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Income Tax Appellate Tribunal, DIVISION BENCH’B’, CHANDIGARH
Before: SMT. DIVA SINGH & MS. ANNAPURNA GUPTA
PER ANNAPURNA GUPTA, A.M.
The present appeal has been filed by the Assessee against the order of the Ld. Commissioner of Income Tax (Appeals), Chandigarh,(in short referred to as CIT(A), dt. 31/10/2014 passed u/s 250(6) of the Income Tax Act,1961 (hereinafter referred to as “Act”).
The sole issue in the present appeal pertains to disallowance made of expenses incurred in relation to earning of exempt income as per the provisions of section 14A of the Act and the ground raised by the assessee in this regard reads as under:
Because the action for upholding the disallowance under Rule 8D(2)(iii) of the Income Tax Act, 1961 for an amount of Rs. 5,35,829/- is being challenged on facts & law & the quantum of disallowance is being disputed. 3. Briefly stated the assessee had shown investment of Rs. 10,71,65,882/- as on 31/03/2010 in equity shares of various companies. The Assessing Officer disallowed an amount of Rs. 5,35,829/- u/s 14A of the Act read with Rule 8D(2)(iii) of the Income Tax Rules, 1961 (hereinafter referred to as ‘Rules’), being half percent of the average value of investment.
The Ld. CIT(A) upheld the order of the Assessing Officer following his decision in the case of the assessee for A.Y. 2009-10.
Before us the Ld. Counsel for the Assessee pointed out that no exempt income had been earned by the assessee during the year. Our attention was drawn to the order of the Assessing Officer at para 4.2 wherein this fact had been noted by him as under:
“ I have considered the submissions made by the assessee. Although the assessee has not declared any income from dividend, the fact remains that the purpose of investment of Rs. 10.72 crore during the year was to earn dividend income only which is exempt from tax as mentioned above.” 6. Ld. Counsel for the assessee stated that in the light of the said fact, no disallowance under section 14A was to be made and relied upon the decision of the Coordinate Bench of ITAT, Chandigarh in the case of M/s Royal Builders & Developers Pvt. Ltd. in ITA No.925/chd/2017 dated 13-12-17, in this regard. Copy of the order was placed before us.
Ld. DR on the other hand relied on the order of the authorities below.
Having considered the rival contentions, we find merit in the contention raised by the Ld. Counsel for the Assessee. The issue before us relates to disallowance of expenses under section 14A of the Act and various courts on this issue have held that where no exempt income is earned no disallowance under section 14A is warranted. The Hon’ble Jurisdictional High Court in the case of CIT Vs. Lakhani Marketing in ITA No. 970/2000 (O&M) dt. 02/04/2014 has held so. Even the Hon’ble Delhi High Court in the case of Holcim India P. Ltd reported in 90 CCH 81 and in the case of Cheminvest Ltd.vs CIT 378 ITR 33 have reiterated the said proposition . In view of the same, considering the admitted fact in the present case that no exempt income was earned by the assessee, and following the judicial precedent as stated above, we hold, that no disallowance under section 14A was warranted. We therefore set aside the order of the Ld. CIT(A) in this regard allowing the ground of appeal raised by the assessee.
In the result, appeal of the Assessee is allowed. Order pronounced in the open court. Sd/- Sd/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 06/12/2018 AG Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR