NANDI HIGHWAY DEVELOPERS LIMITED (SUCCESSOR COMPANY TO NANDI INFRASTRUCTURE CAPITAL COMPANY LTD),BENGALURU vs. INCOME TAX OFFICER 5(1)(1), BENGALURU

ITA 2096/BANG/2026Status: DisposedITAT Bangalore22 September 2026AY 2017-185 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance made by the Assessing Officer under Section 14A read with Rule 8D was not sustainable. The Tribunal noted that the assessee had not earned any exempt income during the assessment year under appeal, despite making investments in shares and securities. Following the judicial precedents of the Delhi High Court in Cheminvest Ltd. v. CIT-IV and the Bombay High Court in Pr. CIT v. Kohinoor Project (P.) Ltd., the Tribunal held that Section 14A is not applicable if no exempt income is received or receivable. The Tribunal also observed that the amendment to Section 14A by the Finance Act, 2022, is prospective and applicable from Assessment Year 2022-23 onwards. Therefore, the Tribunal directed the AO to delete the disallowance made under Section 14A. The issue regarding the restriction of disallowance to total expenditure and compliance by the AO was implicitly decided in favour of the assessee by the deletion of the entire disallowance.

What were the facts?

The assessee, Nandi Highway Developers Limited, filed an appeal against the order of the CIT(A) for Assessment Year 2017-18. The appeal was filed with a delay of 79 days, which was condoned by the Tribunal. The assessee had declared a loss of Rs. 16,584/-. During scrutiny, the Assessing Officer (AO) noted an investment of Rs. 11,42,81,000/- in equity shares of Nandi Highway Developers Limited. The assessee contended that no exempt income was received, thus Section 14A was not attracted. However, the AO disallowed 1% of the average investment, amounting to Rs. 11,42,810/-, under Section 14A read with Rule 8D. The assessee's appeal before the CIT(A) was dismissed due to non-compliance and lack of documentary evidence.

What were the issues?

1. Whether the disallowance under Section 14A of the Income Tax Act, 1961, is sustainable when the assessee has not received any exempt income during the relevant assessment year? (Question of law) 2. Whether the disallowance under Section 14A, as computed by the AO, is restricted to the total expenditure claimed by the assessee, which was Rs. 16,584/-? (Question of mixed law and fact) 3. Whether the AO complied with the requirements of Section 14A to make the addition? (Question of mixed law and fact) Assessee's contentions: - No exempt income was received, hence Section 14A is not applicable. The amendment to Section 14A by the Finance Act, 2022, is prospective and not applicable to the current assessment year. Reliance was placed on various court and tribunal decisions. The disallowance of Rs. 11,42,810/- is more than 68 times the total expenditure of Rs. 16,584/-. The disallowance should be restricted to the total expenditure as per the Proviso to sub-rule 2 of Rule 8D. The AO did not comply with the requirements of Section 14A. Revenue's contentions: - The Ld DR relied on the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI BALAKRISHNAN S & SHRI SOUNDARARAJAN K.

For Respondent: Shri. Pradeep S - Addl. CIT
Pronounced: 22.09.2026

PER SHRI BALAKRISHNAN S, ACCOUNTANT MEMBER:

This appeal is filed by the assessee against the order of Ld. CIT(A) (ADDL/JCIT (A)-1 LUDHIANA vide DIN: ITBA/APL/S/250/2025-26/1083839517(1) dated 18- Dec-2025 for the Assessment Year 2017-18, arising out of the Assessment Order passed under section 143(3) of th

The order continues below.

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