2023 (6) TMI 214 - AT - Income Tax

Disallowance u/s 14A r.w. Rule 8D - whether assessee has not earned any exempt income? - HELD THAT - AO has clearly stated that the assessee has not earned from equity investments which would yield exempt dividend income and the dividend income earned by the assessee is NIL. Thus, it is clear that the assessee has not earned any exempt income in the relevant assessment year under appeal against the investments. As relying on M/S CHETTINAD LOGISTICS PVT. LTD. 2018 (7) TMI 567 - SC ORDER held that when there was no dividend income earned in the relevant assessment year, the disallowance made by the Assessing Officer in view of the provisions of section 14A r.w.r. 8D was completely contrary to the provisions of that section as Rule 8D only provides for a method to determine the amount of expenditure incurred in relation to income, which does not form part of total income of the assessee. Also confirmed by SC 2018 (7) TMI 567 - SC ORDER - Decided against revenue.

Summary

Issues Involved:
The only issue involved in this appeal is relating to deletion of disallowance made under section 14A of the Income Tax Act, 1961 amounting to Rs. 2,36,66,025.

Summary:

Issue 1: Deletion of Disallowance under Section 14A of the Income Tax Act

The appeal filed by the Revenue challenged the deletion of disallowance made under section 14A of the Income Tax Act amounting to Rs. 2,36,66,025. The assessee had filed its return of income for the relevant assessment year admitting a loss. The assessment was completed under section 143(3) of the Act after making the disallowance under section 14A. On appeal, the ld. CIT(A) directed the Assessing Officer to delete the disallowance based on various case laws including the decision in CIT v. Chettinad Logistics Pvt. Ltd. The Revenue contended that the ld. CIT(A) erroneously restricted the disallowance. However, the Tribunal observed that the assessee had not earned any exempt income from equity investments in the relevant assessment year. Citing the decision in CIT v. Chettinad Logistics Pvt. Ltd., the Tribunal upheld the order of the ld. CIT(A) to delete the addition towards disallowance under section 14A. The Tribunal dismissed the appeal filed by the Revenue, concluding that there was no infirmity in the order passed by the ld. CIT(A).

Separate Judgement:
None.