DCIT 12(3)(2), MUMBAI vs. MAJESTIC INFRACON P.LTD, MUMBAI

The only common issue in these appeals of Revenue is against the order of CIT(A) deleting the disallowance of expenses relatable to exempt income by the Assessing Officer by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules, 1961 (hereinafter referred to as the ‘Rules’). For this, Revenue has raised the identical worded grounds in both the years except the quantum, hence, we will take the grounds as raised in AY 2013-14 in ITA No. 3309/Mum/2018. The relevant grounds read as under: -

“1. Whether, on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) erred in deleting the disallowance of Rs.8,75,88,914/- made by the AO u/s.14A under Rule 8D relying on the decision of Hon'ble Delhi High Court in the case of Chemvest Ltd, without appreciating the Hon'ble Supreme Court's Decision in the case of M/s. Maxopp Investment Ltd Vs. CIT?".

We have heard the learned CIT DR and gone through the facts and circumstances of the case. The assessee before the Assessing Officer has claimed vide letter dated 21.06.2016 that the assessee has not earned any exempt income and hence, therefore there is no disallowance under section 14A of the Act. The Assessing Officer computed the disallowance under Rule 8D(2)(iii) of the Rules at Rs. 5,79,57,849/- and under Rule 8D(2)(iii) of the Rules at Rs. 2,96,31,065/- and thereby, the total disallowance made was Rs.8,75,88,914/-. Aggrieved, the assessee preferred the appeal before Commissioner of Income Tax (Appeals). The CIT(A) relying on the decision of Hon’ble Delhi High Court in the case of Cheminvest Limited vs. CIT (2015) 378 ITR 33 (Delhi), deleted the addition by stating that once, there is no exempt income no disallowance can be made by invoking the provisions of section 14A read with Rules 8D of the Rules.

We noted that now this issue is settled by the decision of Hon’ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT [2018] 402 ITR 640 (SC), wherein it is held that once, there is no exempt