2018 (3) TMI 1769 - AT - Income Tax

Disallowance u/s 14A - whether assessee has not earned any exempt income ? - HELD THAT - We find that in the peculiar facts and circumstances of the case, where admittedly there is no exempt income, position of law as considered by the jurisdictional High Court in the case of CIT Vs Lakhani Marketing 2014 (7) TMI 44 - PUNJAB AND HARYANA HIGH COURT and decision of Cheminvest Ltd. 2015 (9) TMI 238 - DELHI HIGH COURT we find that the departmental appeal cannot survive. Accordingly, upholding the conclusion arrived at for the reasons set out herein above, departmental appeal is dismissed and assessee's appeal is allowed.

Summary

Issues:
1. Disallowance of interest on investments under section 36(1)(iii) of the Income Tax Act, 1961.
2. Addition made on account of disallowance under section 14A of the Income Tax Act, 1961 read with rule 8D of the Income Tax Rules 1962.

Analysis:

Issue 1: Disallowance of Interest on Investments
The appeals were filed by both the assessee and the Revenue challenging the order of the ld. CIT(Appeals) pertaining to the assessment years 2013-14. The assessee contended that the disallowance made by the Assessing Officer under section 36(1)(iii) of INR 73,61,265 on interest on investments was unjustified. The AR submitted that the CIT(A) upheld the addition based on the appellant's case for the A.Y. 2011-12. However, the ITAT in the appellant's own case for the identical issue allowed relief. The ITAT, after considering the facts and circumstances, allowed the appeal raised by the assessee, citing consistency with the previous ITAT order.

Issue 2: Disallowance under Section 14A
Regarding the addition made on account of disallowance under section 14A read with rule 8D, the AR argued that the assessee had not earned any exempt income, which was acknowledged by the AO and the CIT(A). Relying on legal precedents and court decisions, the AR contended that the relief granted by the CIT(A) should be upheld. The ITAT concurred, citing precedents from the jurisdictional High Court and the Delhi High Court. As there was no exempt income involved, the departmental appeal was dismissed, and the assessee's appeal was allowed.

In conclusion, the ITAT Chandigarh ruled in favor of the assessee, allowing the appeals and dismissing the departmental appeal. The judgments were pronounced in open court, upholding the relief granted by the CIT(A) and the ITAT's decision based on consistent legal positions and factual considerations.