2019 (8) TMI 1545 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - Whether no exempt income was earned by the assessee during year under consideration - first appellate authority observed that no exempt income was earned by the assessee during year under consideration and therefore no disallowance u/s 14A would be justified - HELD THAT - Before us it is controverted fact that the assessee has not earned any exempt income during the year under consideration. Nothing contrary has been brought on record by the revenue. The stand of learned first appellate authority was in line with the decisions of binding judicial precedents as cited in the impugned order. Therefore the conclusion drawn in the impugned order could not be faulted with. - Decided against revenue.

Summary

Issues:
Appeal by revenue challenging deletion of disallowance u/s 14A for Assessment Year 2014-15.

Analysis:
The appeal before the ITAT Mumbai contested the order of the Ld. Commissioner of Income Tax (Appeals) regarding the deletion of disallowance u/s 14A for the relevant assessment year. The assessee, a resident corporate assessee engaged in the diamond business, was assessed for the impugned year and faced disallowance u/s 14A amounting to ?944.61 Lacs due to investments made. The assessee argued against the disallowance, stating that no exempt income was received and no expenditure was incurred to earn such income. However, the Ld. AO computed the disallowance as per Rule 8D, resulting in a total disallowance of ?944.61 Lacs, including interest and expense components.

The first appellate authority noted that no exempt income was earned by the assessee during the relevant year, leading to the conclusion that no disallowance u/s 14A was justified. The authority relied on various judicial decisions, including those of the Delhi High Court, Punjab & Haryana High Court, and the Supreme Court, to support this stance. As no exempt income was earned by the assessee, and no contradictory evidence was presented by the revenue, the appellate authority's decision was deemed in accordance with established legal precedents.

Consequently, the ITAT Mumbai upheld the decision of the first appellate authority and dismissed the appeal by the revenue challenging the deletion of disallowance u/s 14A for the assessment year in question. The judgment was pronounced on 20th August 2019 by the ITAT Mumbai.