SUMA SHILP LTD,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 6,, PUNE

The only issue raised in this appeal is against the confirmation of disallowance of Rs.8,94,157/- made by the Assessing Officer (AO) under section 14A of the Income-tax Act, 1961 (hereinafter also called `the Act’) read with Rule 8D of the Income-tax Rules, 1962.

Succinctly, the facts of the case are that the assessee is engaged in the business of leasing, wind power generation, trading in shares, promoters & builders. It filed revised return declaring gross income at Rs.5.50 crore. It also earned dividend income of Rs.1,83,420/-, which was claimed as exempt. The assessee offered suo moto disallowance u/s.14A for a sum of Rs.3,00,000/-.

Invoking the provisions of section 14A r.w. rule 8D of the Income- tax Rule, 1962, the AO computed the total disallowance at Rs.11,94,157/-. After allowing the benefit of amount already offered by the assessee, he made further disallowance of Rs.8,94,157/-, which came to be affirmed in the first appeal. The assessee is aggrieved by the sustenance of such disallowance.

We have heard both the sides through Virtual Court and gone through the relevant material on record. 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. Taking this proposition further, the Hon’ble jurisdictional High Court in Pr. CIT VS. HSBC Invest Direct (India) Ltd. (2020) 421 ITR 125 (Bom) has held that disallowance u/s 14A cannot exceed the amount of exempt income.

In the result, the appeal is allowed. Order pronounced in the open Court on 03rd July, 2020.