DCIT, CC - 5(2), CHENNAI vs. PRINCE HOLDINGS MADRAS PVT. LTD., CHENNAI

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ITA 1779/CHNY/2019Status: DisposedITAT Chennai27 February 2020AY 2015-163 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 disallowance under Rule 8D(ii) cannot be made when the assessee has not earned any exempt income. The CBDT circular cannot override the judgments of the High Court and Supreme Court.

What were the facts?

The Assessing Officer made a disallowance under Section 14A read with Rule 8D(ii). The assessee had not earned any exempt income during the assessment year. The CIT(A) deleted the disallowance.

What were the issues?

Whether disallowance under Section 14A read with Rule 8D(ii) can be made in the absence of exempt income 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, ‘D’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI RAMIT KOCHAR

Hearing: 06.01.2020Pronounced: 27.02.2020

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

1.

This appeal of the Revenue is directed against the order passed by the Commissioner of Income Tax (Appeals)–3, Chennai dated 18.03.2019 and pertains to the assessment year 2015-16.

2.

Shri S. Ramakrishnan, the Ld. Departmental Representative submitted that the CIT(A) deleted the disallowance made by the Assessing Officer on the ground that there was no dividend income earned by the assessee on the investment. According to the Ld.DR, the CBDT by a Circular No.5 of 2014 clarified that disallowance has to be made under Rule 8D(ii) of the Income Tax Rules, even in case where no exempt income was earned by the assessee.

3.

On the contrary, Shri N. Devanathan, the Ld. Counsel for the assessee submitted that admittedly there was no exempt income earned by the assessee during the year under consideration. Therefore the CIT(A) by placing reliance on the judgment of the Supreme Court in M/s. Chettinad Logistics Pvt. Ltd., (2018) 95 taxmann.com 250 (SC) deleted the addition.

4.

We have considered the rival submissions on either side and perused the material available on record. It is not in dispute that the assessee has not earned any exempt income during the year under consideration. The question arises for consideration is when the assessee has not earned any exempt income, can there be any disallowance U/s.14A read with Rule 8D(ii) of the Rules. This issue was examined by the Madras High Court in the case of M/s. Chettinad Logistics Pvt. Ltd. The Madras High Court found that when there was Rule 8D(ii). This judgment of the Madras High Court was also confirmed by the Apex Court. The contention of the Revenue before this Tribunal is that there was a CBDT circular saying that even though there was no exempt income during the year under consideration, disallowance can be made. This Tribunal is of the considered opinion that the CBDT cannot override the judgment of the Madras High Court and the Supreme Court. The CIT(A) has rightly followed the judgment of the Madras High Court, confirmed by the Apex Court. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed.

5.

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

Order pronounced in the court on 27th February, 2020 at Chennai.

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