M/S Anriya Project Management Services ... vs Assessee

M/s.Anriya Project Management Services(P)Ltd. No.164, 1st Cross, 1st Stage, AECS Layout, Sanjaynagar, RMV II Stage, Bangalore560058. ... Appellant PAN: AAECA 3362 L

Vs.

Deputy Commissioner of Income-tax, Circle 11(1), Bangalore. ... Respondent

Appellant by: Shri Narendra Sharma, Advocate. Respondent by: Dr.K.Shankar Prasad, CIT(DR).

Date of hearing : 11/02/2015. Date of pronouncement: 20/02/2015.

Per Smt.P.MADHAVI DEVI, JM:

This is an appeal filed by the assessee against the order

of the CIT(A)-I, Bangalore, dated 30/09/2013 for the

assessment year 2009-10.

2. In this appeal, though the assessee has raised as many

as 12 grounds of appeal, we find that ground Nos.1, 11 and 12

are general in nature and need no adjudication. ITA No.1799/Bang/2013

M/s.Anriya Project Management Services (P) Ltd.

Page 2 of 7

3. Ground Nos.2 to 6 relate to the assessee's claim of

deduction u/s 80-IB(10) of the Income-tax Act, 1961

[hereinafter referred to as 'the Act' for short] while ground Nos.7

to 9 are against the disallowance made by the Assessing Officer

(AO) u/s 14A of the Act.

3.1 Brief facts of the case are that the assessee which

is carrying on the business of developing and building of

residential flats and colonies, filed its return of income declaring

total income of Rs.1,95,84,996/- after claiming deduction u/s

80-IB(10) of the Act. The return of income was filed on

9/3/2010 u/s 139(4) of the Act. During the assessment

proceedings, the AO observed that the assessee is not eligible

for deduction u/s 80-IB(10) of the Act since the return is not

filed within due date as specified u/s 139(1) of the Act i.e. on or

before 30/9/2009. Therefore, applying the provisions of

sec.80AC of the Act, the AO disallowed the claim u/s 80-IB(10)

of the Act.

3.2 Being aggrieved, the assessee preferred an appeal

before the CIT(A) who confirmed the disallowance made by the

AO after considering the issue in the light of various judicial

precedents on the issue. Aggrieved by the order of the CIT(A),

the assessee is in appeal before us.

3.3 At the time of hearing, learned counsel for the

assessee, Shri Narendra Sharma, fairly admitted that this issue ITA No.1799/Bang/2013 M/s.Anriya Project Management Services (P) Ltd.

Page 3 of 7 is now covered against the assessee by the decision of the

Special Bench of the Tribunal at Rajkot in the case of Saffire

Garments vs. ITO, Ward 2 reported in (2012) 28 Taxman.com

27 (Raj)(SB) wherein it was held that the requirement of filing of

return within the due date prescribed u/s 139(1) of the act for

claiming deduction is mandatory and if the said condition is not

complied with, then the deduction u/s 10A of the Act is not

allowable.

3.4 The learned Departmental Representative also relied

on the judgment of the Special Bench.

3.5 Having regard to the rival contentions as well as the

decision of the Special Bench of the Tribunal in the case of

Saffire Garments (cited supra), we confirm the order of the

CIT(A). Therefore, the grounds No.2 to 6 are rejected.

4. As regards ground Nos.7 to 9 are concerned, it is the

case of the assessee that it has not made any claim of exempt

income in its return of income and therefore no disallowance u/s

14A can be made. The learned counsel for the assessee

submitted that the AO had made the disallowance u/s 14A read

with rule 8D even though there was no exempt income during

the relevant financial year. The CIT(A) had confirmed the order

of the AO by holding that there is increase in the investment of

the assessee during the relevant assessment year resulting in

increase of interest on total loans and thus interest bearing ITA No.1799/Bang/2013 M/s.Anriya Project Management Services (P) Ltd.

Page 4 of 7 funds were utilized in investments earning exempt income.

Therefore, he held that proportionate interest on investments

earning exempt income is disallowable. He relied upon the

various decisions of ITAT to confirm the disallowance made by

the AO. Aggrieved, the assessee is in appeal before us.

