Facts
The assessee appealed against the CIT(A)'s order confirming a disallowance made under Section 14A read with Rule 8D of the Income Tax Rules. The central point of contention was that the assessee had not earned any dividend income for the relevant assessment year.
Held
Referring to the Delhi High Court's decision in PCIT vs. Era Infrastructure (India) Ltd., the Tribunal held that no disallowance under Section 14A is permissible in the absence of exempt income, a principle applicable up to A.Y. 2021-22. Since the assessee had no exempt income, the disallowance confirmed by the CIT(A) was not justified.
Key Issues
Whether disallowance under Section 14A read with Rule 8D of the Income Tax Rules is justified when the assessee has not earned any exempt/dividend income.
Sections Cited
Section 14A of the Income Tax Act, Rule 8D of the Income Tax Rules
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
ORDER
PER M. BALAGANESH, ACCOUNTANT MEMBER :
This appeal filed by the assessee in for A.Y. 2017-18 arises out of the order by Commissioner of Income Tax (Appeals)-7, Delhi (hereinafter referred to as ld CIT(A) in short).
Though the assessee has raised several grounds, the only effective issue to be decided in this appeal is as to whether the learned CIT(A) was justified in confirming the disallowance made under section 14A r.w. Rule 8D of the Income Tax Rules specially when the assessee has not earned any dividend income at all.
We have heard rival submissions and perused the material available on record. The issue in dispute is no longer res integra in view of the recent decision of Hon’ble Jurisdictional High Court in the case of PCIT vs. Era Infrastructure (India) Ltd. reported in 448 ITR 674 wherein the Hon’ble Delhi High Court even after considering the amendment brought by Finance Act, 2022 in Section 14A by holding that the said amendment could only be given prospective application had held that in the absence of exempt income, no disallowance under section 14A of the Act could be made up to A.Y. 2021-22. In the instant case, there is no dispute that there is no exempt income derived by the assessee and hence, the ratio of the aforesaid decision squarely applies to the instant case. Hence, grounds raised by the assessee are hereby allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 29.04.2024