|The Tax Publishers2021 TaxPub(DT) 0119 (Mad-HC)
INCOME TAX ACT, 1961
Disallowance under section 14A could not be made in absence of earning of any exempt income for relevant assessment years.
Disallowance under section 14A - Expenditure against exempt income - Validity of disallowance when there was no exempt income -
AO made disallowance under section 14A read with rule 8D on allegation that even though assessee did not earn any exempt income for relevant assessment years, but incurring of expenditure in relation to dividend bearing investments could not be ruled out, more particularly when the assessee made huge investments in shares and securities which yield exempt income. Held: Madras High Court in case of Chettinad Logistics Pvt. Ltd. examined this issue and by following the judgment in Redington India Ltd., found that there cannot be any disallowance when there was no exempt income. In fact, the revenue filed an appeal before the Apex Court in Chettinad Logistics Pvt. Ltd. The appeal filed by the revenue was dismissed. Thus, CIT(A) was not justified in observing that the judgment of Madras High Court in Redington India Ltd., was overruled by Apex Court. Judicial discipline demands that all authorities in State of Tamil Nadu and Pondicherry have to follow the judgment of the Madras High Court, including CIT(A).
Followed:CIT v. Chettinad Logistics Pvt. Ltd. (2017) 248 Taxmann 55 (Mad) : 2017 TaxPub(DT) 1144 (Mad-HC) and CIT (Central) v. Chettinad Logistics Pvt. Ltd. 2018 TaxPub(DT) 4126 (SC).
FAVOUR : In assessee's favour.
A.Y. : 2013-14
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