Tribunal dismisses Revenue's appeals on disallowance under section 14A for no exempt income

The Tribunal dismissed the Revenue's appeals against orders deleting disallowance under section 14A of Rs. 3,03,53,000 for assessment years 2013-14 and 2014-15. As the assessee did not earn exempt income, section 14A could not apply. The Tribunal upheld the CIT(A)'s decision, aligning with ITAT Hyderabad Bench's view and citing precedents. The appeals were therefore dismissed.

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Issues:
1. Disallowance under section 14A of Rs. 3,03,53,000
2. Ignoring CBDT's Circular No.5 of 2014
3. Ignoring Supreme Court decision in CIT vs. Walfort Share of Stock Brokers P Ltd

Analysis:
The case involved appeals by the Revenue against orders passed by Ld. CIT(A)-4, Hyderabad for the assessment years 2013-14 and 2014-15. The appeals raised similar grounds for both years, with the only difference being in figures. The first issue pertained to the disallowance under section 14A of Rs. 3,03,53,000. The Ld. CIT(A) had deleted this disallowance, which was the subject of contention. The second issue related to the alleged ignorance of CBDT's Circular No.5 of 2014 dated 11.02.2014. The third issue involved the alleged ignorance of the Supreme Court decision in the case of CIT vs. Walfort Share of Stock Brokers P Ltd [326 ITR 1], which emphasized the mandate of section 14A to prevent the claiming of expenses incurred in relation to exempt income against taxable income without apportionment.

The Tribunal noted that the assessee company did not earn any exempt income during the relevant years, a fact not disputed by the Revenue. The Tribunal referenced previous cases where it was observed that section 14A requires the existence of income in the form of dividend for the disallowance of expenditure "in relation to income." Since no exempt income was earned, section 14A could not be applied. The Tribunal cited cases like DCIT vs. M/s. Modi Builders and Realtors Private Limited, Vinayak Steels Limited vs. ITO, and M/s. Kamadhenu Sukrit Pvt Ltd vs. ITO where a similar view was taken.

The Tribunal found that the view taken by the Ld. CIT(A) aligned with that of the ITAT Hyderabad Bench, and in the absence of any contrary decision cited by the Revenue, upheld the orders passed by the Ld. CIT(A). Consequently, the appeals filed by the Revenue were dismissed.

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