ACIT 8 (1)(1), MUMBAI vs. M/S RELIANCE RETAILS LTD, MUMBAI

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ITA 176/MUM/2020Status: DisposedITAT Mumbai20 July 2021AY 2016-173 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that if no exempt income has been earned, no disallowance under Section 14A read with Rule 8D can be made. This decision is supported by the Supreme Court's ruling in Maxopp Investment Ltd. vs. CIT.

What were the facts?

The Assessing Officer disallowed expenses relatable to exempt income under Section 14A read with Rule 8D. The assessee contended that no exempt income was earned during the year. The CIT(A) deleted the disallowance, relying on High Court decisions.

What were the issues?

Whether disallowance under Section 14A is permissible when no exempt income has been earned during the assessment year.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

For Appellant: Shri Bharat Andhle, CIT DR
Hearing: 20.07.2021Pronounced: 20.07.2021

O R D E R भहावीय स िंह, उऩाध्मक्ष के द्वाया / PER MAHAVIR SINGH, VP: This appeal of the Revenue is arising out of order of the Commissioner of Income Tax (Appeals)]-14, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-14/IT-111/18-19 vide dated 24.10.2019. The Assessment was framed by the Asst. Commissioner of Income Tax, Circle-8(1)(1), Mumbai (in short ACIT / AO) for the A.Y. 2016-17 vide order dated 25.12.2018 under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).

1.

“Whether on facts and circumstances of the case and in law the Ld CIT(A) erred in allowing the appeal of the assessee on the ground that since no exempt income has been earned, no disallowance can be made.

Whether on facts and circumstances of the case and in law the Ld CIT(A) failed to appreciate the provisions of circular no 5 of 2014 dated 11.02.2014 which states that "legislative intent is to allow only that expenditure which is relatable to earning exempt income and therefore follows that the expenses, which are relatable to earning of exempt income have to be considered for disallowance irrespective of the fact whether such income has been earned during the financial year or not.”

3.

The Assessing Officer during the course of assessment proceedings disallowed the expenses relatable to exempt income under section 14A read with Rule 8D of the Rules amounting to ₹2,38,63,631/-. The assessee before Assessing Officer as well as before CIT(A) contended that there is no exempt income earned by the assessee during the year and the Assessing Officer has assumed that there will be income likely to arise in future. The CIT(A) relying on the decision of various High courts deleted the disallowance made by the Assessing Officer.

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