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Income Tax Appellate Tribunal, DELHI BENCH FRIDAY ‘C’ NEW DELHI
Before: SHRI R.K. PANDA & SHRI SUDHANSHU SRIVASTAVA
PER SUDHANSHU SRIVASTAVA, JM : This appeal is preferred by the revenue against the order dated 25.01.2017 passed by the ld. CIT(A)-30, New Delhi for assessment year 2013-14.
2.0 The sole issue arising in this appeal is the deletion of disallowance of Rs. 1,50,72,830/- made u/s 14A of the Income Tax Act, 1961 (hereinafter called 'the Act') r/w Rule 8D of the Income Tax Rules, 1962 (hereinafter called the ‘Rules’).
2.1 Brief facts of the case are that the assessee company is engaged in the business of trading in commodities i.e. silver, 1 gold, timber and sugar etc. through stock exchange as well as in the open market. During the year under consideration, the return of income was filed declaring an income of Rs. 2,100/-.
The case of the assessee was selected for scrutiny under the CASS guidelines and during the course of assessment proceedings, the assessee was asked to explain as to why the provisions of section 14A of the Act were not applicable in the assessee’s case. It was the assessee’s contention before the Assessing Officer that since the assessee had not received any exempt income during the year under consideration, the provisions of Section 14A did not get attracted. However, the Assessing Officer proceeded to make an addition of Rs. 1,50,70,726/- u/s 14A r/w Rule 8D. The assessee’s appeal before the ld. Commissioner of Income Tax(A) was allowed who deleted the addition by holding that since no exempt income had been earned, the Assessing Officer had erroneously invoked the provisions of section 14A.
2.2 Aggrieved with the order of the ld. Commissioner of Income Tax(A), the department is now in appeal before this Tribunal and has challenged the deletion by the ld. Commissioner of Income Tax(A).
2.3 Ld. Sr. DR vehemently argued that the disallowance had been incorrectly deleted by the ld. Commissioner of Income Tax(A). However, the ld. Sr. DR could not negate the fact that during the year under consideration, the assessee was not in receipt of any exempt income. The ld. AR supported the orders of the ld. Commissioner of Income Tax(A).
We have heard the rival submissions and perused the material available on record. In the present case, it is undisputed that the assessee had not received any exempt income during the year under consideration and, therefore, the ratio of judgment of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs C.I.T. (2015) 378 ITR 33 would come to the aid of the assessee wherein the Hon’ble High Court had held that in the absence of any exempt income, disallowance u/s 14A of the Act of any amount was not permissible. The relevant paragraphs of the judgment of the Hon’ble High Court are reproduced hereinunder for a ready reference:-
“22. In the impugned order, the IT AT has referred to the decision in Maxopp Investment Ltd. (supra) and remanded the matter to the AO for reconsideration of the issue afresh. The issue in Maxopp Investment Ltd. (supra) was whether the expenditure (including interest on borrowed funds) in respect of investment in shares of operating companies for acquiring and retaining a controlling interest therein was 3 disallowable under Section 14 A of the Act. In the said case admittedly there was dividend earned on such investment. In other words, it was not a case, as the present, where no exempt income was earned in the year in question. Consequently, the said decision was not relevant and did not apply in the context of the issue projected in the present case.
In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression “does not form part of the total income” in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year.”
3.1 Therefore, respectfully following the ratio of the judgment of the Hon’ble Delhi High Court as aforesaid, we find no reason to interfere with the findings of the ld. Commissioner of Income Tax(A) on the issue and we dismiss the appeal of the revenue.
In the result, the appeal of the revenue stands dismissed.
Order pronounced in the open court on 31st JULY, 2019.