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Income Tax Appellate Tribunal, “C’’ BENCH : BANGALORE
Before: SHRI B.R BASKARAN & SHRI PAVAN KUMAR GADALE
Per B.R Baskaran, Accountant Member :
The Revenue has filed these appeals challenging the orders passed by ld CIT(A)-5, Bengaluru, wherein he has deleted the disallowance made by the AO u/s 14A of the Act and these appeals relate to asst. years 2013-14 and 2014-15. Since the issue urged in these appeals is identical in nature, both were heard together and are being disposed of by this common order.
The assessee is engaged in the business of real estate development and leasing of office spaces. The AO noticed that the assessee has held investments, income from which is exempt. In both the years under consideration the assessee did not make any disallowance u/s 14A of the Act. The AO, however, took the view that provisions of sec.14A should be applied to the assessee and accordingly proportionate expenses should be disallowed. Accordingly the AO disallowed a sum of Rs.995.24 lakhs and Rs.1247.95 lakhs respectively in asst. years 2013-14 and 2014-15 by invoking provisions of sec. 14A of the Act r.w. Rule 8D of Income-tax Rules.
In the appellate proceedings before ld CIT(A), the assessee contended that no disallowance u/s 14A should be made since it did not receive any exempt income during both the years under consideration. The ld CIT(A) was convinced with the contentions of the assessee and accordingly deleted the disallowance made u/s 14A of the Act in AY 2013-14. In AY 2014-15, the Ld CIT(A) expressed the view that the disallowance u/s 14A should be restricted to the exempt income. The Revenue is aggrieved.
We heard the parties and perused the record. We noticed that the ld CIT(A) has followed the decision rendered by Hon’ble Delhi High Court in the case of Joint Investments Ltd., (372 ITR 694) and Cheminvest Ltd. Vs. ITO (2015)(378 ITR 33). to come to the conclusion that disallowance u/s 14A is not warranted when the assessee did not earn any exempt income and if any exempt income is earned by the assessee, then the disallowance u/s14A should not exceed the amount of exempt income. The following observations made by Hon’ble Delhi High Court in the case of Cheminvest Ltd (supra) are relevant here:-
“23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression „does not form part of the total income‟ in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year.”
Since the ld CIT(A) has followed the decision rendered by Hon’ble Delhi High Court in the above said cases, we do not find any reason to interfere with the order passed by ld CIT(A) in both the years under consideration.
In the result, both the appeals of the Revenue are dismissed.