2016 (4) TMI 1271 - AT - Income Tax

Tribunal rules no disallowance under section 14A without exempt income. Revenue appeal dismissed.

Amita Verma Versus Assistant Commissioner of Income Tax, Central Circle-13, New Delhi And Deputy Commissioner of Income Tax, Central Circle-13, New Delhi Versus Amita Verma

The Tribunal held that no disallowance u/s 14A could be made in the absence of exempt income. As the assessee had no exempt income during the relevant ... Disallowance u/s 14A - Held that:- The Revenue has not disputed the fact that during the year under consideration, the assessee has no exempt income and, therefore, hold that no disallowance u/s 14A can be made where there is no exempt income. In view of the above, the assessee’s appeals for all the years are allowed and the Revenue’s appeal is dismissed. See Cheminvest Ltd. Vs. ITO [2009 (8) TMI 126 - ITAT DELHI-B]. Issues: Disallowance u/s 14A of the Income-tax Act, 1961Analysis:1. The appeals by the assessee and the Revenue were directed against the order of the learned CIT(A)-1, New Delhi dated 20th December, 2012. The common question in all appeals was regarding disallowance u/s 14A of the Income-tax Act, 1961.2. For the assessment year 2007-08, the learned CIT(A) partly reduced the disallowance u/s 14A. The Revenue appealed against the relief allowed, while the assessee appealed against the disallowance made. In other years, the learned CIT(A) sustained the disallowance u/s 14A, leading to only the assessee appealing.3. During the hearing, the counsel for the assessee argued that as no dividend income was received, there was no exempt income, and thus no disallowance u/s 14A should be made. The counsel relied on a decision of the Hon'ble Jurisdictional High Court in a specific case.4. The learned CIT-DR, however, supported the Assessing Officer's order.5. The Tribunal noted that the Assessing Officer had rejected the assessee's contention based on a decision of ITAT Special Bench, which was later reversed by the Hon'ble Jurisdictional High Court. The High Court held that for disallowance u/s 14A, there must be actual receipt of income not includible in the total income during the relevant previous year.6. It was established that the assessee had no exempt income during the year under consideration. Therefore, following the High Court's decision, the Tribunal held that no disallowance u/s 14A could be made in the absence of exempt income. The Revenue did not dispute this fact, leading to the dismissal of their appeal and the allowance of the assessee's appeals for all years.7. Consequently, all the appeals of the assessee were allowed, while the appeal of the Revenue was dismissed. The decision was pronounced in open court on 27.04.2016.