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Facts
The assessee's appeal is against the order of the Pr. Commissioner of Income Tax, Hyderabad, passed under section 263 of the Income Tax Act for assessment year 2020-2021. The core of the revision order pertained to the invocation of section 14A read with Rule 8D for disallowance of expenditure, which the assessee claims should not be applied.
Held
The Tribunal noted that the Assessing Officer, in the consequential order passed after the revision proceedings, did not make any disallowance or addition concerning section 14A. Consequently, the Tribunal found that the assessee had no further grievance, and the appeal had become infructuous.
Key Issues
Whether the disallowance under section 14A read with Rule 8D was justified when the Assessing Officer, in the consequential order, made no such disallowance after the PCIT's revisionary order.
Sections Cited
Sec. 263, Sec. 14A, Rule 8D
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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G.
PER VIJAY PAL RAO, VICE PRESIDENT :
This appeal by the Assessee is directed against the Order dated 26.03.2025 of the Pr. Commissioner of Income Tax, Hyderabad-1, Hyderabad, passed u/sec.263 of the Income Tax Act [in short "the Act"], 1961, for the assessment year 2020-2021.
2 ITA.No.1045/Hyd./2025 2. The assessee has raised the following grounds of appeal:
“The order of the Ld. Principal Commissioner of Income Tax, Hyderbad-1 (PCIT) dt. 26/03/2025 passed u/s 263 of the IT Act, 1961 for the Asst. Year 2020-21 is erroneous and unjustified both on facts of the case and in law.
The Ld. PCIT erred in invoking provisions of sec. 263 of the IT Act and issuing directions to the Assessing Officer to reframe the assessment afresh as per the provisions of law on the specious ground that that the aspects of disallowance u/s. 14A read with Rule 8D were not verified by the Assessing Officer during the assessment proceedings.
3. The Ld. PCIT ought to have appreciated that the provisions of sec. 14A read with Rule 8D cannot be invoked to the subject year as the appellant has neither earned nor claimed exempt income in the return of income filed for the year.
4. The Ld. PCIT ought not to have overlooked the judgment of Supreme Court in the case PCIT vs. Oil Industry Development Board [2019] 262 Taxman 102, wherein the Apex Court upheld the decision of Delhi High Court that no disallowance u/s. 14A could be made in the absence of any exempt income.
5. The Ld. PCIT erred in observing that the amended provisions of sec. 14A with effect from Asst. Year 2022-23 are applicable retrospectively and even to the year under consideration when the Memorandum to the Finance Bill 2022 clearly states that the amendment is applicable prospectively.
The Ld. PCIT erred in observing that the clauses (i) and (ii) of Rule 8D (2) of 1 T Rules are applicable to the facts of the case when no direct OR indirect expenditure was incurred by the company to earn hypothetical OR anticipated exempt income.
3 ITA.No.1045/Hyd./2025 7. The Ld. PCIT ought to have appreciated that the interest free funds available to the appellant in the form of equity, share premium. Reserves & surplus far exceed the quantum of tax-free investments made by the appellant in this year and in the earlier years and hence Rule 8D(2)(i) is not applicable to the case of the appellant.
The Ld. PCIT ought to have further considered that no indirect expenditure was incurred by the company comp to earn notional exempt income as the investments were all made in subsidiaries, Joint Ventures and Jointly controlled entities and therefore clause (ii) of Rule 8D (2) is also not applicable to the facts of the case.”
At the time of hearing, the learned Authorised Representative of the Assessee has submitted that the Assessing Officer in the consequential order passed in pursuance to the impugned revision order has not made any disallowance/addition on the issue of sec.14A of the act. He has filed copy of the assessment order dated 21.05.2025 passed by the Assessing Officer in pursuance to the directions of the PCIT u/sec.263 of the Act and submitted that this appeal of the assessee becomes infructuous.
On the other hand, the learned DR has not disputed the fact that the Assessing Officer has passed the consequential order dated 21.05.2025 whereby no 4 ITA.No.1045/Hyd./2025 disallowance was made u/sec.14A of the Act which was the subject matter of the proceedings u/sec.263 of the Act.
Having considered the submissions of the learned Authorised Representative of the Assessee and the learned DR and careful perusal of the consequential order passed by the Assessing Officer in pursuance to the Order u/sec.263, we find that the Assessing Officer has given the finding in Paras-3.3 to 3.8 of the consequential order dated 21.05.2025 as under:
5 ITA.No.1045/Hyd./2025 6 ITA.No.1045/Hyd./2025 7 ITA.No.1045/Hyd./2025
6. Thus, when the Assessing Officer has not made any disallowance in the order dated 21.05.2025 passed in pursuance to the impugned order passed u/sec.263 of the Act, then no grievance of the assessee is left in the present appeal. Accordingly, in the facts and circumstances of the case and in view of the consequential order passed by the Assessing Officer, the present appeal of the assessee becomes infructuous and the same is dismissed.
8 ITA.No.1045/Hyd./2025 7. In the result, appeal of the Assessee is dismissed as infructuous.
Order pronounced in the open Court on 11.02.2026.