M/S. ASHOK MAGNETICS LTD.,CHENNAI vs. ITO, CORPORATE WARD-1(1), CHENNAI

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ITA 2301/CHNY/2025Status: DisposedITAT Chennai13 November 2025AY 2014-15Bench: Shri S.S. Viswanethra Ravi (Judicial Member), Shri Amitabh Shukla (Accountant Member)1 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 14A, confirmed by the CIT(A), was not justified. It noted that the Explanation to Section 14A, which came into effect from 01.04.2022, was not applicable to the assessment year 2014-15.

What were the facts?

The assessee, M/s. Ashok Magnetics Limited, appealed an order confirming disallowance made by the Assessing Officer under Section 14A r.w. Rule 8D(2). The disallowance was to the extent of ₹.2,14,74,050/-, despite the assessee not earning any exempt income.

What were the issues?

Whether the disallowance under Section 14A of the Income Tax Act is justified when the assessee has not earned any exempt income, and whether the Explanation to Section 14A is applicable to the relevant assessment year.

Which sections of the Income-tax Act were involved?

Section 14A,Section 8D(2)

AI-generated summary — verify with the full judgment below

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Before: Shri S.S. Viswanethra Ravi&

Hearing: 12.11.2025Pronounced: 13.11.2025

Year: 2014-15 M/s. Ashok Magnetics Limited, Vs. The Income Tax Officer, (Represented by Shri V. Nagarajan, in Corporate Ward 1(1), the capacity of the Official liquidator), Chennai. Corporate Office – No. 9, 6th Street, Gopalapuram, Chennai 600 086. [PAN:AAACA4304Q] (अपीलाथ�/Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Shri R. Vijayaraghavan, Advocate ��थ� की ओर से/Respondent by : Shri R.V. Aroon Prasad, Addl. CIT सुनवाई की तारीख/ Date of hearing : 12.11.2025 घोषणा की तारीख /Date of Pronouncement : 13.11.2025 आदेश /O R D E R

PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:

1.

This appeal filed by the assessee is directed against the order dated 04.06.2025 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi for the assessment year 2014-15.

2.

The assessee raised 5 grounds of appeal amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in confirming the disallowance made by the Assessing Officer under section 14A of the Income Tax Act, 1961 [“Act” in short] r.w. Rule 8D(2) of the Income Tax Rules, 1962.

3. At the outset, it is noted that the Assessing Officer proceeded to determine the disallowance under Rule 8D(2)(ii) & (iii) to an extent of ₹.2,14,74,050/-. The assessee contended the proposal for disallowance is not justified when there is no exempt income earned, inspite of the same, the Assessing Officer added the above said amount to the total income of the assessee. The ld. CIT(A) confirmed the same while placing reliance of Explanation to section 14A of the Act.

4. After hearing both the parties, it is noted that there is no dispute with regard to earning of no exempt income by the assessee, which is clear from para (a) of the assessment order and para 5.2.2 of the impugned order, but, however, the ld. CIT(A) proceeded to confirm the disallowance by placing reliance of Explanation to section 14A of the Act, which came into effect from 01.04.2022.

5.

The ld. AR Shri R. Vijayaraghavan, Advocate placed reliance on the decision of the Hon’ble High Court of Delhi in the case of PCIT v.

Era Infrastructure (India) Ltd. 448 ITR 674 (Delhi) and argued that the Explanation, which was inserted under section 14A of the Act is applicable from AY 2023-24, but, not to the year under consideration.

6.

The ld. DR Shri R.V. Aroon Prasad, Addl. CIT relied on the order of the ld. CIT(A).

7.

While taking into consideration the said amendment in the case of PCIT v. Era Infrastructure (India) (P.) Ltd. (supra), the Hon’ble High Court Delhi was pleased to hold that it is settled law that the assessment has to be made with reference to the law, which is in existence at the relevant time. We find the year under consideration is AY 2014-15 and has no applicability of Explanation inserted to section 14A of the Act. Therefore, the disallowance computed by the Assessing Officer under Rule 8D(2) and as confirmed by the ld. CIT(A) is not justified. Further, when there is no exempt income earned in the relevant assessment year, section 14A of the Act cannot be invoked in view of the decision of the Hon’ble High Court of Madras in the case of CIT v. Chettinad Logistics (P) Ltd. [2017] 80 taxmann.com 221 (Madras), which was affirmed by the Hon’ble Supreme Court as reported in [2018] 95 taxmann.com 250 (SC) dated 02.07.2018. Thus, the grounds raised by the assessee are allowed.

8.

In the result, the appeal filed by the assessee is allowed. Order pronounced on 13th November, 2025 at Chennai.

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