OJAS INDUSTRIES PRIVATE LIMITED,NEW DELHI vs. ACIT, CIRCLE-19(1), NEW DELHI

At the time of call, none appeared on behalf of the assessee to represent the case despite issuance of notice of hearing through postal mode. Considering the nature of grievance raised by assessee, we proceed to dispose of the appeal ex parte qua the assessee after hearing Learned Departmental Representative and based on material available on record.

Briefly the facts relating to the issue in dispute are, the assessee is a residential corporate entity. For the assessment year under dispute, assessee filed its return of income on 31.10.2017 declaring loss of Rs.56,52,05,458/- under normal provision and book loss of Rs.56,58,08,629/- under Section 115JB of the Act. In course of assessment proceedings, the Assessing Officer, on perusing the Balance Sheet of the assessee for the year ending 31.03.2017, noticed that the assessee had made noncurrent investments of Rs.535,41,99,707/- as on 31.03.2016 and Rs.537,23,64,665/- as on 31.03.2017. After calling for the details of the investments and examining them, the Assessing Officer was of the view that such investments have the potential of yielding exempt income in future. Therefore, he issued a show-cause notice to the assessee seeking an explanation as to why the disallowance under Section 14A r.w.r 8D should not be made in respect of the investments made, which may in future give rise to exempt income. Though, the assessee furnished its reply objecting to the proposed disallowance, however, rejecting the submissions of the assessee, the Assessing Officer proceeded to compute disallowance in terms of Rule 8D(2)(iii) for an amount of Rs.92,94,564/-. Though, the assessee contesting the aforesaid disallowance by filing an appeal before the first appellate authority however, it was unsuccessful.

We have heard Learned Departmental Representative and perused material on record. On a reading of the respective orders of OJAS Industries Pvt. Ltd. vs. ACIT 3 the Departmental authorities, it is a patent obvious, while contesting the decision of the departmental authorities to make disallowance under Section 14A r.w.r 8D, the assessee had categorically submitted that in the previous year relevant to assessment year under dispute, the assessee had not earned any exempt income, whatsoever. Though, the departmental authorities have not disputed the aforesaid factual position claimed by the assessee, however, only on the reasoning that certain investments made by assessee are capable of yielding exempt income in future, disallowance under Section 14A r.w. Rule 8D has been made. It is trite law, in case, an assessee has not earned any exempt income in a particular assessment year, no disallowance under Section 14A r.w. Rule 8D can be made merely because certain investments made by assessee may give rise to exempt income in future. Since, there are plethora of judicial precedents propounding the aforesaid legal position, there is no need to specifically refer to any such judicial precedents here. Considering the fact that in the year under consideration, the assessee had not earned any exempt income, we hold that the disallowance made under Section 14A r.w. Rule 8D is unsustainable. Accordingly, we direct the Assessing Officer to delete the disallowance.