ACIT,CENTRAL CIRCLE-29, NEW DELHI vs. WAVE INFRATECH PVT. LTD.,, NOIDA

This batch of three appeals filed by the Revenue are directed against the separate orders of the CIT(A). In all these appeals, the Revenue is aggrieved with the order of the CIT(A) in deleting the disallowance u/s 14A r.w. Rule 8D made by the Assessing Officer. Since common issues are involved in all these appeals, therefore, these were heard together and are being disposed of by this common order for the sake of convenience.

So far as is concerned, the Assessing Officer made disallowance of Rs.1,71,29,845 by invoking the provisions of section 14A of the IT Act r.w. Rule 8D of the IT Rules, 1962 although the assessee has not earned any exempt income. While doing so, he held that merely because the companies in which the assessee has made investment did not declare dividend, the nature of investment does not change. Further, the assessee company has major shareholding in its group companies and as such declaration of dividend is also controlled by the assessee. The Assessing Officer, therefore, invoking the provisions of section 14A of the IT Act r.w. Rule 8D of the IT Rules, 1962, made a disallowance of Rs.1,71,29,845/-.

Similarly, in Assessing Officer made a disallowance of Rs.3,17,07,847/- by invoking the provisions of section 14A of the 2 IT Act r.w. Rule 8D of the IT Rules, 1962. It is pertinent to mention here that at pra 4.1 of the assessment order the Assessing Officer has categorically mentioned that the assessee has no exempt income.

So far as is concerned, here also, despite the submission of the assessee that the assessee has not earned any exempt income and, hence, disallowance u/s 14A of the IT Act r.w. Rule 8D of the IT Rules, 1962 is not warranted at all, the Assessing Officer, invoking the provisions of section 14A of the IT Act r.w. Rule 8D of the IT Rules, 1962 made a disallowance of Rs.3,07,98,587/-.

The respective CIT(A)s deleted the addition made by the respective Assessing Officers on the ground that the assessee has not earned any exempt income.

Aggrieved with such order of the CIT(A), the Revenue is in appeal before the Tribunal.

We have heard the respective ld. counsels appearing for the assessees. As mentioned earlier, the assessees have not earned exempt income during the year. The Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Del), has held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. The Hon'ble Supreme Court in the case of CIT vs. Chettinad Logistics (P) Ltd. (2017) 95 taxmann.com 250 (SC) has dismissed the SLP filed by the Revenue against the decision of the Hon'ble Madras High Court in the case of CIT vs. Chettinad Logistics (P) Ltd. holding that section 14A cannot be invoked where no exempt income was earned by the assessee in the relevant assessment year. The Hon'ble Delhi High Court in the case of PCIT vs. McDonald’s India (P) Ltd. (2019) 101 taxmann.com 86, after considering various decisions, has dismissed the appeal filed by the Revenue against the order of the Tribunal where the Tribunal has deleted the disallowance made by the Assessing Officer u/s 14A on the ground that the assessee had not earned any exempt income during the relevant assessment year and, therefore, no substantial question of law arises. We further find the Hon'ble Supreme Court in the case of PCIT vs. GVK Project and Technical Services Ltd. (2019) 106 taxmann.com 181 (SC) has dismissed the SLP filed by the Revenue against the decision of the Hon'ble Delhi High Court in the case of CIT vs. GVK Project and Technical Services Ltd., reported in 106 taxmann.com 180 where the Hon'ble High Court upheld the order of the Tribunal holding that in absence of any exempt income returned by the assessee, disallowance could not be made u/s 14A. The Hon'ble Supreme Court, again, in the case of PCIT vs. Oil Industry Development Board (2019) 103 taxmann.com 326 (SC), has dismissed the SLP filed by the Revenue against the decision of the Hon'ble High Court upholding the Tribunal’s order that in absence of any exempt income, disallowance u/s 14A of any amount was not permissible. In view of the decisions of the Hon'ble Delhi High Court cited (supra), we do not find any perversity or illegality in the order of the CIT(A) 4 deleting the disallowance made by the Assessing Officer u/s 14A of the IT Act r.w. Rule 8D of the IT Rules, 1962 when the assessee has not earned any exempt income. Accordingly, the orders of the CIT(A) on this issue is upheld.

In the result, the appeals filed by the Revenue in respect of the above three assessees are dismissed.