4.1 The learned counsel for the assessee, while reiterating

the submissions made by the assessee before the authorities

below, filed a copy of the profit and loss account before us to

demonstrate that there was no claim of any exempt income in its

return of income for the relevant assessment year. He placed

reliance upon the decision of the 'B' Bench of the Tribunal in the

case of Bhuwalka Steel Industries Ltd. in ITA No.349/Bang/2013

dated 4/7/2014 wherein, after considering various judicial

pronouncements of the Hon'ble High Court, it was held that

when there is no exempt income during the previous year, then

the provisions of sec.14A cannot be invoked. A copy of the said

order is filed before us.

4.2 The learned Departmental Representative, however,

relied upon the orders of the authorities below and the judicial

precedents relied upon by the CIT(A) while confirming the

disallowance.

4.3 Having regard to the rival contentions and the material

on record, we find that the assessee has not made any claim of

exempt income during the relevant assessment year. The co- ITA No.1799/Bang/2013

M/s.Anriya Project Management Services (P) Ltd.

Page 5 of 7 ordinate bench of this Tribunal in the case of Bhuwalka Steel

Industries Ltd. (cited supra) had relied upon the decisions of the

various High Courts in coming to the conclusion that in the

absence of exempt income earned by the assessee, the

provisions of sec.14A cannot be invoked. The relevant portion of

the Tribunal order is reproduced hereunder for the sake of

convenience.

"17. The learned counsel for the assessee relied on the following judicial pronouncements of the Hon'ble High Courts to the proposition that if there is no exempt income during the previous year, then the provisions of section 14A of the Act cannot be invoked:

· CIT v. Winsom Textile Industries Ltd.(2009) 319 ITR 204 (P&H);

· CIT v Corrtech Energy P. Ltd. (Tax Appeal No.239 of 2014, dt.24.03.2014)(Guj);

· JCIT v. Shivam Motors (P) Ltd.

(ITA.17/Lkw/2012, dated 12.11.2013)(ITAT- Lucknow); and

· CIT v. M/s Shivam Motors (P)Ltd. (ITA.88 of 2014, dated 5.5.14) Alalhabad High Court

18. The learned DR relied on the order of the Assessing Officer and drew our attention to the circular No.5 of 2014, dt.11.02.2014, wherein the CBDT has opined that even in the absence of exempt income earned by the assessee during the previous year, provisions of section 14A have to be invoked.

ITA No.1799/Bang/2013 M/s.Anriya Project Management Services (P) Ltd.

Page 6 of 7

19. We have given a careful consideration to the rival submissions. On the basis of the documents to which our attention was drawn it is clear that the assessee did not earn any exempt income during the previous year. In such circumstances as laid down in the decisions relied upon by the learned counsel for the assessee, provisions of section 14A could not be invoked. The Board circular which is contrary to the Hon'ble High Court's decisions cannot therefore be the basis to sustain the disallowance made by the Revenue authorities. We, therefore, hold that the disallowance made u/s 14A of the Act should be deleted. Accordingly, the appeal of the assessee is allowed."

Respectfully following the decision of the co-ordinate bench on

similar set of facts, we hold that the disallowance made u/s 14A

of the Act is to be deleted. Thus grounds No.7 to 9 are allowed.

5. Ground No.10 relates to interest u/ss. 234A, 234B and

234C of the Act. We remand the same to the AO to give

consequential relief to the assessee, if any. This ground is

accordingly allowed for statistical purposes.

6. In the result, the assessee's appeal is partly allowed.

Pronounced in the open court on 20th February, 2015.

sd/- sd/- (Jason P Boaz) (Smt. P.Madhavi Devi) ACCOUNTANT MEMBER JUDICIAL MEMBER eksrinivasulu ITA No.1799/Bang/2013

M/s.Anriya Project Management Services (P) Ltd.

Page 7 of 7 Copy to:

1. Appellant

2. Respondent

3. CIT

4. CIT(A)

5. DR, ITAT, Bangalore.

6. Guard file

By order

Assistant Registrar Income-tax Appellate Tribunal Bangalore