DY. COMMISSIONER OF INCOME TAX , CIRCLE-1(2), HYDERABAD vs. CASPIAN IMPACT INVESTMENTS PRIVATE LIMITED , HYDERABAD

The Revenue has raised the following substantive grounds in the instant appeal: “1.CIT(A) erred in deleting the disallowance made u/s.14A to the extent of Rs.2,29,49,164/- while computing the income under the normal provisions. 2.CIT(Appeals) erred in ignoring the fact that said amount of ‘portfolio management fee’ paid by the assessee is direct expenditure incurred on the investments, income from which is exempt and therefore has to be disallowed under Rule 8D(i). 3.CIT(A) erred in deleting the disallowance made of the said sum while computing the book profits, which is contrary to clause (f) of explanation 1 to Sec 115JB. 4.Any other ground that be urged at the time of hearing.”

At the outset, learned authorised representative submitted that since there is no dividend income earned in the relevant previous year the CIT(A)’s order deleting the impugned Section 14A disallowance r.w. rule 8D disallowance may be upheld. In this connection, he relied on the following case law: i. CIT Vs. Chettinad Logistics Pvt. Ltd., [80 taxmann.com 221] (Madras); ii. CIT Vs. Corrtech Energy Pvt. Ltd., [223 Taxman 130] (Guj); iii. Cheminvest Ltd., Vs. CIT (2015) [378 ITR 33] (Del) Their lordships hold that Section 14A read with Rule 8D applies only in relation to an assessee’s exempt income and not otherwise. It is an admitted fact that the assessee has not derived any exempt income in the relevant previous year. We therefore sustain the order of CIT(A) under challenge for this precise reason alone.

This Revenue’s appeal is dismissed in above terms.