NEUBERG DIAGNOSTICS PVT. LTD.,KANCHIPURAM vs. ITO, CORP. WARD-4(1), CHENNAI

ITA 3804/CHNY/2025Status: DisposedITAT Chennai07 October 2026AY 2018-1913 pages
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What did the Tribunal hold?

The Tribunal held that the disallowance of Rs. 4,89,58,868 under Section 14A of the Income Tax Act, 1961, was not sustainable. The Tribunal noted that a primary requirement for invoking Section 14A is that there must be expenditure incurred in relation to income which does not form part of the total income. In this case, there was no dispute that the assessee did not earn any exempt income during AY 2018-19. The Tribunal referred to the jurisdictional High Court of Madras decision in *CIT v. Chettinad Logistics Pvt. Ltd.*, which held that no disallowance under Section 14A could be made if no exempt income was earned. Therefore, the disallowance made by the AO and confirmed by the CIT(A) was set aside. The appeal was allowed for statistical purposes. The judgment also discusses other issues related to disallowance of expenditure and cash deposits under Section 69A, which were restored to the file of the AO for verification.

What were the facts?

The assessee, Neuberg Diagnostics Private Limited, is in appeal before the Income Tax Appellate Tribunal (ITAT) against orders of the Commissioner of Income Tax (Appeals) (CIT(A)) for Assessment Year (AY) 2018-19. The assessee's return for AY 2018-19 showed nil income and a loss of Rs. 8,59,98,553. The Assessing Officer (AO) initiated scrutiny and observed significant paid-up share capital, unsecured loans, and investments in unlisted equities and a partnership firm. The AO also noted finance costs (interest paid to others) of Rs. 6,77,69,491. The AO proposed disallowance of interest under Section 14A of the Income Tax Act, 1961, to the extent of investments made to earn exempt income. The assessee contended that no exempt income was earned, making Section 14A inapplicable. The AO disallowed Rs. 4,89,58,868. The CIT(A) confirmed the AO's order. The assessee also filed appeals for AY 2023-24, but one appeal for AY 2018-19 (ITA No. 3804/Chny/2025) was withdrawn as infructuous.

What were the issues?

1. Whether the disallowance of Rs. 4,89,58,868 under Section 14A of the Income Tax Act, 1961, read with Rule 8D(2)(ii) of the Income Tax Rules, 1962, is sustainable in law when the assessee admittedly had not earned any exempt income during the relevant assessment year (AY 2018-19)? Assessee's Contention: The assessee argued that since no exempt income was earned during the assessment year, the disallowance of interest under Section 14A was not warranted. The assessee relied on judicial precedents including *Principal Commissioner of Income-tax v. Era Infrastructure (India) Ltd.* (Delhi High Court), *Principal Commissioner of Income-tax v. Avantha Realty Ltd.* (Calcutta High Court), and *Williamson Financial Services Ltd. v. Commissioner of Income-tax* (Gauhati High Court), among others. Revenue's Contention: The Revenue relied on the orders of the authorities below.

Which sections of the Income-tax Act were involved?

Section 14A,Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI MANU KUMAR GIRI & SHRI S.R.RAGHUNATHA

For Respondent: Shri. Shivanand K.Kalakeri, CIT
Hearing: 04.08.2026Pronounced: 07.10.2026

PER S. R. RAGHUNATHA, AM

The present appeals of the assessee are directed against the separate orders of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi (hereinafter referred to as the “Ld.CIT(A)”), arising out of the separate assessment orders pas

The order continues below.

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