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Income Tax Appellate Tribunal, “D” BENCH: KOLKATA
Before: Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
This is an appeal filed by the revenue against the order of Ld. CIT(A)-1, Kolkata dated 13.01.2017 for AY 2007-08. None appeared on behalf of the assessee. After hearing the Ld. DR and considering the material available on record, we dispose of this appeal ex parte.
The sole issue involved in this appeal of revenue is against the order of Ld. CIT(A) in deleting the disallowance of expenses of Rs.81,77,708/- made u/s. 14A of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) read with Rule 8D of the Income-tax Rules, 1962 (hereinafter referred to as the “Rules”).
Briefly stated the facts are that during the course of assessment proceedings, the AO noted on perusal of the balance sheet and its schedules that the assessee is holding investments which are capable of generating exempt income. The assessee also claimed
AKJ Minerals Limited, AY 2007-08 expenses of interest payment in its statement of P&L Account in the relevant financial year. According to the AO, any expenditure relatable to the investments irrespective of whether exempt income was earned or not, was liable for disallowance u/s. 14A of the Act read with Rule 8D of the Rules. For that proposition, he relied on CBDT Circular No. 05/2014 dated 11.02.2014 and the decision of the CIT Vs. RKBK Fiscal Services (P) Ltd. 258 ITR 288. Thereafter, the AO worked out the disallowance under Sec. 14A read with Rule 8D of the Rules at Rs.81,77,708/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to delete the addition. Against the impugned action of the Ld. CIT(A), the revenue is before us.
We have heard the Ld. DR and perused the records. We note that the AO has made disallowance u/s. 14A of the Act with the aid of Rule 8D(2)(ii) and 8D(2)(iii) of the Rules. Before the Ld. CIT(A) the assessee’s AR submitted that the assessee did not earn any exempt income by investing the borrowed money; and secondly the borrowed funds were utilized only for the assessee’s business on which the interest paid was an allowable expenditure. The Ld. CIT(A) has taken note that the assessee company has not disclosed any exempt income in its audited accounts during the financial year relevant to assessment year under consideration. Therefore, the Ld. CIT(A) relying on the case laws in the cases of CIT Vs. Lakhani Marketing, (P&H High Court), CIT Vs. Shivam Motors (P) Ltd. , ITA No. 88/2014 (All.), CIT Vs. Cortech Energy Pvt. Ltd., ITA No. 239 of 2014 (Guj) and CIT Vs. Delite Enterprises, ITA No.110/2009 (Bom) in which it was held that unless there is exempt income in a year, no disallowance u/s. 14A can be made for that year, and therefore the Ld CIT(A) took the view that the AO was not justified in invoking the provisions of section 14A of the Act read with Rule 8D of the Rules and accordingly, he directed to delete the disallowance of Rs.81,77,708/-. At the outset, we note that the assessee has not earned any dividend income. Since the assessee has not earned any dividend income, we relying on the case of Chem Investment Ltd. Vs. CIT (2009) 121 ITD 318 (Del.) hold that section 14A disallowance is not to be made in case the assessee has not earned any exempt income. Therefore, no disallowance was warranted invoking sec. 14A
AKJ Minerals Limited, AY 2007-08 of the Act and, therefore, we dismiss this ground of appeal of the revenue and confirm the order of Ld. CIT(A). This ground of appeal of revenue is dismissed.
In the result, the appeal of revenue is dismissed.