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Income Tax Appellate Tribunal, MUMBAI BENCH “H” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-9, Mumbai and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).
The issue in the present case falls in a narrow compass. The issue is whether the Assessing Officer (AO) can make a disallowance u/s 14A M/s M.M. Poonjiaji Spices Ltd. r.w. Rule 8D of Income Tax Rules, 1962 when the assessee has not earned any exempt income during the year under consideration.
Briefly stated, the facts of the case are that the AO made a disallowance of Rs.3,13,997/- u/s 14A r.w. Rule 8D relying on the CBDT Circular No. 5/2014 dated 11.02.2014 stating that disallowance of expenditure can be made under the above section and Rule even where taxpayer in a particular year has not earned any exempt income.
In appeal, the Ld. CIT(A) has confirmed the said disallowance made by the AO.
Before us, the Ld. counsel of the assessee submits that the assessee-company has not earned any income from the partnership firms during the year which can be claimed as exempt income. Therefore, no disallowance can be made u/s 14A.
On the other hand, the Ld. DR relies on the order of the Ld. CIT(A). Reliance is also placed by him on the CBDT Circular mentioned above.
We have heard the rival submissions and perused the relevant materials on record. The issue whether disallowance u/s 14A r.w. Rule 8D can be made in a case when there is no exempt income is no longer res integra. 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 Cheminvest Ltd. v. CIT (2015) 61 taxmann.com 118 (Del) that section 14A will not apply if no exempt income is received or receivable during the relevant previous year.