The Tax Publishers2020 TaxPub(DT) 0973 (Bom-HC)

INCOME TAX ACT, 1961

Section 14A

No disallowance could be made under section 14A in absence of any exempt income earned during year under consideration.

Disallowance under section 14A - Expenditure against exempt income - No exempt income -

AO made disallowance under section 14A. However, Tribunal deleted the said disallowance on the ground that no exempt income was earned by assessee during relevant year under consideration. Revenue contended the Tribunal was not justified in deleting the said disallowance ignoring the provisions of CBDT Circular No. 5/2014 dated 11-2-2014 wherein, it has been clarified that section 14A provides for disallowance of expenditure even where the assessee in particular has not earned exempt income. Held: No disallowance could be made under section 14A in absence of any exempt income earned during year under consideration. Further, CBDT Circular No. 5/2014 dated 11-2-2014 cannot override the statutory provisions. In instant case, as assessee did not earn any exempt income during relevant year under consideration, no disallowance could be made under section 14A.

Relied:PCIT-3 v. India Debt Management Pvt. Ltd. Income Tax Appeal No. 266 of 2017: 2019 TaxPub(DT) 4692 (Bom-HC) Pr. CIT-04 v. IL & FS Energy Development Company Ltd. (Income Tax Appeal No. 520 of 2017), decided on 16-8-2017: 2017 TaxPub(DT) 3890 (Del-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2008-09



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