THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1),, AHMEDABAD vs. ADANI WILMAR LTD.,, AHMEDABAD

Both the appeals of the revenue have been filed against the decision of ld. CIT(A) in deleting the disallowance made u/s. 14A of the act. Since the I.T.A No. 2210 & 2211/Ahd/2017 A.Y. 2014-15 & 2013-14 Page No 2

The brief fact is that assessee has filed return of income of Rs. 1,25,71,480/- on 28th Nov, 2013. Thereafter, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 4th Sep, 2014. During the course of assessment, the assessing officer noticed that assessee has made investment to the tune of Rs. 27,78,87,305/- on 31st March, 2012 and the same was increased to Rs. 1,57,04,32,421/- as on 31st March, 2013. However, the assessing officer has noticed that assessee has not made any disallowance u/s. 14A r.w. Rule 8D of the IT Rule in respect of any expenditure incurred for the aforesaid investment. On query, the assesse has explained along with relevant detail that interest free funds were used for investing in equity shares, therefore, no disallowance was required to be made u/s. 14A r.w. Rule 8D of the IT Rules. The assessee has also explained that it has not made any claim for exemption of any income from payment of tax, therefore, the disallowance u/s. 14A should not be made. The assessing officer has not accepted the explanation of the assessee after referring CBDT Circular No. 5/2014 dated 11th Feb, 2014 stated that disallowance can be made by invoking section 14A of the act even no income has been earned by an assessee claimed as exempt during the year under consideration. Therefore, the assessing officer has computed disallowance u/s. 14A r.w. Rule 8D to the amount of Rs. 4,72,00,565/- and added to the total income of the assessee.

Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has deleted the disallowance made by the assessing officer after following the decision of Juri ictional High Court of Gujarat in the case of CIT vs. Corrtech India Pvt. Ltd. (2014) 45 taxman.com 116. 5. We have heard both the issues and perused the material on record carefully. We have noticed that it is undisputed fact that assessee has not earned any exempt income during the year under consideration. Vide a number of judicial pronouncements the Co-ordinate Benches of the ITAT Ahmedabad have held that no disallowance shall be made under section 14A of the act if the assessee has not earned any exempt income otherwise the disallowance shall be restricted to the exempt income. Section 14A(1) provides that for the purpose of computing total income under chapter IV, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of other total income under the act. We have noticed that Id. CIT(A) has followed the decision of the Co-ordinate Bench of the ITAT in the case of Shah Alloys Ltd. (2315/Ahd/2010 dated 27-03-2015 and the decision of the Hon'ble Gujarat Taxmann.com 116) on identical issue of disallowance u/s. 14A when no dividend income is earned by the assessee. The judicial findings of the Hon'ble juri ictional High Court and the decision of the Co-ordinate Bench of the ITAT have been elaborated in the decision of the Ld. CIT(A) vide which similar issue on identical facts have been decided in favour of the assessee. We have also perused the judicial pronouncement in the case of CIT v Corrtech Energy (p) Ltd (2014) 45 taxmann.com.116 of Hon'ble High

In the result, the appeal ITA No. 2210/Ahd/2017 and 2211/Ahd/2017 filed by the revenue are dismissed.