2019 (5) TMI 314 - AT - Income Tax

Disallowance u/s 14A r.w.Rule 8D - assessee did not earn exempt income in the impugned assessment years - HELD THAT - The expenditure in the form of investment was incurred by the appellant. It is also equally not in dispute that there is no exempt income in the form of dividend received by the appellant for the respective assessment years. There is no controverting material before the AO regarding the exempted income. The overwhelming judicial view regarding disallowance u/s.14A r.w.r. 8D is that no disallowance can be made in the absence of deemed dividend . See M/S. REDINGTON (INDIA) LTD. VERSUS THE ADDITIONAL COMMISSIONER OF INCOME TAX 2017 (1) TMI 318 - MADRAS HIGH COURT and M/S. CHETTINAD LOGISTICS PVT. LTD. 2017 (4) TMI 298 - MADRAS HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Maintainability of appeals due to tax effect less than ?20,00,000
2. Disallowance made under section 14A r.w.Rule 8D of I.T.Rules

Issue 1: Maintainability of appeals due to tax effect less than ?20,00,000
The appeals were filed by the revenue against the CIT(A)'s order. The Ld.AR argued that the tax effect involved in the appeals was less than ?20,00,000, making them not maintainable. Both parties were heard, and it was held that since the tax effect was below the specified amount as per CBDT circular No. 03/2018, the appeals were not maintainable and were dismissed.

Issue 2: Disallowance made under section 14A r.w.Rule 8D of I.T.Rules
The AO disallowed certain amounts under section 14A r.w.Rule 8D of I.T.Rules for the A.Ys 2013-14 to 2015-16 due to investments made by the assessee resulting in exempt income. The CIT(A) found that no exempt income was earned by the assessee during those years and deleted the additions based on tribunal decisions. The Tribunal noted that the AO made disallowances related to exempt income, but since no exempt income was earned, the additions were deleted by the CIT(A) following judicial views. The Tribunal upheld the CIT(A)'s decision based on the judicial precedents and dismissed the revenue's appeals for the A.Ys 2013-14 to 2015-16.

Cross Objections:
The assessee filed cross objections for A.Y. 2011-12 to 2015-16 with a delay of 88 days and did not file a condonation petition for the delay. The cross objections were dismissed in limine. Consequently, both the revenue's appeals and the assessee's cross objections were dismissed.