INCOME TAX OFFICER-11(1)(1), MUMBAI, CHURCHGATE, MUMBAI vs. MS. SAICHARAN CONSULTANCY PVT LTD, MUMBAI

Per : Prabhash Shankar, Accountant Member:

The present appeal has been filed by the Revenue, which emanates from the appellate order passed by the Ld. CIT(A)/NFAC,Delhi, with regard to the assessment order passed under section 143(3) r.w.s. 144 of the Income Tax Act 1961, (in short ‘the Act’).In the only ground of appeal, the Revenue has contended that the Ld. CIT(A)/NFAC erred in holding that no disallowance under section 14A can be made even when no exempt income during the year.

2. Briefly stated the facts of the case are that during the course of assessment proceedings, the Ld. Assessing Officer invoked the provision of sub-section 14A of the Act. The assessee has challenged action of the Ms. Saicharan Consultancy Pvt Ltd AO in making addition u/s 14A amounting to Rs.2,37,12,256/-. In this regard,it has submitted that the disallowance u/s 14A ought not have been made in absence of any exempt income earned by it.The AO on the other hand, relied on the CBDT circular of the file 5/2014 dated 11/02/2014 in making the above disallowance. In the subsequent appeal before the Ld. CIT(A) vide order No. ITBA/ NFAC/S/250/2024- 25/1065080716(1) dated 22/05/2024 deleted the said addition by the relying on various judicial decisions.

3. Before us the Ld. Sr. DR relied on the order of the Ld. AO. On the other hand the Ld. Sr. Authorized Representative relied on order passed by this Bench itself in assesse’s own case in dated 28.08.2019 for the assessment year 2014-15 wherein the tribunal deleted the said addition on similar set of facts. The copy of said order is placed on record. Para 6 of the order on page 3 is reproduced for ready reference :

“6. We have heard the Ld. DR and perused the relevant materials on record. The fact remain that the assessee-company has not earned any exempt income during the year under consideration. We are of the considered view that the legislative intent is more discernable in the judicial decisions. In CIT vs. Chettinad Logistics (P) Ltd. (2017) 80 taxmann.com 221 (Mad), the Hon'ble Madras High Court has held that section 14A cannot be invoked where no exempt income was earned by the assessee in the relevant assessment year. In the case of CIT v. Shivam Motors (P) Ltd. (2015) 55 taxmann.com 262 (All), it has been held that in absence of any tax free income earned by the assessee, disallowance u/s 14A could not be made. In a similar vein, it has been held in Ballarpur Industries Ltd. (supra) that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. Following the above decisions, we confirm the order of the Ld. CIT(A).”