2017 (12) TMI 807 - AT - Income Tax

Disallowance under section 14A - no exempt income has been earned or received by the assessee - Held that - We find that the Hon ble Delhi High Court in the case of Cheminvest Ltd (2015 (9) TMI 238 - DELHI HIGH COURT) has clearly held that no disallowance under section 14A of the Act can be made in a year in which no exempt income has been earned or received by the assessee. In our considered opinion, the learned CIT(A) has followed the binding precedents of the Hon ble Delhi High Court on the issue in dispute and we do not find any error in the said finding of the learned CIT(A)- Decided in favour of assessee.

Issues Involved:
1. Erroneous directions of the learned CIT(A).
2. Deletion of addition made under Section 14A read with Rule 8D.
3. Erroneous and untenable order of the learned CIT(A).
4. Grounds of appeal without prejudice to each other.
5. Appellant's right to add, alter, amend, or forego any grounds of appeal.

Issue-wise Detailed Analysis:

1. Erroneous Directions of the Learned CIT(A):
The Revenue contended that the directions of the learned CIT(A) were erroneous and contrary to facts and law. However, the Tribunal found that the CIT(A) followed the binding precedents of the Hon'ble Delhi High Court, particularly in the cases of Holcim (India) Private Limited and Cheminvest Ltd., which held that no disallowance under Section 14A can be made if no exempt income is earned during the year.

2. Deletion of Addition Made Under Section 14A read with Rule 8D:
The primary issue was the deletion of the addition of ?1,33,31,898/- made under Section 14A read with Rule 8D. The CIT(A) had deleted this addition based on the Delhi High Court's rulings, which state that disallowance under Section 14A is not applicable if no exempt income has been earned. The Tribunal upheld this view, emphasizing that judicial discipline demands adherence to the High Court's decisions.

3. Erroneous and Untenable Order of the Learned CIT(A):
The Revenue argued that the CIT(A)'s order was erroneous and untenable. However, the Tribunal found that the CIT(A) had correctly applied the legal principles established by the jurisdictional High Court. The CIT(A) had noted that the assessee did not earn any exempt income during the year and thus followed the High Court's ruling that no disallowance under Section 14A is warranted in such cases.

4. Grounds of Appeal Without Prejudice to Each Other:
This ground was a general statement indicating that the grounds of appeal are independent and not mutually exclusive. The Tribunal did not find it necessary to address this ground separately as it did not impact the substantive issue of disallowance under Section 14A.

5. Appellant's Right to Add, Alter, Amend, or Forego Any Grounds of Appeal:
The Revenue reserved the right to modify the grounds of appeal. However, this did not affect the Tribunal's decision on the main issue of disallowance under Section 14A.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order that no disallowance under Section 14A can be made in a year where no exempt income is earned. The Tribunal emphasized the importance of following binding precedents from higher courts, ensuring consistency and fairness in the application of the law. The decision was pronounced in the open court on 14th December 2017.

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