ARYADOOT TRANSPORT P. LTD,MUMBAI vs. DCIT CEN CIR 6(4), MUMBAI

The grounds of appeal

read as under:- “1. The learned CIT(A) erred in confirming disallowance of Rs.4,05,199/- being 0.5% of average investment of Rs.8,30,39,847/- without appreciating the fact that it has been held in the case of M/s.Magna Publishing Co.Ltd. v. ITO in and also in the case of ACIT vs. Punjab state Coop & Marketing Fed Ltd. in ITA Nos.548/Chd/2011 that no disallowances under section 14A of the Act can be made where no exempt income is earned.

At the outset, in the case the learned Counsel for the assessee has submitted that assessee has not earned / received any exempt income during the concerned financial year, hence the learned Counsel pleaded that no disallowance u/s 14A should be done. For this proposition, the learned Counsel of the assessee placed reliance upon several decisions including that of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. v. CIT [(2015) 378 ITR 33 (Delhi)] and the Hon’ble Madras High Court in the case of Redington (India) Ltd. v. Addl.CIT [(2017) 77 taxmann.com 257 (Madras)]. In the light of these case laws, the learned Counsel pleaded that no disallowance u/s 14A is permissible.

Upon careful consideration, I note that the authorities below have relied upon a Special Bench case of the ITAT Delhi Bench in the case of Cheminvest Ltd. However, the same stands reversed by the Hon’ble Delhi High Court. In the above decision, the Hon’ble Delhi High Court and the Hon’ble Madras High Court have held that no disallowance u/s 14A is permissible as there is no exempt income earned. However, I note that in the assessment order the Assessing Officer has observed that dividend income has been received by the assessee. This is quite contrary to the submission of the learned Counsel of the assessee. Hence in the interest of justice, I remit this issue to the file of the Assessing Officer. The Assessing Officer shall factually examine whether any exempt income has been earned or not. If any exempt income have been earned, then as per the ratio emanating from the above High Court decisions, no disallowance u/s 14A needs to be done.