DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1(1)(1), BANGALORE vs. M/S AVESTHAGEN LIMITED, BANGALORE

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ITA 291/BANG/2019Status: DisposedITAT Bangalore26 July 2019AY 2013-144 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 held that no disallowance under Section 14A is required in the absence of any exempt income. This decision was supported by High Court precedents.

What were the facts?

The AO disallowed Rs. 297.65 lakhs under Section 14A by applying Rule 8D, even though the assessee did not earn any exempt income. The CIT(A) deleted this disallowance.

What were the issues?

Whether disallowance under Section 14A is warranted when no exempt income has been earned by the assessee.

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, “B’’ BENCH : BANGALORE

Before: SHRI B.R BASKARAN & SMT. BEENA PILLAI

For Appellant: Shri R.N Siddappaji, Addl. CIT
For Respondent: Shri Gururajan
Hearing: 24.07.2019Pronounced: 26.07.2019

O R D E R

Per B.R Baskaran, Accountant Member

1.

The Revenue has filed this appeal challenging the order dated 26/11/2018 passed by ld CIT(A)-1, Bengaluru for asst. year 2013- 14.

2.

The Revenue is aggrieved by the decision of ld CIT(A) in deleting the disallowance made by the AO u/s 14A of the Act.

3.

We heard the parties and perused the record. The assessee is engaged in the business of research and development in bio- technology and bio informatics. During the course of asst. proceedings, the AO noticed that the assessee has made investments in shares of certain companies. Even though the assessee did not earn any exempt income, yet the AO took the view that the disallowance u/s 14A of the Act is required to be made. Accordingly, by applying the provisions of Rule 8D, the AO disallowed a sum of Rs.297.65 lakhs. The ld CIT(A) deleted the same and hence the Revenue has filed this appeal before us.

4.

The ld DR submitted that the assessee has made investment in shares, the income from which is exempt from taxation. Hence disallowance u/s 14A was rightly made by the AO.

5.

We heard the person appearing on behalf of the assessee. We noticed that the ld CIT(A) has verified the records and found that the assessee has not earned any exempt income. Accordingly, by following the decision rendered by the coordinate bench of ITAT in the case of Quality Engineering and Software Technologies (2014) 52 Taxman 55, the ld CIT(A) has held that no disallowance u/s 14A is required to be made in the absence of any exempt income. Accordingly he has deleted the addition made by the AO u/s 14A of the Act.

6.

We noticed that the view taken by the Ld CIT(A) also gets support from the decision rendered by Hon’ble Delhi High Court in the case of Cheminvest Investment Ltd. Vs. CIT, 378 ITR 33. Since the assessee did not earn exempt income, no disallowance u/s 14A is called for as per the decision rendered by Hon’ble Delhi High Court in the above cited case. Accordingly we do not find any reason to interfere with the order passed by ld CIT(A).

7.

In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the Open Court on 26th July, 2019.

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