2022 (9) TMI 1468 - AT - Income Tax

Addition u/s 14A r.w.r 8D - absence of any exempt income - HELD THAT - The undisputed fact is that there is no exempt income earned by the assessee during the year under consideration. On such facts, the dispute is well settled in favour of the assessee and against the revenue by the decision of the Hon'ble Supreme Court in the case of Oil Industry Development Board 2019 (3) TMI 1571 - SC ORDER by which the Hon'ble Supreme Court dismissed the Special Leave Petition preferred by the revenue against the order of the Hon'ble High Court of Delhi 2018 (2) TMI 1861 - DELHI HIGH COURT in which case the Tribunal had held that in the absence of any exempt income, disallowance u/s 14A of any amount was not permissible. The Hon'ble High Court of Delhi upheld the order passed by the Tribunal 2019 (6) TMI 666 - ITAT DELHI and the Hon'ble Supreme Court dismissed the SLP preferred by the Revenue. Also in the case of Caraf Builders Constructions P Ltd 2018 (12) TMI 410 - DELHI HIGH COURT has held that when no taxable income is earned, corresponding expenditure could not be worked out for disallowance. Similar view was taken in the case of Cheminvest Ltd Vs. CIT 2015 (9) TMI 238 - DELHI HIGH COURT Respectfully following the judicial decisions cited hereinabove, we decline to interfere with the findings of the CIT(A). Accordingly, Ground of appeal raised by the Revenue is dismissed.

Summary

Issues:
1. Addition under section 14A of the Income-tax Act, 1961.

Analysis:
The appeal before the Appellate Tribunal ITAT Delhi involved the deletion of an addition of Rs. 13,35,28,383/- made by the Assessing Officer under section 14A of the Income-tax Act, 1961. The Assessing Officer had computed the disallowance based on the provisions of section 14A read with Rule 8D of the ITAT Rules. The key contention was that the assessee had not earned any exempt income during the relevant assessment year. The CIT(A) deleted the addition after considering the facts and submissions, citing judicial decisions to support the conclusion that in the absence of exempt income, no disallowance could be made under section 14A of the Act.

The Revenue, represented by the ld. DR, supported the Assessing Officer's findings, while the assessee, represented by the ld. AR, reiterated their stance before the lower authorities. The Tribunal, after careful consideration, noted the absence of exempt income earned by the assessee during the relevant year. The Tribunal referred to the decision of the Hon'ble Supreme Court in the case of Oil Industry Development Board, where it was held that in the absence of exempt income, disallowance under section 14A was not permissible. Additionally, the Tribunal cited the case of Caraf Builders & Constructions [P] Ltd and Cheminvest Ltd Vs. CIT, where similar principles were upheld by the Hon'ble High Court of Delhi. Relying on these judicial precedents, the Tribunal declined to interfere with the CIT(A)'s findings and dismissed the appeal raised by the Revenue.

Therefore, the Tribunal upheld the CIT(A)'s decision to delete the addition made by the Assessing Officer under section 14A of the Income-tax Act, 1961, as there was no exempt income earned by the assessee during the relevant assessment year. The appeal of the Revenue was consequently dismissed, in line with the established legal principles and precedents cited in support of the decision.