2024 (10) TMI 479 - AT - Income Tax

Addition u/s 14A r.w.r 8D - no dividend income received - HELD THAT - It is an admitted fact that the assessee has not received any dividend income during the year and the statement made by assessee at the Bar could not be controverted by the DR. In assessee s own case, the CIT(A) has already taken a view in assessment years 2012-13 and 2014-15 that in absence of any exempt income, there cannot be any disallowance u/s 14A - Nothing contrary was brought to our notice against the order of the CIT(A) for the earlier assessment years where such disallowance made by the Assessing Officer was deleted by him. CIT(A) while deciding the issue has followed the decision of CIT vs. Chettinad Logistics Pvt. Ltd 2018 (7) TMI 567 - SC ORDER where it has been held that in absence of any exempt income, no disallowance can be made u/s 14A - As reasoning given by the CIT(A) on this issue and in absence of any contrary material brought to our notice by the Revenue, we do not find any infirmity in the order of the CIT(A) deleting the disallowance made by the AO. Accordingly, the same is upheld. The grounds raised by the Revenue are according dismissed.

Summary

Issues:
1. Disallowance under section 14A of the Income Tax Act, 1961.
2. Applicability of disallowance when no dividend income is received.
3. Judicial precedents and decisions influencing the disallowance u/s 14A.

Analysis:
The appeal before the Appellate Tribunal ITAT Pune pertained to the disallowance of Rs. 3,73,19,882/- made by the Assessing Officer under section 14A of the Income Tax Act, 1961. The assessee, a company engaged in manufacturing and technology services, had made investments in a subsidiary company, resulting in exempt income. The Assessing Officer disallowed the amount as the assessee failed to provide details justifying the disallowance under section 14A read with rule 8D.

The CIT(A) deleted the addition based on the argument that the investments were made from the assessee's own funds without incurring any interest expenditure. The CIT(A) cited judicial decisions and the absence of exempt income to support the deletion of the disallowance. The Tribunal noted that the assessee did not receive any dividend income during the relevant year, and the CIT(A) had previously ruled in favor of the assessee in similar cases for assessment years 2012-13 and 2014-15.

The Tribunal upheld the CIT(A)'s decision, emphasizing the absence of exempt income as a crucial factor in determining the disallowance under section 14A. The Tribunal concurred with the CIT(A) and cited the decision of the Hon'ble Supreme Court in a related case to support the deletion of the disallowance. The Tribunal found no fault in the CIT(A)'s reasoning and dismissed the Revenue's appeal, affirming the deletion of the disallowance made by the Assessing Officer.

In conclusion, the Tribunal upheld the CIT(A)'s order, emphasizing the absence of exempt income as a decisive factor in disallowing the addition under section 14A. The Tribunal relied on judicial precedents and the CIT(A)'s consistent rulings in similar cases to support the decision to dismiss the Revenue's appeal and uphold the deletion of the disallowance.