M/S. TAPI PRESTRESSED PRODUCTS LTD,,JALGAON vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 2,, JALGAON

Tersely, the facts of the case are that the assessee did not offer any disallowance u/s.14A. Applying Rule 8D of the M/s. Tapi Prestressed Products Ltd., Income-tax Rules, 1962, the AO computed disallowance at Rs.62,34,039/-. The assessee contended before the ld. CIT(A) that no exempt income was earned during the year. Not convinced, the ld. CIT(A) upheld the addition, against which the assessee has come up in appeal before the Tribunal.

We have heard the ld. DR and perused the relevant material on record. There is no appearance from the side of the assessee despite notice. We are, therefore, proceeding to dispose of the appeal ex parte qua the assessee. It is found as an admitted position as has also already been recorded in the impugned order that the assessee did not earn any exempt income during the year. Despite that, the AO has computed disallowance u/s.14A amounting to Rs.62,34,039/-.

The Hon'ble Delhi High Court in Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Del) has held that if there is no exempt income, there can be no question of making any disallowance u/s 14A of the Act. Similar view has been taken by the Hon'ble Delhi High Court in CIT vs. Holcim India P.

Ltd. (2014) 90CCH 081-Del-HC. More recently the Hon’ble jurisdictional High Court in Pr. CIT VS. Kohinoor Projects Pvt. Ltd. (2020) 425 ITR 700 (Bom) has held that in the M/s. Tapi Prestressed Products Ltd., absence of any exempt income, there cannot be any disallowance of expenses u/s 14A of the Act. As the assessee in the instant case did not earn any exempt income, respectfully following the precedent, we hold that no disallowance was called for. The impugned order is overturned and the sustenance of the disallowance is deleted.

In the result, the appeal is allowed. Order pronounced in the Open Court on 18th January, 2022.