Indian Kanoon - Search engine for Indian Law

Total Rs.97,09,947/-

Thus, the disallowance was made by the AO to the tune of Rs.97,09,947/-

which was added to the income u/s 14A r.w.r. 8D, vide assessment order dated 09-03-2015 passed by the AO u/s 143(3).

4. Aggrieved by the assessment order dated 09-03-2015 passed by the AO u/s 143(3), the assessee filed first appeal before the learned CIT(A), who granted the relief of the assessee by following the decisions on Hon'ble Delhi High Court dated 02.09.2015 in the case of Cheminvest Ltd. v CIT in ITA no. 749/2014, where it has been held by Hon'ble Delhi High Court that no disallowance can be made u/s. 14A if there is no exempt income earned by the assessee . The learned CIT(A) held as under:-

4.3.2 However, I am inclined to accept the alternative plea of the appellant based on case-laws cited in para 4.2.1 above as well as the judgment of the Hon'ble Delhi High Court dated 02.09.2015 in the case of M/s.Cheminvest Ltd. v. CIT (ITA 749/2014) wherein it has been held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. While setting aside the decision of Hon'ble Special Bench in that case, it has been held that the expression „does not form part of the total income' in section 14A of the Act envisages that there should be an actual receipt of income which is not includible in the total income during the relevant previous year for the purpose of disallowing any expenditure in relation to the said income. It is a matter of record that the appellant has not received any exempt income during the relevant period. Therefore, respectfully following the ratio of above decisions, it is held that the A.O. was not justified in making disallowance of Rs.97,09,947/- u/s.14A r.w. Rule ITA no. 6267/Mum/2016 8D in case of the appellant. The disallowance so made by the A.O: is directed to be deleted. Ground raised by the appellant is accordingly allowed.

8. In view of the above, it is submitted that the issue of disallowance under section 14A of the Act may be decided after taking due cognizance of the discussion made in the preceding paragraphs and accordingly the order of the Assessing Officer be confirmed.

(Purushottam Kumar) Sr. AR, ITAT, „D‟ Bench, Mumbai"

The learned DR fairly agreed that there is no exempt income earned by the assessee during the impugned assessment year and the ratio of decision of Cheminvest Limited(supra) shall be applicable in the instant case.

Disallowance u/s. 14A of the IT. Act, 1961 Aggregate of the following

i) Expense's directly attributable to exempt income Rs. Nil

ii) Amount of Expenditure by way of interest Rs. 15,963/-

iii) 0.5% of Average value of Investment Rs.96,93,984/ -

Total Rs.97,09,947/-

We have observed that Hon'ble Delhi High Court in the case of Cheminvest Limited(supra) had held that no disallowance can be made u/s. 14A . if no exempt income is received or receivable during the year. The decision of the Hon'ble Delhi High Court is approved by Hon'ble Bombay High Court in the ITA no. 6267/Mum/2016 case of Principal CIT v. Ballarpur Industries Ltd. in ITA no. 51 of 2016 reported in {2016 (10) TMI 1039 Bombay High Court}. Thus keeping in view ratio of decision of Hon'ble Delhi High Court in the case of Cheminvest Limited (supra) and Hon'ble Bombay High Court in the case of Ballarpur Industries Ltd.(supra) , we order deletion of the addition of Rs. 97,90,947/-