expenditure u/s 14A of the Act is not tenable. Respectfully following the above decisions (cited supra), we also hold that the disallowance of expenditure u/s 14A of the Act is not tenable and therefore delete the disallowance of ₹ 7,34,975 made by the AO. 10. Though ld. DR has relied upon a decisio .....

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disallowance u/s 14A can be made. In the facts of the present case, assessee has taken a specific plea that it has not claimed/earned any income which is exempt under the Act. On perusal of the relevant assessment orders it is noticed that AO has only referred to investments made by assessee and not to any exempt income earned by assessee while working out disallowance u/s 14A. Even though, assessee has raised specific ground on the issue before ld. CIT(A), she has also not given any finding on .....

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resaid direction, the grounds raised by the department challenging the relief granted by ld. CIT(A) in restricting the disallowance u/s 14A have become infructuous, hence, they are dismissed. 11. The only other issue raised by the department in appeal filed for AY 2010-11 is with regard to ld. CIT(A) deleting disallowance made for an amount of ₹ 7,70,901 on account of non remittance of employees contribution to PF and ESI within the due date. 12. As can be seen from the facts on record, in .....

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s contribution would not be covered by section 43B of the Act. Being aggrieved of such disallowance, assessee preferred appeal before ld. CIT(A). 13. Ld. CIT(A) after considering the submissions of assessee in the light of the decision of the Hon ble Supreme Court in case of CIT Vs. Alom Extrusions Ltd., 319 ITR 366 and some other decisions of different High Courts held that even where the employees contribution to ESI and PF were not paid within the due date as per section 36(1)(va), but, were .....

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y to employees contribution as such amendment is not with reference to section 36(1)(va). In support of such contention, he relied upon a decision of Hon ble Gujarat High Court in case of CIT Vs. Gujarat State Road Transport Corporation, 366 ITR 170. 15. Opposing the contention of ld. DR, ld. Counsel for assessee submitted before us, after deletion of the second proviso to section 43B of the Act, even employee s contribution to PF & ESI if remitted before due date of filing of return as prov .....

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bed. 16. We have heard the parties and perused the orders of revenue authorities as well as the materials on record. We have also carefully applied our mind to the decisions placed before us by the parties. There is no dispute as far as the factual aspects are concerned. It is a fact on record that employees contribution to PF & ESI have not been remitted to the Govt. account/appropriate fund within the due date as per Explanation to section 36(1)(va). At the same time, it is also not disput .....

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