ACIT, CIRCLE-17(1), NEW DELHI vs. MODERN INFO TECHNOLOGY PVT. LTD., NEW DELHI

The facts in brief are that Assessing Officer has noted that the assessee has done investment in equities, however, no expenses under the provision of Section 14A read with Rule 8D have been added back in the computation of income. One very important fact noted by the Assessing Officer that assessee in reply filed before the Assessing Officer had categorically stated that company had not claimed any exempt income, therefore, there is no question of any disallowance u/s.14A. However, ld. Assessing Officer mechanically proceeded to make the disallowance u/s.14A read with Rule 8D and worked out the disallowance at Rs.3,12,87,693/-.

Ld. CIT(A) after referring to the various judgments of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT, 378 ITR 333 and catena of other judgments held that no disallowance can be made when there is no exempt income and further Assessing Officer has not been able to establish any nexus between the exempt income if at all earned by the appellant and any expenditure incurred to earn this income.

After considering the submissions made by the parties and on perusal of the finding given in the impugned order, we find from the computation of income filed in the paper book that no exempt income has been claimed by the assessee either in the return of income or in the computation of income. This fact has also been noted by the ld. Assessing Officer, at the first page of the order. Once there is no exempt income, then there is no question of any disallowance u/s.14A, and therefore, in the light of the principle laid down by the Hon’ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT (supra), no disallowance can be made.