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2020 (11) TMI 863 - AT - Income TaxDisallowance u/s 14A read with Rule 8D - absence of any exempt income reported by the assessee - CIT(A) deleted the said disallowance - HELD THAT - No infirmity in the impugned order of the ld. CIT(A) deleting the disallowance made by the Assessing Officer u/s 14A of the Act by holding that in the absence of any exempt income reported by the assessee during the year under consideration, there was no question of making any disallowance u/s 14A of the Act. The same is accordingly upheld on this issue dismissing the appeal of the Revenue.
Issues Involved:
Deletion of addition made under section 14A of the Income Tax Act, 1961 read with Rule 8D. Analysis: 1. Deletion of Addition under Section 14A: The appeal filed by the Revenue was against the order of ld. CIT(A)-7, Pune for the assessment year 2011-12. The primary issue was the deletion of the addition of ?16,85,75,866/- made by the Assessing Officer on account of disallowance under section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962. The Assessing Officer applied Rule 8D to work out the expenses to be disallowed under section 14A, even though the assessee had not claimed any exempt income in the return of income. The ld. CIT(A) deleted the disallowance based on the argument that in the absence of any exempt income reported by the assessee during the relevant year, there was no basis for making the disallowance under section 14A. The ld. CIT(A) referred to various case laws and reasoned that the disallowance u/s 14A was not required as the appellant had offered its income under the head of income from business and profession and had not shown any exempt income or capital gains. The Tribunal upheld the decision of the ld. CIT(A) based on legal precedents and dismissed the appeal of the Revenue. 2. Legal Precedents and Rulings: The Tribunal found that the issue of disallowance under section 14A was squarely covered in favor of the assessee by decisions of the Hon'ble Jurisdictional High Court and the Hon'ble Apex Court. Reference was made to the case of CIT vs. M/s. Delite Enterprises where it was held that if no profit was derived by the assessee from a partnership firm exempt from tax, the disallowance under section 14A would not arise. Additionally, the Tribunal cited a case where the disallowance made by the Assessing Officer was deleted as there was no exempt income reported by the assessee. The Tribunal also considered the legal position from the decision of the Hon'ble Supreme Court in Hindustan Aeronautics Ltd. vs. CIT, emphasizing that when the Supreme Court or High Court has declared the law on a question, it prevails over circulars or instructions issued by the CBDT. Based on these legal precedents, the Tribunal upheld the deletion of the disallowance under section 14A by the ld. CIT(A). 3. Conclusion: The Tribunal, after considering the arguments and legal precedents, upheld the decision of the ld. CIT(A) to delete the addition made by the Assessing Officer under section 14A. The Tribunal dismissed the appeal of the Revenue, emphasizing that in the absence of any exempt income reported by the assessee during the relevant year, the disallowance under section 14A was not justified. The order was pronounced on November 23, 2020. This detailed analysis highlights the key aspects of the legal judgment, including the issues involved, the arguments presented, relevant legal precedents, and the final decision of the Tribunal.
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