DCIT CEN CIR 5(4), MUMBAI vs. EMERALD REALTORS P.LTD, MUMBAI

2393/Mum/2018 M/s. Emerald Realtors Pvt. Ltd. of Income Tax & Asst. Commissioner of Income Tax, Central Circle – 5(4), Mumbai (hereinafter referred to as ld. AO).

The only identical issue to be decided in both the years is as to whether the ld CIT(A) was justified in deleting the disallowance made u/s.14A of the Act r.w.rule 8D of the rules when the assessee had not received any exempt income.

None appeared on behalf of the assessee. We have heard the ld. DR. It is not in dispute that assessee had not earned or received any exempt income during the years under consideration. We find that this issue is now covered in favour of the assessee by the decision of Hon’ble Delhi High Court in the case of Joint Investments Pvt. Ltd., vs. CIT reported in 372 ITR 694 (Del). The relevant operative portion of the said judgement is as under:- “9. In the present case, the AO has not firstly disclosed why the appellant/assessee's claim for attributing Rs.2,97,440/- as a disallowance under Section 14A had to be rejected. Taikisha says that the jurisdiction to proceed further and determine amounts is derived after examination of the accounts and rejection if any of the assessee's claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the AO - an aspect which is completely unnoticed by the CIT (A) and the ITAT. The third, and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs.48,90,000/-, the disallowance ultimately directed works out to nearly 110% of that sum, i.e., Rs.52,56,197/-. By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income". This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case.”

Respectfully following the aforesaid decision, we hold that the ld. CIT(A) was right in granting relief to the assessee. Accordingly, the grounds raised by the revenue are dismissed.

In the result, appeals of revenue are dismissed.