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| The Tax Publishers2020 TaxPub(DT) 4872 (Chen-Trib) : (2020) 208 TTJ 0968 : (2021) 087 ITR (Trib) 0540 INCOME TAX ACT, 1961
Section 14A Rule 8D
Where it is a settled position of law by the decisions of Supreme Court and other High Courts that when there is no exempt income for the year, then disallowance contemplated under section 14A cannot be made, following the same, no disallowance under section 14A can be made as there was no dividend income.
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Disallowance under section 14A - Expenditure against exempt income - No exempt income -
AO made additions towards disallowance of expenditure incurred in relation to exempt income under section 14A on the ground that although assessee had not earned any exempt income but expenses relatable to exempt income cannot be ruled out when the assessee had systematically invested huge amounts in dividend bearing investments. Held: It is a settled position of law by the decisions of Supreme Court and other High Courts that when there is no exempt income for the year, then disallowance contemplated under section 14A cannot be made. Supreme Court in the case of CIT v. Chettinad Logistics Pvt. Ltd. [(2017) 80 Taxmann.com 221 (Mad-HC) : 2017 TaxPub(DT) 1144 (Mad-HC) had held that no disallowance under section 14A can be made if there is no dividend income. A similar view has been expressed by in the case of Oil Industry Development Board [2019 TaxPub(DT) 1945 (SC)] where the Court while dismissing the SLP filed by the Revenue had confirmed the decision of High Court of Delhi which held that in the absence of any exempt income disallowance under section 14A of any amount was not permissible. The Supreme Court while arriving at a conclusion had followed its earlier decision in the case of Cheminvest Limited v. CIT [(2015) 378 ITR 33 (Del) : 2015 TaxPub(DT) 3520 (Del-HC)], where a similar view had been expressed by the Court. In this case, the assessee had filed all evidences to prove the fact that no exempt income was earned for the year. Assessee had also filed all evidences to prove that its own fund being share capital and reserves and surplus was over and above amount of investments. In view of decisions cited above, disallowance made by AO was deleted.
Followed:CIT v. Chettinad Logistics Pvt. Ltd. [(2017) 80 Taxmann.com 221 (Mad-HC) : 2017 TaxPub(DT) 1144 (Mad-HC)], Oil Industry Development Board [2019 TaxPub(DT) 1945 (SC)] and Cheminvest Limited v. CIT [(2015) 378 ITR 33 (Del-HC) : 2015 TaxPub(DT) 3520 (Del-HC)].
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2014-15 to 2016-17
INCOME TAX ACT, 1961
Section 37(1)
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