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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:-
“1. That the order of the assessing officer in so far as it is against the appellant is against the law, facts, circumstances, natural justice, equity, without jurisdiction, bad in law and all other known principles of law. 2. That the total income computed and the total tax computed is hereby disputed.
That the order of the authorities below is based on surmises, conjectures, assumptions and presumptions and not based on facts emerging from records and hence requires to be vacated on this ground alone.
4. That the learned authorities below erred in making disallowance u/s 14A rwr 8D of the Act amounting to Rs. 2,32,85,216/-. 5. That the learned authorities below erred in not appreciating that when there is no tax free income, there cannot be any expenditure incurred for earning exempt income. 6. That the learned authorities below erred in not following the binding/relevant decisions of the higher appellate authorities on the issue. 7. The appellant denies the liability for interest u/s 234B & 234C of the Act. Further prays that interest if any should be levied only on the returned income. 8. No opportunity has been given before levy of interest u/s 234B & 234C of the IT Act. 9. Without prejudice to the appellant's right of seeking waiver before appropriate authority the appellant begs for consequential relief in the levy of interest u/s. 234B & 234C of the Act. 10. For the above and other grounds and reasons which may be submitted during the course of hearing of this appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered.”
Though various grounds are raised, but they all relate to the disallowance made u/s. 14A of the Income Tax Act, 1961 [“the Act”].
3. During the course of hearing, the ld. counsel for the assessee has invited our attention to the fact that the assessee has not received any exempted dividend income. Therefore, in the absence of any exempt income, disallowance us/. 14A is not possible. In support of this contention, he placed reliance upon the judgment of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. v. CIT, 378 ITR 33 (Del). In order to demonstrate that assessee does not have any exempt income, our attention was invited to the copy of the Profit & Loss account and the Balance Sheet which is available at pages 27 to 28 of the compilation of the assessee.
The ld. DR placed reliance upon the order of the CIT(Appeals).
Having carefully examined the orders of lower authorities in the light of rival submissions and the judgments referred to by the parties, we find that undisputedly the assessee does not have any exempted income, therefore disallowance u/s. 14A of the Act cannot be made. We have also examined the judgment of the Hon’ble Delhi High Court in which Their Lordships have categorically held that where the assessee had not earned any taxable income in the relevant assessment year in question, then the corresponding expenditure could not be worked out for disallowance.
Thus, no disallowance u/s. 14A of the Act can be made in the year in which no exempt income had been earned or received by the assessee. The view taken by the Hon’ble Delhi High Court has been consistently followed by the Tribunal in a series of cases. In the light of these facts, we are of the view that disallowance u/s. 14A is not sustainable. We accordingly set aside the order of CIT(Appeals) and delete the disallowance made u/s. 14A of the Act.
In the result, the appeal of assessee is allowed.
Pronounced in the open court on this 31st day of March, 2017.