TARINI STEEL COMPANY LTD,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 10, PUNE

The only issue raised in this appeal is against the confirmation of disallowance of Rs.2,13,600/- made u/s.14A of the Income-tax Act, 1961 (hereinafter also called `the Act’).

Briefly stated, the facts of the case are that the assessee filed the return declaring total income of Rs.5.38 crore. During the course of assessment proceedings, the AO observed that the assessee had made investments in shares of Zion Steel Ltd. and Madhur Engineers Pvt. Ltd. amounting to Rs.4,27,20,000/-. On being called upon to explain as to why no disallowance u/s.14A of the Act was offered, the assessee submitted that no dividend income was earned on these investments. Not Convinced, the Assessing Officer computed the disallowance u/s.14A at Rs.2,13,600/-, which came to be countenanced in the first appeal.

We have heard the ld. DR through virtual court and gone through the relevant material on record. There is no appearance from the side of the assessee despite notice. It is seen as an admitted position that the assessee did not earn any exempt income from the shares. Despite that, the AO has computed the disallowance u/s.14A to the tune of Rs.2,13,600/-. The Hon'ble Delhi High Court in Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Del) has held that if there is no exempt income, there can be no question of making any disallowance u/s 14A of the Act. Similar view has been taken by the Hon'ble Delhi High Court in CIT vs. Holcim India P. Ltd. (2014) 90CCH 081-Del-HC. More recently the Hon’ble jurisdictional High Court in Pr. CIT VS. Kohinoor Projects Pvt. Ltd. (2020) 425 ITR 700 (Bom) has held that in the absence of any exempt income, there cannot be any disallowance of expenses u/s 14A of the Act. As the assessee in the instant case did not admittedly earn any exempt income, respectfully following the precedent, we hold that no disallowance was called for. The impugned order is overturned and the sustenance of the disallowance is deleted.

In the result, the appeal is allowed. Order pronounced in the Open Court on 21st December, 2020.