2019 (4) TMI 1814 - HC - Income Tax

Disallowance u/s 14A - there is no exempt income received or receivable by the assessee during the relevant previous year - HELD THAT - Assessee had not received any exempt income during the period relevant to the assessment year 2009-10 despite which AO sought to invoke the provisions of section 14A of the Income Tax Act 1961 and made disallowance of the expenditure. Delhi High Court in case of Cheminvest Ltd. Vs. Commissioner of Income Tax 2015 (9) TMI 238 - DELHI HIGH COURT held that in such a situation disallowance of the expenditure under section 14A of the Act would not be permissible. This decision was carried in Appeal filed by the Revenue before the Supreme Court. SLP has been dismissed. This Court following the said decision in several cases in case of The Principal Commissioner of Income Tax-10 Vs. HSBC Invest Direct (India) Ltd. 2019 (2) TMI 731 - BOMBAY HIGH COURT has dismissed the Revenue s Appeal.

Summary

Issues involved:
- Disallowance of expenditure under section 14A of the Income Tax Act 1961 when no exempt income was received by the assessee.

Analysis:

1. The appeal was filed by the revenue against the judgment of the Income Tax Appellate Tribunal, questioning the deletion of disallowance of ?76,16,530 made under section 14A of the Income Tax Act. The main issue for consideration was whether the ITAT was justified in deleting the disallowance when no exempt income was received or receivable by the assessee during the relevant previous year.

2. The undisputed facts revealed that the respondent assessee did not receive any exempt income during the assessment year 2009-10. Despite this, the Assessing Officer disallowed the expenditure under section 14A. The Delhi High Court in the case of Cheminvest Ltd. Vs. Commissioner of Income Tax held that in such circumstances, disallowance of expenditure under section 14A would not be permissible. This decision was upheld by the Supreme Court after an appeal was filed by the Revenue. The Bombay High Court, in various cases including The Principal Commissioner of Income Tax-10 Vs. HSBC Invest Direct (India) Ltd., has consistently followed this precedent and dismissed the Revenue's appeals based on the same reasoning.

3. Considering the legal precedent and the absence of exempt income in the present case, the High Court dismissed the appeal filed by the revenue. The court's decision was in line with the interpretation that disallowance under section 14A is not warranted when no exempt income is received by the assessee, as established by previous judicial decisions and upheld by higher courts.