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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SH. N. K. BILLAIYA & MS SUCHITRA KAMBLE
ORDER PER SUCHITRA KAMBLE, JM
This appeal is filed by the Revenue against the order dated 07/03/2017 passed by CIT(A)- 5, New Delhi for Assessment Year 2013-14.
The grounds of appeal
are as under:-
1. Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 8,97,28,299/- towards interest by way of disallowance u/s 14A of Income Tax Act, 1961 read with Rule 8D of Income tax Rules, 1962 on the grounds that no dividend income or any other exempt income has been earned whereas there is no provisions u/s 14A that such disallowance shall be made only on earning of tax exempt income.
2. Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 8,97,28,299/- towards disallowance of interest u/s 14A of Income Tax Act, 1961 read with Rule 8D on the grounds that the AO has not recorded satisfaction of correctness of claim of expenditure whereas there is no such statutory requirement of law for recording such satisfaction and further the assessee is statutorily not eligible to claim such deduction.
3. That the appellant craves leave to add, alter, amend or forego any ground(s) of the appeal raised above at the time of hearing.”
3. The assessee is engaged in the business of providing clinical establishment services including IPD, OPD, radiology and other ancillary services by way of running hospital. The revised return of income declaring loss of Rs. 26,04,43,165/- was e-filed on 01.10.2014. The scrutiny assessment was concluded reducing the loss returned to a figure of Rs. (-) 17,07,14,870/- wherein the Assessing Officer made disallowance of Rs. 8,97,28,299/- u/s 14A of te Income Tax Act, 1961.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT (A) partly allowed the appeal of the assessee.
The Ld. DR relied upon the assessment order and submitted that the CIT(A) was not correct in deleting the addition of Rs. 8,97,28,299/- towards interest by way of disallowance u/s 14A of Income Tax Act, 1961 read with Rule 8D of Income tax Rules, 1962 on the grounds that no dividend income or any other exempt income has been earned whereas there is no provisions u/s 14A that such disallowance shall be made only on earning of tax exempt income. The Ld. DR further submitted that the CIT(A) was also not right in deleting the addition of Rs. 8,97,28,299/- towards disallowance of interest u/s 14A of Income Tax Act, 1961 read with Rule 8D on the grounds that the AO has not recorded satisfaction of correctness of claim of expenditure whereas there is no such statutory requirement of law for recording such satisfaction and further the assessee is statutorily not eligible to claim such deduction.
The Ld. AR submitted that the observation of the Assessing Officer that the assessee had investment in equity and mutual fund of Rs. 4,15,93,23,919/- and made disallowance u/s 14A read with Rule 8D is not just and proper. The Ld. AR submitted that the assessee neither had earned any exempt income during the year nor had any expense incurred which were directly relatable to the investment in question. The Ld. AR relied upon the decision of the Hon’ble Delhi High Court in case of CIT Vs. Holcim India Pvt. Ltd. 272 CTR 282 and Cheminvest Ltd. reported at 371 ITR 23 as well as the decision of the Apex Court in case of Maxopp Investment Ltd. 402 ITR 640 (SC). Thus, the Ld. AR relied upon the order of the CIT(A).
We have heard both the parties and perused the material available on record. It is clear from the records that that there was no exempt income attributable in the hands of the assessee. Therefore, applying Section 14A read with Rule 8D is not appropriate on part of Assessing Officer. The CIT(A) rightly held that no expenditure can be disallowed against Nil exempt income and this view is also supported by the decision of the Jurisdictional High Court of Delhi in case of CIT Vs. Holcim India Pvt. Ltd. 272 CTR 282 and Cheminvest Ltd. reported at 371 ITR 23. The Hon’ble Apex Court has clearly set out in Maxopp Investment Ltd. 402 ITR 640 (SC) that the expenditure should be actually incurred and there should be exempt income. But in assessee case there is a clear finding by Assessing Officer as well as by the CIT(A) that there is no exempt income. Therefore, the appeal of the Revenue is dismissed.
In result, the appeal of the Revenue is dismissed.
Order is pronounced in the open court in presence of both the parties on 06th January, 2021.
Order pronounced in the Open Court on this 06th day of January, 2021.