ITO,WD-9(3), KOLKATA, KOLKATA vs. M/S COMPACT FINSTOCK PVT. LTD., KOLKATA
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal upheld the CIT(Appeals)'s deletion of the disallowance, reiterating that Section 14A applies only when exempt income is actually received or receivable.
What were the facts?
The assessee, engaged in dealing in shares, claimed no disallowance under Section 14A as it received no exempt income. The Assessing Officer, relying on a CBDT circular, disallowed Rs. 3,13,904/-.
What were the issues?
Whether disallowance under Section 14A is permissible when the assessee has not earned any exempt income during the assessment year.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Shri P.M. Jagtap
This appeal filed by the Revenue is directed against the order of ld. Commissioner of Income Tax (Appeals)-2, Kolkata dated 26.06.2015, whereby he deleted the disallowance of Rs.3,13,904/- made by the Assessing Officer under section 14A of the Act read with Rule 8D of the Income Tax Rules.
The assessee in the present case is a Company, which is engaged in the business of dealing in shares and securities. The return of income for the year under consideration was filed by it on 26.09.2011 declaring total income of Rs.2,33,831/-. Although the assessee-Company in the year ./2015 Assessment year: 2011-2012 Page 2 of 3 under consideration had made some investment in shares, no disallowance on account of expenses incurred in relation to the said investment was offered by it as required by the provisions of section 14A on the ground that no exempt income in the form of dividend, etc. was received by it in the year under consideration. This claim of the assessee was not found acceptable by the Assessing Officer and relying on the CBDT’s Circular dated 11.02.2014 he made a disallowance of Rs.3,13,904/- under section 14A of the Act read with Rule 8D of the Income Tax Rules.
On appeal, the ld. CIT(Appeals) deleted the said disallowance made by the Assessing Officer relying on the various judicial pronouncements, wherein it was held that the disallowance under section 14A could be made only when there was any exempt income earned by the assessee. Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal.
I have heard the arguments of both the sides and also perused the relevant material available on record. Although the ld. D.R. has relied on the same CBDT’s Circular, which was relied upon by the Assessing Officer to make a disallowance under section 14A, it is observed that the position of law as settled in the various judicial pronouncements is that no disallowance under section 14A can be made in the year where the assessee has not earned any exempt income. In one of such decisions rendered in the case of Cheminvest Limited –vs.- CIT (ITA No. 749 of 2014 dated 02.09.2015), Hon’ble Delhi High Court has held that section 14A envisages that there should be an actual receipt of income which is not includible in total income and the said section will not apply where no exempt income is received or receivable during the relevant year. It is also well settled that the Circulars issued by the CBDT are binding on the revenue authorities and not on the Courts. I, therefore, uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made ./2015 Assessment year: 2011-2012 Page 3 of 3 by the Assessing Officer under section 14A and dismiss this appeal of the Revenue.
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