DREAM FLOWER HOUSING PROJECTS PRIVATE LIMITED,ERNAKULAM vs. DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(1), KOCHI
Facts
The assessee, a builder, filed its return for AY 2015-16. The AO made disallowances under Section 14A and Section 40(a)(ia) of the Income Tax Act. The disallowance under Section 14A was made due to investments in equity shares, despite the absence of any exempt income. The CIT(A) confirmed the disallowance under Section 14A.
Held
The Tribunal, relying on judicial precedents, held that no disallowance under Section 14A of the Income Tax Act can be made when there is no exempt income. Therefore, the AO was not justified in making the disallowance under Section 14A.
Key Issues
Whether disallowance under Section 14A of the Income Tax Act is permissible in the absence of any exempt income.
Sections Cited
143(3), 14A, 40(a)(ia)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
1 ITA No.122/Coch/2025 Dream Flower Housing Projects Private Limited vs. DCIT
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH
BEFORE SHRI INTURI RAMA RAO, AM AND SONJOY SARMA, JM
ITA No. 122/Coch/2025 Assessment Year:2015-16 Dream Flower Housing Projects Private Limited .......... Appellant 49/1295E, Ponckkara Road, Edapally PO Kochi-682024. PAN: AACCD4362K vs. DCIT .......... Respondent Corporate Circle-1(1), Kochi, Kerala.
Appellant by: Shri G. Surendranath Rao, CA Respondent by: Smt. Leena Lal, Sr. D.R.
Date of Hearing: 02.06.2025 Date of Pronouncement: 30.06.2025
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee company is directed against the order of the Learned Addl / Joint Commissioner of Income Tax (Appeals), Aurangabad (in short “CIT(A)”), dated 13/01/2025 for Assessment Year (AY) 2015-16.
2 ITA No.122/Coch/2025 Dream Flower Housing Projects Private Limited vs. DCIT
Briefly the facts of the case are that the assessee is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of builders of residential apartments. The Return of Income for the AY 2015-16 was filed on 09/08/2016 declaring a total income of Rs. 67,98,772/-. Against the said return of income, the assessment was completed by the Deputy Commissioner of Income Tax, Corporate Circle-1(1), Kochi (hereinafter referred to as “AO”) vide order dated 29/12/2017 passed U/s. 143(3) of the Income Tax Act, 1961 (in short “the Act”) at a total income of Rs. 69,92,530/-. While doing so, the AO made a disallowance of Rs. 53,286/- U/s. 14A and Rs. 69,92,531/- U/s. 40(a)(ia) of the Act. The factual background facts leading to the above addition are as under.
During the course of the assessment proceedings, the AO found that the appellant had made investments in the Equity Shares of certain companies therefore, the AO was of the opinion that the disallowance U/s. 14A of the Act is required to be made, notwithstanding the fact that there was no exempt income and no expenditure was incurred to earn the exempt income placing reliance on the Central Board of Direct Taxes (in short “CBDT”) Circular No. 5/2014, dated 11/02/2014.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order while setting aside the issue of addition U/s. 14A of the Act to the file of the AO, however, confirmed the disallowance U/s. 14A of the Act.
3 ITA No.122/Coch/2025 Dream Flower Housing Projects Private Limited vs. DCIT
Being aggrieved, the appellant is in appeal before us in the present appeal.
The issue that arises for our consideration is whether the CIT(A) was justified in confirming the disallowance U/s. 14A of the Act even in the absence of any exempt income. Now, it is a settled position of law that in the absence of exempt income, no disallowance U/s. 14A of the Act can be made. Reliance in this regard is placed on the following judgments:
(1) CIT vs. Tamilnadu Road Development Company Ltd (2021) 435 ITR 323 (Mad.) (2) Tamil Nadu Development Co Ltd vs. DCIT, 436 ITR 298 (3) PCIT vs. Nam Estates P Ltd, 434 ITR 154 7. Respectfully following the ratio of the above decisions, we hold that the AO was not justified in making the disallowance U/s. 14A in the absence of exempt income.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 30th June, 2025. Sd/- Sd/- (SONJOY SARMA) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Cochin, Dated: 30th June, 2025 okk sps
4 ITA No.122/Coch/2025 Dream Flower Housing Projects Private Limited vs. DCIT
Copy to:
The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File Assistant Registrar ITAT, Cochin
