2019 (11) TMI 1242 - AT - Income Tax

Condonation of delay - delay of 133 days beyond time prescribed u/s 253(3) - Change of officer who was looking after taxation matter and due to this change over of relevant officer incharge , it could not file its appeal in time with tribunal as there was not proper handover by outgoing officer looking after taxation matter to a new officer incharge of taxation matter - HELD THAT - it is now a well settled position of law that if technicalities are pitted against substantial justice, the Court will lean towards substantial justice and in our considered view the assessee has shown sufficient cause in explaining delay of 133 days in filing of this appeal with tribunal beyond time prescribed u/s 253(3) of the 1961 Act and hence keeping in view, interest of substantial justice, we are inclined to condone this delay of 133 days in filing of this appeal late by assessee beyond time prescribed u/s 253(3) of the 1961 Act, by invoking our powers u/s 253(5) of the 1961 Act and admit this appeal to be adjudicated on merits in accordance with law. It is pertinent to mention that no averments are made by Revenue nor there is any material on record to show that there is an malafide on part of assessee in filing this appeal late with tribunal Disallowance u/s 14A - no exempt income is earned by taxpayer - HELD THAT - In the case of Chettinad Logistics Private Limited 2017 (4) TMI 298 - MADRAS HIGH COURT has held that no disallowance of expenditure u/s 14A can be made when no exempt income is earned by taxpayer. The SLP filed by Revenue against decision of Hon ble Madras High Court decision in case of Chettinad Logsitics Private Limited(supra) has been dismissed by Hon ble Supreme Court 2018 (7) TMI 567 - SC ORDER When no exempt income is earned by taxpayer, no disallowances of expenditure u/s 14A are warranted. Thus no disallowance of expenditure by invoking provisions of Section 14A of the 1961 Act is warranted as assessee has not earned any exempt income during the year under consideration and hence we hereby order deletion of disallowances of expenditure made by AO by invoking provisions of Section 14A of the 1961 Act read with Rule 8D of the 1962 Rules, which additions were later confirmed by Ld.CIT(A). MAT Computation - Our above decisions shall also apply mutatis mutandis while making disallowance of expenditure incurred for earning of exempt income while computing book profits u/s 115JB of the 1961 Act. The decision in the case of ACIT v. Vireet Investment Private Limited 2017 (6) TMI 1124 - ITAT DELHI is relevant wherein it is held that computation under clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the 1962 Rules.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Disallowance under section 14A of the Income Tax Act.
3. Disallowance under section 14A in the context of section 115JB of the Income Tax Act.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was filed with a delay of 133 days. The assessee explained the delay due to a change in the officer handling taxation matters and inadequate handover. The tribunal, considering the affidavit and the lack of malafide intent, condoned the delay. The tribunal emphasized that substantial justice should prevail over technicalities, thus admitting the appeal for adjudication on merits.

2. Disallowance under Section 14A of the Income Tax Act:
The AO disallowed ?15,01,125 as expenditure under Section 14A read with Rule 8D, despite the assessee not earning any exempt income during the assessment year. The CIT(A) upheld this disallowance. The assessee argued that no expenditure was incurred for earning exempt income and that the investments were made from surplus funds, not borrowed funds.

The tribunal noted that the AO did not record any satisfaction before invoking Rule 8D and did not analyze the assessee's claim of no expenditure incurred. The tribunal relied on the decision of the Hon’ble Madras High Court in CIT v. Chettinad Logistics (P.) Ltd., where it was held that no disallowance under Section 14A is warranted if no exempt income is earned. The Supreme Court had dismissed the SLP against this decision. Similar views were upheld in Redington (India) Limited v. Addl. CIT and Cheminvest Limited v. CIT. Consequently, the tribunal ordered the deletion of the disallowance made under Section 14A.

3. Disallowance under Section 14A in the Context of Section 115JB of the Income Tax Act:
The assessee contended that disallowance under Section 14A should not affect the computation of book profits under Section 115JB. The tribunal agreed, referencing the Special Bench decision in ACIT v. Vireet Investment Private Limited, which held that computation under clause (f) of Explanation 1 to Section 115JB(2) should be made without resorting to Section 14A read with Rule 8D. The tribunal applied this principle and ordered that no disallowance under Section 14A should impact the book profits computation under Section 115JB.

Conclusion:
The tribunal allowed the appeal, condoning the delay and deleting the disallowance under Section 14A for both the regular provisions and the computation of book profits under Section 115JB, based on the consistent judicial stance that no disallowance is warranted when no exempt income is earned. The decision was pronounced on November 26, 2019, in Chennai.