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2020 (6) TMI 73 - AT - Income TaxDisallowance u/s 14A - assessee submitted that admittedly there was no exempt income earned by the assessee during the year under consideration - HELD THAT - It is not in dispute that the assessee has not earned any dividend income from the investment made during the year under consideration. The question arises for consideration is when the assessee has not earned any exempt income / dividend during the year under consideration, can there be any disallowance u/s.14A read with Rule 8D(ii). This issue was examined by the Madras High Court in Redington India Ltd 2017 (1) TMI 318 - MADRAS HIGH COURT wherein as found that there was no disallowance when there was no exempt income. Madras High Court in the case of Chettinad Logistics Pvt. Ltd. 2017 (4) TMI 298 - MADRAS HIGH COURT examined this issue and by following the judgment in Redington India Ltd., found that there cannot be any disallowance when there was no exempt income. In fact, the Revenue filed an appeal before the Apex Court in Chettinad Logistics Pvt. Ltd. The appeal filed by the Revenue was dismissed. In those circumstance, this Tribunal is of the considered opinion, the CIT(A) is not justified in observing that the judgment of Madras High Court in Redington India Ltd., was overruled by the Apex Court 2018 (7) TMI 567 - SC ORDER There may be difference of opinion with regard to issues arises for consideration. Irrespective of the personal difference of opinion, the CIT(A) while deciding the appeal is bound to follow the judgment of the Apex Court and the jurisdictional High Court. Judicial discipline demand that all authorities in the State of TamilNadu and Pondicherry has to follow the judgment of the Madras High Court including the present CIT(A). Therefore, we are unable to uphold the order of the CIT(A). Accordingly, the orders of both the authorities below are set aside and the disallowance made by the Assessing Officer U/s.14A of the Act is deleted. - Decided in favour of assessee.
Issues:
Disallowance under Section 14A when no exempt income earned. Analysis: The appeal was against the order by the Commissioner of Income Tax (Appeals) for the assessment year 2017-18. The assessee contended that no exempt income was earned during the year. The Counsel referred to a judgment by the Madras High Court in a similar case, which was not overruled by the Apex Court. The Departmental Representative acknowledged that no exempt income was earned. The Tribunal considered the arguments and the material on record. It was noted that the assessee did not earn any dividend income during the year. The key issue was whether disallowance under Section 14A could be made when no exempt income was earned. The Madras High Court in the case of Redington India Ltd. and Chettinad Logistics Pvt. Ltd. held that no disallowance could be made in the absence of exempt income. The Tribunal emphasized that the CIT(A) was bound to follow the judgments of the Apex Court and the jurisdictional High Court. Therefore, the Tribunal set aside the orders of the lower authorities and deleted the disallowance made by the Assessing Officer under Section 14A. The Tribunal's decision was based on the principle that when there is no exempt income earned, disallowance under Section 14A cannot be imposed. The Tribunal highlighted the importance of judicial discipline in following the judgments of the higher courts. The Tribunal emphasized that the CIT(A) was obligated to adhere to the decisions of the Apex Court and the jurisdictional High Court, even if there were personal differences of opinion. Therefore, the Tribunal allowed the appeal filed by the assessee, concluding that the disallowance made by the Assessing Officer under Section 14A was unwarranted.
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