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Income Tax Appellate Tribunal, DELHI “C” BENCH: NEW DELHI
Before: SHRI G.S. PANNU & SHRI KUL BHARAT
This appeal filed by the assessee for the assessment year 2013-14 is directed against the order of learned CIT(A)-22, New Delhi dated 13.10.2017.
The assessee has raised following grounds of appeal:-
1. “Action of Commissioner of Income Tax(A) in upholding the addition made on account of disallowance of expenses U/s. 14A Rs.8,88,582/- by Deputy Commissioner of Income tax to the returned income is unjust, illegal, arbitrary and against the facts and circumstances of the case.
The appellant craves leave to add, alter, amend or delete the above grounds of appeal at the time of hearing.”
2. The only effective ground raised by the assessee in this appeal is against the sustaining of addition made on account of disallowance of expenses u/s 14A of the Income Tax Act, 1961 (‘the Act’). 1 | P a g e
Facts giving rise to the present appeal are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s 143(3) of the Act was framed vide order dated 07.03.2016. While framing the assessment, the Assessing Officer made two disallowances on account of depreciation amounting to Rs.1,10,11,470/- and disallowance made u/s 14A of the Act of Rs.8,88,582/-.
Aggrieved against this, the assessee preferred appeal before Ld.CIT(A) who after considering the submissions, partly allowed the appeal.
Ld.CIT(A) following the decisions pertaining to Assessment Year 2011-12, deleted the disallowances made on account of depreciation and sustained the disallowance made u/s 14A of the Act.
Aggrieved against this, the assessee is in appeal before this Tribunal.
Ld. Counsel for the assessee vehemently argued that authorities below were not justified in making the disallowance as the assessee has not incurred any expenditure in respect of administration, interest for earning of such income. He contended that in the year under consideration, no exempt income has been received. Therefore, he contended that the disallowance can be made by invoking Section 14A of the Act r.w.Rule 8D of Income Tax Rules, 1962. To buttress this contention, Ld. Counsel for the assessee relied on the judgement of Hon’ble Delhi High Court rendered in the case of Cheminvest Ltd. vs CIT [2015] 378 ITR 33 (Delhi).
We have heard the rival submissions and perused the material available on record. Ld.CIT(A) sustained addition by observing as under:-
8. “In this case, the disallowance u/s 14A of the Act r.w.rule 8D of Rs.8,88,582/- has been contested by the appellant. The A.O. had made the disallowance u/s 14A of the Act read with Rule 8D on the basis of CBDT Circular No.5/2014 dated 11.02.2014. The A.O. has worked out disallowance under 8D (ii) and 8D (iii) of the Rules. Total disallowance made by the A.O, is Rs.8,88,582/-.
8.1. I have carefully considered submission of the appellant and perused the order of the A.O, the argument the Ld. AR that the appellant has not incurred any expenditure to earn exempt income, is rejected. The appellant has earned dividend income of Rs.38,42,693/- from the investment. The AO in his order has discussed this issue in detail and has made out case for incurring the expenditure by the appellant for earning for exempt income. The appellant has not made any suo moto disallowance of expenditure for earning this exempt income. The provision of rule 8D is very clear and an unambiguous. After the introduction of sub section 2 & 3 of section 14A w.e.f 01.04.2007 and rule 8D, the disallowance has to be computed by the only method available for apportionment of expenditure. No other method of apportionment is permissible except that provided in rule 8D. In view of this, the addition on account of section 14A r.w.r 8D of Rs. 8,88,582/- is confirmed. The decision of ground number 2 is decided against the appellant.”
8.1. The Hon’ble Jurisdictional High Court in the case of Cheminvest Ltd. vs CIT (supra) has held as under:-
“In the context of the facts enumerated hereinbefore the court answers the question framed by holding that the expression “does not form part of the total income” in section 14A of the Act envisages that there should be an actual receipt of income, which is not includible in the total
income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, section 14A will not apply if no exempt income is received or receivable during the relevant previous year.”
Therefore, respectfully following the judgement of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs CIT (supra), we hereby direct the Assessing Officer to delete the disallowance. Thus, Ground No.1 raised by the assessee in this appeal is allowed.
Ground No.2 raised by the assessee is general in nature, needs no separate adjudication.
In the result, the appeal of the assessee is allowed.
Above decision was pronounced on conclusion of Virtual Hearing in the presence of both the parties on 28th May, 2021.