2018 (3) TMI 1623 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on section 14A, no exempt income, CBDT Circular not overriding

The Tribunal affirmed the CIT(A)'s decision to delete the addition under section 14A as no exempt income was earned by the assessee during the relevant ... Deletion of additions made u/s 14A - expenses relatable to earning exempt income - Held that:- t right from the stage of assessment, assessee has, inter-alia, canvassed against invoking of Sec. 14A of the Act by pointing out that in this year it has not earned any income which is exempt from tax. At the time of hearing, the learned representative supported the said assertion by referring to the Profit & Loss Account, wherein also no such income has been reported. - No disallowance u/s 14A - Decided in favor of assessee. Issues:Appeal against CIT(A) order under section 143(3) of Income Tax Act, 1961 for Assessment Year 2011-12. Disallowance under section 14A despite no exempt income claimed by the assessee.Analysis:The appeal by the Revenue was against the order of CIT(A)-5, Mumbai for the Assessment Year 2011-12, arising from the order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961. The Revenue raised grounds of appeal related to the deletion of disallowance made under section 14A despite the assessee's investment standing at Rs. 1112 crores at the year-end. The CIT(A) had deleted the addition under section 14A as there was no exempt income claimed by the assessee during the relevant year.The dispute raised by the assessee was regarding the deletion of the addition made by the Assessing Officer under section 14A of the Act amounting to Rs. 3,16,59,443. The CIT(A) justified the deletion by stating that no exempt income was earned by the assessee during the relevant year, making the invocation of section 14A unnecessary. The Revenue did not challenge this finding by the CIT(A), and it was noted that the deletion was in line with the judgment of the Delhi High Court in the case of Cheminvest Ltd. v. CIT.During the proceedings, the assessee consistently argued against the application of section 14A, emphasizing the absence of any exempt income during the year. The representative supported this claim by referring to the Profit & Loss Account, which did not report any such income. The Tribunal's decision in the assessee's case for the previous Assessment Year was also cited to strengthen the argument. The Revenue, however, relied on a CBDT Circular to support the invocation of section 14A even without exempt income. The Tribunal upheld the CIT(A)'s decision, emphasizing that the CBDT Circular did not override the legal position established by the Delhi High Court's judgment in the Cheminvest Ltd. case.Ultimately, the Tribunal affirmed the CIT(A)'s order and dismissed the Revenue's appeal, concluding that the deletion of the addition under section 14A was appropriate given the absence of exempt income during the relevant year. The appeal of the Revenue was consequently dismissed, and the order was pronounced on 21st March 2018.