DCIT CORPORATE CIRCLE 1(1) , CHENNAI vs. AGILE ELECTRIC SUB ASSEMBLY PVT LTD. , CHENNAI

This appeal of the Revenue is directed against the order of the Principal Commissioner of Income Tax (Appeals) -1, Chennai, dated 23.05.2017 and pertains to assessment year 2012-13. The assessee has filed a cross-objection against the very same order of the Pr. CIT(Appeals). Since common issue arises for consideration in both the appeal and the cross-objection, we heard the same together and disposing of the same by this common order.

Shri AR.V. Sreenivasan, the Ld. Departmental Representative, submitted that the Assessing Officer disallowed the expenditure incurred by the assessee for earning exempted income by applying Rule 8D(2) of the Income-tax Rules, 1962. However, the Pr. CIT(Appeals) found that the assessee has not earned any income. Therefore, according to the Ld. D.R., there cannot be any disallowance under Section 14A of the Income-tax Act, 1961 (in short 'the Act'). According to the Ld. D.R., Rule 8D(2) very clearly says that irrespective of the fact whether assessee has earned any exempted income or not, the expenditure incurred for earning exempted income has to be disallowed. According to the Ld. D.R., Rule 8D(2) provides method for disallowance in case the Assessing Officer is not satisfied with the computation made by the assessee, therefore, the Pr.CIT(Appeals) is not justified in deleting the disallowance made by the Assessing Officer.

On the contrary, Sh. T. Banusekar, the Ld. representative for the assessee, submitted that the Pr. CIT(Appeals) by placing reliance on the judgment of Madras High Court in Redington (India)

We have considered the rival submissions on either side and perused the relevant material available on record. It is not the case of the Revenue that the assessee has earned any exempted income. When the assessee has not earned exempted income, this Tribunal is of the considered opinion that there cannot be any disallowance of expenditure in view of the judgment of Madras High Court in Redington (India) Ltd. (supra). Therefore, we are unable to accept the contention of the Ld. Departmental Representative. The Pr. CIT(Appeals) has rightly followed the judgment of Madras High Court in Redington (India) Ltd. (supra). Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

Since the issue of disallowance under Section 14A of the Act raised by the Revenue in the appeal stands dismissed, the cross- objection filed by the assessee also stands dismissed as infructuous.

In the result, the appeal of the Revenue as well as the cross- objection of the assessee stand dismissed.