2021 (9) TMI 214 - AT - Income Tax

Tribunal deletes unjustified addition under section 14A for lack of exempt income

M/s. Raghukul Trading Pvt. Ltd. Versus The ACIT, Circle-2, Ghaziabad

The Tribunal found the addition under section 14A to be unjustified as the assessee had not earned any exempt income during the relevant assessment year. ... Disallowance u/s 14A r.w.r.8D - Assessee submitted that assessee has not earned any dividend income and has not claimed any exempt income earned - HELD THAT:- As it is clear that assessee did not earn any exempt income in assessment year under appeal - we set aside the Orders of the authorities below and delete the entire addition. Accordingly, appeal of the Assessee is allowed. Issues:Challenge to addition under section 14A of the I.T. Act, 1961 read with Rule 8D of the I.T. Rules, 1962.Analysis:The appeal was against the addition of Rs. 24,27,800 under section 14A of the I.T. Act, 1961, read with Rule 8D of the I.T. Rules, 1962, for the A.Y. 2014-2015. The assessee, a company deriving income from Finance and Investment, declared a net profit of Rs. 41,59,822, claiming interest expenses of Rs. 64,58,319. The Assessing Officer (A.O.) issued a show cause notice regarding the disallowance of interest under section 14A. The A.O. applied Rule 8D and made the disputed disallowance. The assessee argued that as no exempt income was claimed, the addition was unjustified, citing a judgment of the Delhi High Court. The Ld. CIT(A) upheld the addition based on a previous order for A.Y. 2012-2013.Upon review, it was found that the assessee had not earned any exempt income during the relevant assessment year. The ITAT, Delhi B-Bench had previously deleted a similar addition for the assessee in A.Y. 2012-2013, emphasizing that if no exempt income was earned, no disallowance under section 14A could be made. The Tribunal held that since there was no exempt income, the disallowance was not warranted. The assessee's contention was supported by the principle laid down by the jurisdictional High Court. Consequently, the Tribunal set aside the lower authorities' orders and deleted the entire addition, allowing the appeal of the Assessee.In conclusion, the Tribunal found the addition under section 14A to be unjustified as the assessee had not earned any exempt income during the relevant assessment year. Relying on previous judgments and the absence of exempt income, the Tribunal allowed the appeal and deleted the addition in its entirety.