Tribunal allows appeal, deletes disallowance under Section 14A for regular provisions & book profits.

The tribunal allowed the appeal, condoning the delay and deleting the disallowance under Section 14A for both the regular provisions and the computation of book profits under Section 115JB. The decision was based on the consistent judicial stance that no disallowance is warranted when no exempt income is earned.

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Issues Involved:
1. Delay in filing the appeal.
2. Disallowance under section 14A of the Income Tax Act.
3. Disallowance under section 14A in the context of section 115JB of the Income Tax Act.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was filed with a delay of 133 days. The assessee explained the delay due to a change in the officer handling taxation matters and inadequate handover. The tribunal, considering the affidavit and the lack of malafide intent, condoned the delay. The tribunal emphasized that substantial justice should prevail over technicalities, thus admitting the appeal for adjudication on merits.

2. Disallowance under Section 14A of the Income Tax Act:
The AO disallowed Rs. 15,01,125 as expenditure under Section 14A read with Rule 8D, despite the assessee not earning any exempt income during the assessment year. The CIT(A) upheld this disallowance. The assessee argued that no expenditure was incurred for earning exempt income and that the investments were made from surplus funds, not borrowed funds.

The tribunal noted that the AO did not record any satisfaction before invoking Rule 8D and did not analyze the assessee's claim of no expenditure incurred. The tribunal relied on the decision of the Hon’ble Madras High Court in CIT v. Chettinad Logistics (P.) Ltd., where it was held that no disallowance under Section 14A is warranted if no exempt income is earned. The Supreme Court had dismissed the SLP against this decision. Similar views were upheld in Redington (India) Limited v. Addl. CIT and Cheminvest Limited v. CIT. Consequently, the tribunal ordered the deletion of the disallowance made under Section 14A.

3. Disallowance under Section 14A in the Context of Section 115JB of the Income Tax Act:
The assessee contended that disallowance under Section 14A should not affect the computation of book profits under Section 115JB. The tribunal agreed, referencing the Special Bench decision in ACIT v. Vireet Investment Private Limited, which held that computation under clause (f) of Explanation 1 to Section 115JB(2) should be made without resorting to Section 14A read with Rule 8D. The tribunal applied this principle and ordered that no disallowance under Section 14A should impact the book profits computation under Section 115JB.

Conclusion:
The tribunal allowed the appeal, condoning the delay and deleting the disallowance under Section 14A for both the regular provisions and the computation of book profits under Section 115JB, based on the consistent judicial stance that no disallowance is warranted when no exempt income is earned. The decision was pronounced on November 26, 2019, in Chennai.

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