2017 (2) TMI 991 - AT - Income Tax

Disallowance made under section 14A - Held that - In this case, the assessee has not earned any dividend income in the year under consideration and moreover no expenditure was incurred. The assessee has not made investment in wholly owned subsidiaries. When the assessee has made investments in its own subsidiaries, investment in subsidiaries was out of commercial expediency and hence no expenditure can be determined and disallowed in view of the decision of the Tribunal in the case of EIH Associated Hotels Ltd. v. DCIT (2013 (9) TMI 604 - ITAT CHENNAI ). - Decided against revenue

Summary

Issues:
Disallowance made under section 14A of the Income Tax Act, 1961.

Analysis:
The appeal was against the order of the ld. Commissioner of Income Tax (Appeals) related to the assessment year 2012-13, focusing on the disallowance under section 14A of the Act. The assessee's return of income was revised multiple times, leading to scrutiny and assessment under section 143(3) of the Act. The ld. CIT(A) allowed the appeal, prompting the Revenue to appeal to the Tribunal. The Revenue argued against the order citing a pending appeal before the High Court, while the assessee relied on a recent judgment to support their case.

Upon review, it was noted that the Assessing Officer observed significant investments by the assessee, leading to a query on the disallowance under section 14A. The AR of the assessee clarified that no exempt income was earned, no direct expenditure was incurred, and no common interest expenses were claimed. Despite this, the Assessing Officer estimated expenses using Rule 8D, resulting in a disallowance added to the total income.

The ld. CIT(A) deleted the disallowance under section 14A, citing precedents from the Tribunal. The Tribunal further analyzed the case, highlighting that the assessee had not earned any dividend income and had not disputed the absence of wholly owned subsidiaries. The Tribunal referenced previous judgments to support the decision, emphasizing that investments in subsidiaries were for commercial expediency and not for earning income, thus no expenditure should be disallowed.

The Tribunal referred to specific case details and judgments, including the decision in Redington (India) Ltd. v. Addl. CIT, to support the conclusion that in the absence of exempt income, no disallowance of expenditure should occur. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the order passed by the ld. CIT(A).

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the decision of the ld. CIT(A) regarding the disallowance under section 14A of the Income Tax Act, 1961.