Loading judgment…
Facts
The assessee's appeal for AY 2017-18 arose from an order passed under Section 143(3) of the Income-tax Act, 1961. The lower authorities invoked Section 14A read with Rule 8D, disallowing Rs.7,95,853/-.
Held
The Tribunal held that the disallowance under Section 14A was not sustainable as the assessee had not derived any actual exempt income in the relevant assessment year. Reliance was placed on the decision in Cheminvest Limited Vs. CIT.
Key Issues
Whether disallowance under Section 14A is permissible in absence of any exempt income earned by the assessee?
Sections Cited
143(3), 14A, 8D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: “SMC” NEW DELHI
Before: SHRI SATBEER SINGH GODARA
Date of hearing 29.10.2025 Date of pronouncement 29.10.2025 ORDER This assessee’s appeal for assessment year 2017-18, arises against the Commissioner of Income Tax (Appeals)/Addl./JCIT(A)- 2, Lucknow’s DIN order no. ITBA/APL/S/250/2025- 26/1079341740(1), dated 06.08.2025 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case file perused.
It transpires during the course of hearing with the able assistance coming from both the parties that the learned lower authorities have invoked section 14A read with Rule 8D disallowance of Rs.7,95,853/- in the assessee’s case despite the fact that it has not derived any actual exempt income in the relevant assessment year. That being the case and in light of the fact that the legislature has inserted Explanation to section 14A making the same applicable even in absence of an exempt income vide Finance Act, 2021 with prospective effect only, I hereby quote Cheminvest Limited Vs. CIT (2015) 378 ITR 33 (Delhi HC) to conclude that the impugned disallowance is not sustainable once the assessee has not declared any exempt income in its case.