M/S. ZEELAND ACRES PVT. LTD.,CHENNAI vs. ITO, CORPORATE WARD - 3 (3), CHENNAI

This is an appeal filed by the assessee against the Commissioner of Income Tax (Appeals)-11, Chennai in dated 03.04.2019 for assessment year 2014-15.

Shri. G. Baskar, Advocate represented on behalf of the assessee and Ms. R. Anitha, JCIT represented on behalf of the Revenue.

It was submitted by the Ld. AR that in respect of ground nos. 1.1 to 1.5, the issue was in respect of determination of the fair market value of the shares transferred. It was a submission that the Ld. CIT(A) in para 9 of page 11 of his order has directed the AO to re-work the fair market value as on 10.03.2014. The Ld. AR placed before me a copy of the order giving effect to the Ld. CIT(A) dated 16.05.2019, wherein the addition u/s. 56(2)(vii) r.w.r.

In reply, the Ld. DR did not raise any objection. It was agreed that the issue has become academic in nature.

I have considered the rival submissions through video conference. As the issues raised in ground 1.1 to 1.5 has admittedly become academic in nature, the said grounds stand dismissed as infructuous.

In respect of the grounds 2.1 and 2.2, it was submitted by the Ld. AR that the issue was against the action of the Ld. CIT(A) in confirming the disallowance made by invoking section 14A r.w.r. 8D. The Ld. AR drew my attention to the para 4 of page 2 of the assessment order, wherein the AO has recorded that the assessee is not in receipt of any exempt income by way of the investment. It was a submission by the Ld. AR that the Ld. CIT(A) had relied upon the circular issued by the CBDT in Circular No. 5 of 2014 dated 11.02.2014. It was a submission that the issue was squarely covered by the decision of the Hon’ble Supreme Court in the case of Chettinad Logistics reported in 95 Taxmann.com 250 (SC), wherein it has been held that if the assessee has not earned any exempt income, then no disallowance u/s. 14A is called for.

In reply, the Ld. DR vehemently supported the order of the Ld. CIT(A).

I have considered rival submissions through video conference. The assessee in the present case has not earned any exempt income, as has been recorded by the AO in the assessment order. This being so, I am of the view that the decision of the Supreme Court in the case of Chettinad Logistics, (supra) squarely applies in the present case and as the assessee has not earned any exempt income during the relevant assessment year, no disallowance u/s. 14A is called for. In the circumstances, the addition made by the AO and confirmed by the Ld. CIT(A) by invoking provisions of section 14A stands deleted. Grounds 2.1 and 2.2 of the assessee’s appeal stands allowed.

In the result, the appeal filed by the assessee is partly allowed.