M/S. LAKHANI RUBBER UDYOG (PVT) LTD.,NEW DELHI vs. ACIT, FARIDABAD

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ITA 4124/DEL/2016Status: DisposedITAT Delhi18 September 2019AY 2012-135 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the assessee did not earn any exempt income during the assessment year, no disallowance under Section 14A read with Rule 8D can be made. This is a well-settled principle in favour of the assessee.

What were the facts?

The assessee claimed administrative expenses, but the Assessing Officer disallowed a portion under Section 14A read with Rule 8D, as the assessee had invested in equity shares. The assessee argued no exempt income was received.

What were the issues?

Whether disallowance under Section 14A read with Rule 8D is permissible when no exempt income has been earned by the assessee.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI ‘D’ BENCH,

Before: SHRI N.K. BILLAIYA, & SHRI KULDIP SINGH

For Respondent: Shri Vijay Kumar Chadha Sr. DR
Hearing: 16.09.2019Pronounced: 18.09.2019

PER N.K. BILLAIYA, ACCOUNTANT MEMBER,

1.

This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals], Faridabad dated 24.05.2016 pertaining to assessment year 2012-13.

2.

The short grievance of the assessee is that the ld. CIT(A) erred in confirming the disallowance of administrative expenses of Rs. 11,47,420/- in terms of Rule 8D(2)(iii) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'].

3.

None appeared on behalf of the assessee. We, therefore, decided to proceed exparte qua the assessee after hearing the ld. DR.

4.

Facts emanating from the assessment order show that during the course of scrutiny assessment proceedings, the Assessing Officer noticed that invoices in equity shares of several companies. The assessee was asked to explain why disallowance u/s 14A r.w.r 8D be not made since it has not disallowed any expenditure for earning exempt income.

5.

The assessee in its replied explained that during the year, the assessee has not received any dividend income from these companies which are exempt. Therefore, there is no question of any disallowance u/s 14A of the Act.

6.

Reply of the assessee did not find any favour with the assessee who proceeded by computing the disallowance by invoking the provisions of section 14A r.w.r. 8D of the Act and made disallowance of Rs. 2,59,63,959/-.

7.

The assessee carried the matter before the ld. CIT(A) but could get part relief only.

8.

As mentioned elsewhere, since during the subject assessment year there is no exempt income earned by the assessee during the year, there cannot be any disallowance u/s 14A r.w.r 8D. This issue is by now well settled in favour of the assessee and against the revenue by the decision of the Special Bench of the Tribunal in the case of M/s Cheminvest Ltd 121 ITD 318 which was affirmed by the Hon'ble High Court of Delhi. Same view is taken by the Hon'ble Gujarat High Court in the case of Corrtech Energy (P) Ltd 372 ITR 97. In view of the above, the impugned disallowance is directed to be deleted.

Accordingly, the Ground raised by the assessee is allowed.

9.

In the result, the appeal of the assessee in is allowed.

The order is pronounced in the open court on 18.09.2019.

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