M/S. BLUEDIAMOND TRACOM PVT. LTD.,KOLKATA vs. I.T.O., WARD - 3(1), , KOLKATA

The only issue involved in the present appeal of the assessee is with regard to disallowance made by the Assessing Officer and confirmed by the ld. CIT(A) u/s.14A read with Rule 8D of the Act when there was no exempt income earned by the assessee.

Brief facts of the case are that the assessee had made investment in equity shares. During the course of assessment proceedings, the Assessing Officer observed that if the assessee has no exempt income during the year but there must be administrative cost for maintaining the investment. It was also observed by the Assessing Officer that from the investment in shares the assessee will get only dividend which is exempt to tax. Accordingly, the Assessing Officer invoked the provisions of Section 14A read with rule 8D and disallowed the investment made by the assessee. In the appellate proceedings, the ld.CIT(A) upheld the view taken by the Assessing Officer. Now, the assessee is in further appeal before the Tribunal.

Ld. AR submitted that the impugned assessment year is assessment year 2014-2015. It was submitted that the audit report of the assessee clearly shows that no exempt income had been earned by the assessee. It was further submitted that as no income has been earned by the assessee. Ld. AR further submitted that the Assessing Officer had made disallowance applying ½ % of average value of investment. Ld. AR also submitted that the issue is now squarely covered by the decision of the Hon’ble Supreme Court in the case of Chettinad Logistics (P) Ltd., reported in [2019] 103 taxmann.com 326 (SC), wherein the Hon’ble supreme Court has categorically held that where no exempt income was earned in the relevant assessment year by the assessee, Section 14A could not be invoked.

I have considered the rival submissions of ld. AR and perused the assessment order as well as the appellate order. The Assessing Officer has made disallowance by invoking the provisions of Section 14A read with Rule 8D. The Assessing Officer also does not dispute the fact that the assessee has not claimed any exempt income during the impugned assessment year. This being so, respectfully following the principle laid down by the Hon’ble Supreme Court in the case of Chittinad Logistics Pvt.

Ltd., referred to supra, the disallowance made by the Assessing Officer and confirmed by the ld. Addl/JCIT(A) stands deleted.

In the result, appeal of the assessee is allowed.