2018 (4) TMI 23 - HC - Income Tax

Revision u/s 263 - apportionment of expenses against exempted income under Section 14A r.w.r.8D - Held that - The issue involved in the present case stands concluded against the revenue in The Pr. Commissioner of Income Tax, Patiala Vs. State Bank of Patiala 2017 (5) TMI 843 - PUNJAB AND HARYANA HIGH COURT as held the amount of disallowance under section 14A was restricted to the amount of exempt income only and not at a higher figure. Once that was so, we do not consider it appropriate to discuss the scope of section 263 of the Act as the same has been rendered academic in view of the issue being answered in favour of the assessee on the merits. Thus, no substantial question of law arises.

Summary

Issues:
1. Whether the High Court was legally correct in deleting the addition of ?19.70 crores made on account of apportionment of expenses against exempted income under Section 14A of the Income Tax Act, 1961?
2. Whether the order under Section 263 of the Act was correctly set aside by the Tribunal, rendering the subsequent proceedings infructuous?

Analysis:

Issue 1:
The appellant-revenue filed an appeal against the order of the Income Tax Appellate Tribunal (ITAT) which made an addition of ?7,03,49,029/- on account of apportionment of expenses against exempted income under Section 14A of the Act. The Commissioner of Income Tax Appeals (CIT(A)) confirmed this addition. Later, the Commissioner of Income Tax passed an order under Section 263 of the Act, setting aside the assessment order and directing an additional income enhancement of ?19.70 crores. The Assessing Officer made the necessary addition under Section 14A of the Act. However, the Tribunal, in a subsequent order, deleted the addition made under Section 143(3) of the Act and set aside the order passed by the CIT under Section 263 of the Act. The High Court upheld the Tribunal's decision, stating that no addition could be made against the assessee as the order under Section 263 had been quashed.

Issue 2:
The appellant-revenue argued that the issue in the present case had already been decided against them in a previous judgment involving State Bank of Patiala. In that case, it was held that the disallowance under Section 14A should be restricted to the amount of exempt income only and not at a higher figure. As a result, the Court dismissed the appeal, stating that no substantial question of law arose. This decision was consistent with a similar judgment in another case involving the same parties. Therefore, the High Court concluded that no substantial question of law arose in the present appeal, and consequently, the appeal was dismissed.