DCIT, NEW DELHI vs. M/S. ASF INFRASTRUCTURE PVT. LTD., NEW DELHI

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ITA 93/DEL/2017Status: DisposedITAT Delhi29 July 2019AY 2013-143 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the deletion of the disallowance by the CIT(A). It followed the precedent set by the Delhi High Court in Cheminvest Ltd., stating that Section 14A applies only when there is actual receipt of income not includable in total income.

What were the facts?

The Assessing Officer disallowed expenditure of Rs.93,97,635/- under Section 14A read with Rule 8D for investments made by the assessee. The assessee argued that no exempt income was earned during the year, making the disallowance inapplicable.

What were the issues?

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

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 ‘A’ BENCH,

Before: SHRI N.K. BILLAIYA, & SHRI SUCHITRA KAMBLE

For Respondent: Shri Ashish Goeal
Hearing: 29/07/2019Pronounced: 29/07/2019

PER N.K. BILLAIYA, ACCOUNTANT MEMBER,

1.

This appeal by the Revenue is preferred against the order of the CIT(A)-1, New Delhi, dated 14/10/2016 pertaining to AY 2013-14.

2.

The solitary grievance of the Revenue is that the Ld. CIT(A) erred in deleting the additions of Rs.93,97,635/- made by the Assessing Officer on account of disallowance of expenditure u/s14A read with Rule-8D. 3. The brief facts of the case are that the assessee is engaged in the business of subletting the properties and showing other higher income. 4. During the course of scrutiny assessment proceedings, the AO noticed that the assessee has made investment of Rs.7.47 crores into equity of the subsidiary companies and associates. The AO found that the assessee has not disallowed any expenditure in relation to keeping the investment in equity. Invoking provisions of section 14A r.w.r. 8D, the AO computed the disallowance of Rs.93,97,635/-.

5.

The assessee carried the matter before the ld. CIT(A) and strongly objected the disallowance claiming that during the year the assessee has not earned any exempt income and therefore the ratio laid down by the Hon’ble High Court of Delhi in the case of Cheminvest Ltd. 61 taxmann.com 118 squarely apply.

6.

Considering the facts of nil exempt income, the Ld. CIT(A) deleted the disallowance.

7.

This issue is now well settled in favour of the assessee and against the Revenue by the Hon’ble High Court of Delhi in the case of Cheminvest (supra) wherein the Hon’ble High Court has held that there should be actual receipt of income and which is not includable in total income, hence, section 14A will not apply, where no exempt income is received or receivable during the relevant assessment year. Similar view was taken by the Hon’ble High Court of Gujarat in the case of CIT vs Corrtech Energy Pvt. Ltd. [2014] 45 taxman.com 116 (Gujarat). Respectfully following the decisions of the Hon’ble High Courts, we decline to interfere with the findings of the Ld. CIT(A).

8.

In the result, appeal filed by the Revenue is accordingly dismissed. The order is pronounced in the open court on 29/07/2019

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