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2021 (4) TMI 338 - AT - Income TaxDisallowance u/s 14A - Whether assessee had not earned any exempt income during these assessment years? - HELD THAT - There is no dispute and as a matter of fact authorities below categorically recorded that the assessee had not earned any exempt income during these assessment years and therefore the decision of the Hon ble jurisdictional High Court in the cases of Cheminvest Ltd 2015 (9) TMI 238 - DELHI HIGH COURT and Holcim India Pvt. Ltd . 2014 (9) TMI 434 - DELHI HIGH COURT are applicable to the facts of the case. We are of the considered opinion that where there is no dispute of fact that no dividend income was earned by the assessee during the year, no disallowance is called for under section 14 A of the Act. For these reasons, we uphold the findings of the Ld. CIT(A) and dismiss the grounds of appeal of the Revenue.
Issues:
- Application of section 14A of the Income Tax Act, 1961 with Rule 8D for assessment years 2013-14 and 2014-15. - Disallowance of expenses by the Assessing Officer. - Deletion of addition by the Commissioner of Income Tax (Appeals). - Non-appearance of the assessee during the proceedings. Analysis: 1. Application of Section 14A and Rule 8D: The assessee, engaged in infrastructure development, contested that no exempt income was earned during the relevant assessment years, thus challenging the applicability of section 14A of the Act read with Rule 8D of the Rules. The Ld. CIT(A) accepted this argument, relying on precedents such as Cheminvest Ltd vs. CIT and Holcim India Pvt. Ltd. The Revenue, however, argued that future earnings might include dividends, justifying disallowance of expenses related to investments. The Tribunal noted that no exempt income was earned, aligning with established case law, and upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal. 2. Disallowance of Expenses: The Revenue contended that even without current exempt income, future earnings could trigger disallowances under section 14A. However, the Tribunal emphasized that the absence of factual disputes regarding the lack of dividend income during the assessment years negated the need for disallowances. Citing legal principles and precedents, the Tribunal affirmed that no disallowance was warranted under section 14A in the absence of actual exempt income. 3. Deletion of Addition by CIT(A): The Ld. CIT(A) had deleted the additions made by the Assessing Officer, emphasizing the non-earning of exempt income by the assessee during the relevant years. This decision was based on the interpretation of section 14A and Rule 8D, aligning with judicial precedents and the principle of notional income. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing the lack of factual basis for disallowances. 4. Non-Appearance of the Assessee: During the proceedings, neither the assessee nor any authorized representative appeared, leading to considerations around proper service of notices. The Tribunal noted that despite failed attempts at service, the absence of proactive measures by the assessee did not warrant additional time. Proceeding with the case, the Tribunal examined the arguments and legal aspects presented by the Revenue, ultimately upholding the Ld. CIT(A)'s decision based on established legal principles and factual findings. In conclusion, the Tribunal dismissed the Revenue's appeals, affirming the Ld. CIT(A)'s decision regarding the non-applicability of section 14A and Rule 8D due to the absence of actual exempt income during the assessment years. The judgment highlighted the significance of factual evidence and legal interpretations in determining the validity of expense disallowances under tax laws.
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