Milkfood Ltd., New Delhi vs Assessee

M/s. Milkfood Limited, vs. DCIT, Circle 6 (1), 5th Floor, Bhandari House, New Delhi. 91, Nehru Place, New Delhi.

(PAN : AAACM5913B)

(APPELLANT) (RESPONDENT)

ASSESSEE BY : Shri R.S. Singhvi, CA REVENUE BY : Shri P. Dam Kanunjna, Senior DR

Date of Hearing : 22.07.2015 Date of Pronouncement : 31.07.2015

ORDER

PER A.T. VARKEY, JUDICIAL MEMBER :

This appeal, at the instance of the assessee, is directed against the

order of the Commissioner of Income-tax (Appeals)-IX, New Delhi dated

30.09.2013 for the assessment year 2008-09.

2. The grounds of appeal taken by the assessee read as under :-

"1(i). That on the facts and circumstances of the case, the CIT(A) was not justified in confirming disallowance of Rs.26,22,501/- u/s. 14A read with rule 8D without appreciating the fact there was no case of any expenditure attributable to claim of any exempt income.

2 ITA No.6109/Del./2013

(ii). That finding of the lower authorities is in total disregard to provisions of sec. 14A(2)& (3) of the Income Tax Act, 1961 and principle laid down by Delhi High Court in the case of M/s.

Maxopp Investment Ltd. 347 ITR 272.

2. That the impugned disallowance is illegal, arbitrary and or highly excessive.

3. That orders of the lower authorities are not justified on facts and same are bad in law."

3. Brief facts of the case are that the assessee company is a Public

Limited Company incorporated under the Companies Act, 1956 inter alia

carrying on the business of manufacture and sale of Pure Ghee, Skimmed

Milk Powder, Whole Milk Powder, etc. under the name and style of "Milk

Food". The assessee company is supplying Skimmed Milk Powder to

major institutions i.e. Nestle, SKB, Wockhardt, Mother Dairy, etc. The

assessee filed return of income on 30.09.2008 declaring NIL income. The

same was processed u/s 143(1) of the Income- tax Act, 1961 (hereinafter

'the Act'). Subsequently, the case was selected for scrutiny and statutory

notice u/s 143(2) was duly served upon the assessee. The assessment was

completed u/s 143(3) vide order dated 13.09.2010 by the AO at the NIL

income making the following additions:

i) EPF & ESI u/s 2(24 )(X) of the Act Rs. 1,74,445/-

ii) Disallowance u/s 14A Rs.26,31,080/- iii) Interest on amounts advanced to subsidiary company Rs. 7,23,148/-

4. Since the additions made also resulted into loss, the AO computed

tax 3 ITA No.6109/Del./2013

payable as per section 115JB of the Act, after adding disallowed amount to

book profit. Aggrieved, the assessee went in appeal before the CIT (A) and

the CIT (A) confirmed the disallowance u/s 14A of Rs.26,22,50 1/- out of

Rs.26,31,080/- thereby giving a relief of Rs.8,579/-.

5. The assessee, being aggrieved, is in appeal before us against the

disallowance of Rs.26,22,501/- under section 14A of the Act.

6. Ld. AR for the assessee reiterated the submissions made before the

ld. CIT (A). Ld. AR also stressed that in the relevant assessment year, the

assessee was not in receipt of any exempt income under section 14A read

with Rule 8D, therefore, disallowance was not applicable. Ld. AR also

submitted that ITAT, Delhi Bench 'A', New Delhi in ITA

NO.3298/De1/2013 vide order dated 08.12.2014 in the revenue's appeal in

the case of the assessee for assessment year 2007-08 (previous assessment

year) itself had dealt this issue and the revenue's appeal on this issue was

rejected.

7. On the other hand, ld. DR relied on the orders of the authorities

below.

8. We have heard both the sides on the issue and perused the material

on record. The ld. AR of the assessee contended before us that the assessee

was not in receipt of any exempt income in the assessment year under

consideration , therefore, disallowance under section 14A, read with rule

8D cannot be made. The ld. DR could not controvert the fact that the 4 ITA No.6109/Del./2013

assessee earned any exempt income in this relevant assessment year. We

also find that ITAT, Delhi Bench 'A' in assessee's own case vide order

dated 08.12.2014 (supra) had rejected this issue taken by the revenue and

the said order was passed by this Bench. For the sake of clarity, we

reproduce the relevant finding of the aforesaid order as under:-

"4. Apropos ground no.1, ld. CIT(A) deleted the addition, inter alia, observing that since in view of the decision of Hon'ble Bombay High Court in the case of Godrej and Boyce Manufacturing Ltd. Vs. DC IT 328 ITR 81 (ITA 3298/Del/13 M/s Milk Food Ltd. (Bom.), Rule 8D was not applicable, therefore, the disallowance made by AO u/s 14A read with Rule 8D could not be upheld.

5. Ld. counsel for the assessee submitted that assessee had not earned any exempt income during the year. Therefore, in view of the matter, no disallowance could be made u/s 14A. In this regard, ld. counsel has relied on following decisions:-

• Hon'ble Delhi High court's decision dated 5-9-2014 (ITA nos.486/2014 & ITA no.299/2014) in the case of CIT Vs. Holcim India P. Ltd.

• Hon'ble Punjab & Haryana High court's decision in CIT Vs. M/s Lakhani Marketing Incl. (ITA no. 970/2008 decided on 2.4.2014)

• Hon'ble Punjab & Haryana High court's decision in CIT Vs. Hero Cycles Ltd. 323 ITR 518; and

• Hon'ble Punjab & Haryana High court's decision in CIT Vs. Winsome Textile Industries Ltd 319 ITR 204.

6. We have heard rival contentions and perused the material available on record. In view of the aforementioned decisions, relied upon by the assessee, wherein a consistent view has been taken that where no exempt income is earned, there could not be any disallowance u/s 14A, we find no merit in the ground taken by the Revenue. Accordingly, ground no. 1 is dismissed." 5 ITA No.6109/Del./2013

9. The contention of the assessee that it has not earned any exempt

income is not controverted by the Revenue, the ratio of the decision cited

above applies and we find force in the contention of the ld. AR that no

disallowance was warranted u/s 14A of the Act. Respectfully following

the aforesaid decision of the Tribunal, we delete the disallowance made u/s

14A of Rs.26,22,501/-. The ground is accordingly allowed.

10. In the result, the appeal of the assessee is allowed.

Order pronounced in open court on this 31st day of July, 2015.

Sd/- sd/- (S.V. MEHROTRA) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated the 31st day of July, 2015 TS

Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A)-IX, New Delhi. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.