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

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.

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.

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.

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.

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