2021 (9) TMI 236 - AT - Income Tax

Disallowance u/s 14A - whether assessee has not earned exempt income ? - HELD THAT - No disallowance u/s. 14A is permissible when the assesse has not earned exempt income. This proposition is further supported by the decision in the case of Delite Enterprises 2009 (2) TMI 498 - BOMBAY HIGH COURT and in Maxopp Investment Ltd. 2018 (3) TMI 805 - SUPREME COURT wherein the proposition that disallowance cannot exceed the exempt income has been upheld. As an obvious corollary, when there is no exempt income there cannot be disallowance u/s 14A. Hence, we do not find any infirmity in the order of Ld.CIT(A). Contribution made towards the Employees Provident Fund - Addition on the ground that it has paid beyond the due dates prescribed u/s. 2(24)(x) r.w.s. 36(1)(va) - CIT-A deleted the addition - HELD THAT - It is not disputed that the impugned amounts were paid/deposited before the due date of filing of the return. See GHATGE PATIL TRANSPORTS LTD. 2014 (10) TMI 402 - BOMBAY HIGH COURT - Ld. DR could not controvert that the issues are could not covered in favour of the assessee. Accordingly, we uphold the order of Ld.CIT(A).

Summary

Issues involved:
1. Disallowance under Sec 14A for not earning exempt income.
2. Disallowance of EPF contribution made after due date.

Analysis:
Issue 1: Disallowance under Sec 14A for not earning exempt income
- The AO disallowed amounts under Sec 14A as the appellant had not earned any dividend income on investments. The CIT(A) accepted the appellant's argument that no exempt income was earned, hence disallowance under Sec 14A was not justified, citing relevant court decisions.
- The ITAT upheld the CIT(A)'s order, stating that no disallowance under Sec 14A is permissible when no exempt income is earned. They referred to various court decisions supporting this stance, emphasizing that disallowance cannot exceed exempt income.

Issue 2: Disallowance of EPF contribution made after due date
- The AO disallowed EPF contribution made after the due date. The CIT(A) ruled in favor of the appellant, noting that the contribution was made before the due date of filing the return, citing relevant court decisions and tribunal rulings.
- The ITAT upheld the CIT(A)'s decision, stating that the issue was covered in favor of the appellant as the amounts were paid before the due date of filing the return. The ITAT dismissed the revenue's appeal, emphasizing that the issue was not disputed and the CIT(A)'s order was upheld.

In conclusion, both appeals by the revenue were dismissed by the ITAT, maintaining the decisions of the CIT(A) in favor of the appellant on both issues. The judgments and relevant legal provisions were thoroughly analyzed and applied to reach the final decision.