ITAT Allows NDTV's Business Expense Claims, Quashes Section 14A Disallowance [Read Order]

In a significant relief for NDTV, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has partly allowed the company’s appeal for the Assessment Year 2014–15. The Tribunal set aside disallowances related to business expenses and Section 14A, while remanding the issue of directors remuneration back to the Assessing Officer for fresh verification.

The appellant, NDTV Networks Ltd., had challenged the order passed by the Commissioner of Income Tax (Appeals)-6, Delhi, dated 28 August 2018, which upheld disallowances made by the Assessing Officer under Sections 37(1) and 14A of the Income Tax Act, 1961.

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The primary issue pertained to the disallowance of Rs.3.62 crore in business expenditure on the grounds that the company was not carrying on any business and had not earned any income under the head “profits and gains from business or profession”. The Revenue argued that NDTV Networks Ltd. was merely a holding company, and its investment activities did not constitute a business within the meaning of Section 2(13) of the Act.

However, after hearing the arguments and examining the record, the Tribunal noted that similar business expenditure had been allowed in the company’s case in earlier years. Citing precedents such as ESSAR Investments Ltd. v. DCIT and CIT v. Amalgamations (P.) Ltd., the Tribunal held that even a holding company making investments in subsidiaries could be regarded as carrying on business activity. It observed that the Assessing Officer had not brought any material on record to indicate that the expenses were not incurred wholly and exclusively for business purposes. Accordingly, the disallowance was deleted.

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On the second issue, concerning the disallowance of Rs.1.6 crore towards excess directors’ remuneration, the Tribunal accepted the assessee’s alternate submission that the amount had been reversed and offered to tax in the subsequent year. Given this fact, the Bench, comprising Satbeer Singh Godara (Judicial Member) and Manish Agarwal (Accountant Member), remanded the matter back to the Assessing Officer to verify the reversal and re-compute the allowable expense.

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Lastly, the Tribunal quashed the disallowance of Rs.2.78 lakh under Section 14A read with Rule 8D, noting that the assessee had not earned any exempt income during the relevant year. Relying on the decisions of the Delhi High Court in Cheminvest Ltd. and PCIT v. Era Infrastructure (India) Ltd., the Tribunal held that the said provision could not be invoked unless exempt income had actually accrued.

The appeal was accordingly partly allowed in favour of the appellant.

To Read the full text of the Order CLICK HERE

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