2017 (10) TMI 1447 - AT - Income Tax

Disallowance u/s 14A - no exempt income - HELD THAT - In the absence of any exempt income, it was held that no disallowance u/s 14A could be made. The I.T.A.T. had relied upon the decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Lakhani Marketing Inc 2014 (7) TMI 44 - PUNJAB AND HARYANA HIGH COURT and in the case of CIT Vs. Holcim India Pvt. Ltd 2014 (9) TMI 434 - DELHI HIGH COURT . DR has not brought to our notice any contradictory decision of the Hon'ble jurisdictional High Court. Moreover, the CBDT Circulars issued are binding on the authorities under the respective statutes and are not binding on courts as held by the Hon ble Apex court in the case of Commissioner of Central Excise vs Ratan Melting and Wire Industries 2008 (10) TMI 5 - SUPREME COURT OF INDIA . Therefore, we find no merit in the content ion of the Ld. DR that the disallowance is to be made u/s 14A of the Act in view of the CBDT Circular No.5/2014. - Decided against revenue.

Summary

Issues: Disallowance under section 14A of the Income Tax Act, 1961

Analysis:
The appeal before the Appellate Tribunal ITAT Chandigarh involved a dispute regarding the disallowance made under section 14A of the Income Tax Act, 1961. The Assessing Officer had disallowed expenses amounting to ?2,07,14,800 incurred for making investments in shares, which was deleted by the Ld. CIT(Appeals) based on the absence of any exempt income earned during the year. The Ld. CIT(Appeals) followed a previous order of the ITAT related to the same assessee for the assessment year 2012-13, where relief was granted on similar grounds. The Revenue, aggrieved by this decision, raised grounds of appeal challenging the CIT(A)’s interpretation of section 14A in light of CBDT Circular No. 5/2014 and the decision of the Bombay High Court in the case of Godrej & Boyce Vs. DCIT regarding the prospective application of Rule 8D. During the hearing, the Ld. DR argued in favor of disallowance based on the CBDT Circular and the Bombay High Court judgment, while the Ld. counsel for the assessee supported the CIT(A)’s decision. The Tribunal, after considering the arguments, upheld the CIT(A)’s order, emphasizing that in the absence of any exempt income, no disallowance under section 14A could be made. The Tribunal cited previous decisions and highlighted that CBDT Circulars are binding on tax authorities but not on courts. Consequently, the Tribunal dismissed the Revenue’s appeal, affirming the CIT(A)’s decision to delete the disallowance under section 14A.