ACIT 12(2)(2), MUMBAI vs. M/S HATHWAY CABLE & DARACOM LTD., MUMBAI

This appeal in A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-20, Mumbai in appeal No.CIT(A)-20/IT-10575/2016-17 dated 29/03/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 28/11/2016 by the ld. Asst. Commissioner of Income Tax-12(2)(2), Mumbai (hereinafter referred to as ld. AO).

The only issue to be decided in this appeal of the revenue is as to whether any disallowance u/s.14A of the Act r.w.Rule 8D of the Rules could be made when assessee has not received any exempt income during the year.

We have heard rival submissions and perused the materials available on record. We find that there is no dispute that assessee had not received any exempt income during the year under consideration. In view of the huge investments held by the assessee, the ld. AO directly proceeded to apply third limb of Rule 8D(2) of the Rules and made disallowance of indirect expenses u/s.14A to the tune of Rs. 1,69,35,716/- by considering 0.5% of average value of investments. We find the issue is now very well settled in the decision of the Hon’ble Supreme Court in the case of Maxopp Investments reported in 402 ITR 640 and other decisions wherein it has been categorically held that when there is no exempt income derived by the assessee during the year under consideration, the applicability of Section 14A of the Act does not come into operation. Respectfully following the same, we do not find any infirmity in the order of the ld. CIT(A) granting relief to the assessee. Accordingly, the grounds raised by the Revenue are dismissed.