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Income Tax Appellate Tribunal, KOLKATA ‘C(SMC
Before: Shri P.M. Jagtap, Vice-
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-2, Kolkata dated 04.02.2019 and the solitary issue involved therein relates to the disallowance of Rs.6,34,313/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962.
The assessee in the present case is a Company, which is engaged in the business of providing I.T. Enabled Services. The return of income for the year under consideration was filed by the assessee on 30.09.2015 declaring total loss of Rs.1,00,001/-. During the course of assessment proceedings, it was noticed by the Assessing Officer that even though the assessee-company had not earned any tax-free income, total investment Assessment Year: 2015-2016 Radhey I.T. Solution Pvt. Limited of Rs.1.81 crores was made by it in equity shares, which was capable of generating exempt income. Relying on the CBDT Circular No. 5/2014 dated 11.02.2014, he invoked Rule 8D and worked out the disallowance to be made under section 14A at Rs.6,34,313/-. Accordingly a disallowance to that extent was made by him in the assessment completed under section 143(3) vide an order dated 19.09.2017. On appeal, the ld. CIT(Appeals) confirmed the said disallowance made by the Assessing Officer. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
I have heard the arguments of both the sides and also perused the relevant material available on record. As held, inter alia, by the Hon’ble Jurisdictional High Court in the case of CIT –vs.- M/s. Ashika Global Securities Limited (ITAT No. 100 of 2014 dated 11.06.2018) cited by the ld. Counsel for the assessee, Section 14A and Rule 8D could not be operated if there was no exempt income actually earned by the assessee during the relevant year. Since the assessee in the present case had admittedly not earned any exempt income during the year under consideration, I hold by relying, inter alia, on the decision of the Hon’ble Jurisdictional High Court in the case of Ashika Global Securities Limited (supra) that the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 14A read with Rule 8D is not sustainable. I accordingly delete the said disallowance and allow this appeal of the assessee.
In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on November 15, 2019.