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Facts
The Assessing Officer disallowed an amount of ₹.1,22,39,954/- under section 14A read with Rule 8D of I.T. Rules, presuming the assessee's investment in shares was primarily for earning exempt income. The assessee appealed this disallowance, but the CIT(A) confirmed it.
Held
The Tribunal noted that the assessee had no exempt income during the relevant assessment year. Therefore, no disallowance under section 14A r.w. Rule 8D could be made. The Tribunal relied on decisions from the Gujarat High Court and Delhi High Court.
Key Issues
Whether disallowance under section 14A r.w. Rule 8D is justified when the assessee has no exempt income.
Sections Cited
Section 14A, Rule 8D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI RAHUL CHAUDHARY, HONBLEShri Dr. K. Shivaram & Shri Rahul Hakani Shri Paresh Deshpande
O R D E R PER NARENDRA KUMAR BILLAIYA (AM)
This appeal by the assessee is preferred against the order dated 16.10.2023 by National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] pertaining to A.Y.2017-18.
(A.Y: 2017-18) GROWWELL MERCANTILE PRIVATE LIMITED 2. The solitary grievance of the assessee is that the Ld. CIT(A) erred in confirming the disallowance of ₹.1,22,39,954/- made by the Assessing Officer under section 14A r.w. Rule 8D of I.T. Rules.
During the course of the scrutiny assessment proceedings and on perusal of the balance sheet the Assessing Officer noticed that assessee made investment to the tune of ₹.122,39,95,434/-. The Assessing Officer presumed that the main intention to invest in shares is to earn exempt income. Invoking provisions of section 14A r.w. Rule 8D of I.T.Rules the Assessing Officer computed the disallowance at ₹.1,22,39,954/-.
Assessee carried the matter before Ld. CIT(A) but without success.
Before us, it has been brought to our notice that assessee has no exempt income during the year under consideration, therefore, there is no question of any disallowance under section 14A r.w. Rule 8D of I.T.Rules.
We have given a thoughtful consideration to the order of the Ld.CIT(A). The undisputed fact is that during the year under consideration the assessee has no exempt income, therefore, in our
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(A.Y: 2017-18) GROWWELL MERCANTILE PRIVATE LIMITED considered opinion no disallowance is to be made under section 14A r.w. Rule 8D of I.T. Rules. For this proposition, we draw support from the decision of the Hon’ble Gujarat High Court in the case of CIT v. Corrtech Energy Pvt Ltd., [372 ITR 97] and the decision of the Hon’ble Delhi High Court in the case of Cheminvest Limited v. CIT [378 ITR 33]. Respectfully following the ratio laid down by the Hon’ble High Court, we direct the Assessing Officer to delete the impugned disallowance of ₹.1,22,39,954/-. Appeal of the assessee is accordingly allowed.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 10th May, 2024.