ACIT CENTRAL -2, INDORE vs. M/S KETI CONSTRUCTION LTD, INDORE

The grounds of appeal raised by the revenue read as under:-

The learned CIT-DR submitted that the Ld. CIT(A) has granted relief to the assessee without considering the relevant facts and circumstances of the case and ignoring the relevant CBDT circular No. 5 dated 11.02.2014 and judgment of Hon’ble Karnataka High Court in the case of PCIT vs. Karnataka State Financial Corporation (2022) 137 Taxmann.com 195. Therefore impugned first appellate order may kindly be set aside by restoring that of the AO.

Replying to the above the learned AR submitted that it is a peculiar fact of the case that in the present case the appellant had no exempt income in the relevant financial year pertaining to assessment year under consideration therefore no disallowance could have been made u/s. 14A of the Income Tax Act 1961, and Rule 8D of the Income Tax Rules 1963. In view of judgment of Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs CIT in ITA 749/2014 dated 02.09.2015.

In view of above the controversy regarding making disallowance u/s. 14A r.w.r 8D of the Rules no disallowance can be made in the hands of the assessee when the assessee has not claimed any exempt income. Ld. CIT(A) after considering the written submissions of the assessee has granted relief to the assessee by following judgement of Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT (supra) where Their Lordship categorically held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year by the assessee. In view of above we are unable to see any valid reason to interfere with the findings arrived at by the Ld. CIT(A), therefore we uphold the same. The sole contention of the revenue is that the Hon’ble Supreme Court has issued notices in the cases of PCIT vs. Adani Wilmar Ltd(2021) 133 taxmann.com 444 Ltd against the order of Hon’ble High Court of Gujarat reported as (2021) 133 taxmann.com 443 (Guj) and in the PCIT vs. Karnataka State Financial Corporation against judgement of Hon’ble Karnataka High Court reported as (2021) 127 taxmann.com 115 (Kar.) wherein Hon’ble respective High Courts granted relief to the assessee by holding that no disallowance of expenditure of expenditure u/s. 14A of the Act can be made more than actual exempt income earned by the assessee. Similar proposition has been rendered by Hon’ble High Court of Delhi in the case of Cheminvest Ltd. vs Commissioner of Income Tax (supra). In our humble view until unless the issue is adjudicated at the level of Hon’ble Supreme Court modifying of setting aside the orders of judgments of Hon’ble High Court all authorities below to the High Court’s including this Tribunal is duty bound to follow the propositions rendered by Hon’ble High Court therefore we are inclined to hold that the Ld. CIT(A) was right in granting relief to the assessee by following the proposition rendered by various High Court’s including judgment of Hon’ble Delhi High Court in the case of Cheminvest vs. CIT (supra). Consequently ground of revenue being devoid of merit is dismissed.

In the result, appeal of the Revenue is dismissed.