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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI S. JAYARAMAN
Per Sunil Kumar Yadav, Judicial Member
This appeal is preferred by the assessee against the order of the CIT(Appeals) inter alia on the following grounds:-
“The Appellant objects to the order of the Ld. CIT ( A) on the following grounds:
1. The impugned order is opposed to the facts of law in so far as it is pre-judicial to the interest of the appellant.
2. The Ld. CIT(A) erred in upholding the disallowance made in accordance with Rule 8D inasmuch as the application of Rule 8D is not mandatory and cannot be invoked merely by rejecting the claim of the Assessee u/s 14A(2) of the Income Tax Act, 1961. 3. The Ld. CIT (A) erred in not considering the fact that the Appellant had not earned any exempt income during the year and amount of disallowance computed u/r 8D r.w.s 14A of the Income Tax Act, 1961 cannot exceed the amount of income itself. 4. The Ld. CIT (A) erred in not considering the fact that the Appellant held these investments to have a strategic control in the group companies and not to earn any exempt income out of it and as such provisions of rule 8D are not applicable. For these and such other grounds that may be adduced in time to time, it is requested that the Hon'ble ITAT may be pleased to examine the case in the light of justice and grant the relief sought for.”
During the course of hearing, the ld. counsel for the assessee has contended that in the impugned assessment year, assessee has not earned any exempted income, therefore no disallowance u/s. 14A is permissible. He has invited our attention to the profit & loss account and the details of other income in support of his contention that he has not earned any exempted income during the impugned assessment year. The ld. counsel for the assessee further placed reliance upon the order of Tribunal and various orders of the High Court in which it has been held that in the absence of any exempted income, the provisions of section 14A cannot be invoked. Copy of the order of Tribunal in the case of Alliance Infrastructure Projects Pvt. Ltd. v. DCIT, & 1043/Bang/2013 in compilation.
The ld. DR, on the other hand, has placed reliance upon the order of CIT(Appeals).
Having carefully examined the orders of lower authorities in the light of rival submissions, we find from the record and profit & loss account that the assessee did not earn any exempted income during the year.
Therefore, in the absence of any exempted income, provisions of section 14A of the Act cannot be invoked. Reliance was placed upon the order of Tribunal in the case of Alliance Infrastructure Projects Pvt. Ltd. v. DCIT (supra) and AllBank Finance Ltd. in in which it has been held in the light of various judicial pronouncements of various High Courts that in the absence of any exempted income, provisions of section 14A of the Act cannot be invoked. Therefore, in the light of this legal position, we are of the view that in the instant case, the AO has wrongly invoked the provisions of section 14A for making the disallowance.
Accordingly we set aside the order of CIT(Appeals) and delete the addition made in this regard.
In the result, the appeal of assessee is allowed.
Pronounced in the open court on this 28th day of April, 2017.