SEVEN HILLS BYTES PVT. LTD.,KOLKATA vs. DCIT, CIR-1(1), KOLKATA

The assessee in this appeal has assailed the action of the lower authorities in making/confirming the addition of Rs.1,31,797/- u/s 14A of the Act in respect of notional expenses incurred for earning of exempt income. At the outset, the ld. counsel for the assessee has invited our attention to para 5 of the impugned order of the CIT(A) to submit that the undisputed fact is that the assessee has not earned any exempt Assessment year: 2015-16 Seven Hills Bytes Pvt. Ltd income during the year. He in this respect has relied upon the following case laws:

Cheminvest Ltd. vs. CIT 378 ITR 33 (Del). CIT vs. M/s. Holcim India Pvt. Ltd. in and ITA no. 299/2014; Judgment dt. 5-9-2014 CIT v. Shivam Motors (P.) Ltd. [2015] 230 Taxman 63 CIT vs. Ashika Global Securities Ltd. (G.A. No. 2122 of 2014) dt. 11/06/2018 In these case laws, Hon’ble High Courts have been unanimous to hold that where the assessee has not derived any tax exempt income from investments, then no disallowance is attracted u/s 14A of the Act.

The ld. D/R, however, has relied upon the newly inserted explanations to Section 14A of the Act, which is extracted for the sake of ready reference:- “14A. [(1)] [Notwithstanding anything to the contrary contained in this Act, for the purposes of] computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.] ************************ *********************** [Explanation.—For the removal of doubts, it is hereby clarified that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where the income, not forming part of the total income under this Act, has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such income not forming part of the total income.]”