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2023 (1) TMI 1285 - AT - Income TaxDisallowance u/s. 14A r.w.r. 8D - no disallowance can be made in the hands of the assessee when the assessee has not claimed any exempt income - HELD THAT - CIT(A) after considering the written submissions of the assessee has granted relief to the assessee by following judgement in the case of Cheminvest Ltd. vs. CIT ( 2015 (9) TMI 238 - DELHI HIGH COURT where Their Lordship categorically held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year by the assessee. In view of above we are unable to see any valid reason to interfere with the findings arrived at by the Ld. CIT(A), therefore we uphold the same. Until unless the issue is adjudicated at the level of Hon ble Supreme Court modifying of setting aside the orders of judgments of Hon ble High Court all authorities below to the High Court s including this Tribunal is duty bound to follow the propositions rendered by Hon ble High Court therefore we are inclined to hold that the Ld. CIT(A) was right in granting relief to the assessee by following the proposition rendered by various High Court s including judgment of Hon ble Delhi High Court in the case of Cheminvest vs. CIT (supra). Consequently ground of revenue being devoid of merit is dismissed.
Issues:
1. Disallowance under section 14A of the Income Tax Act, 1961 for Assessment Year 2017-18. Analysis: The Revenue filed an appeal against the order of the Ld. CIT(A), Indore, challenging the deletion of an addition made by the Assessing Officer (AO) for disallowance under section 14A of the Income Tax Act, 1961. The main contention was the lack of quantitative details provided by the assessee to prove separate maintenance of accounts for taxable and exempt income in respect of shares. The Revenue argued that the CIT(A) erred in ignoring the fact that the investment made by the assessee could earn dividend income exempt from tax. They also pointed out the circular issued by CBDT, emphasizing that disallowance could be triggered even if exempt income was not included in a particular year's income. Reference was made to judicial decisions, including one where the High Court held that only expenses proportionate to earning exempt income could be disallowed under section 14A. In response, the Assessee contended that as there was no exempt income earned during the relevant financial year, no disallowance should have been made under section 14A. They cited a judgment of the Delhi High Court supporting their position. The Assessee emphasized that when no exempt income is received or receivable, section 14A should not apply. The Tribunal upheld the CIT(A)'s decision to grant relief to the Assessee. They relied on various High Court judgments, including the Delhi High Court, which held that section 14A would not apply if no exempt income was received. The Tribunal noted that until the issue is adjudicated by the Supreme Court, all authorities are bound to follow the propositions of the High Courts. Therefore, they dismissed the Revenue's appeal, stating that the CIT(A) was correct in granting relief to the Assessee based on the principles established by the High Courts. In conclusion, the Tribunal dismissed the appeal of the Revenue, upholding the decision of the CIT(A) to delete the addition made by the AO for disallowance under section 14A of the Income Tax Act, 1961 for the Assessment Year 2017-18.
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