ITA NO. 684/DEL/2014
This appeal by the assessee is directed against the order passed by the CIT(A) on 1.11.2013 in relation to the Assessment Year 2009-10.
2. Briefly stated, the facts of the case are that the Assessing Officer (AO), during the course of assessment proceedings, required the assessee to file details with reference to disallowance u/s 14A of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) read with Rule 8D. The assessee contended before the AO that it had not made any investments to earn any exempt income nor it had earned any such income during the year. It was also submitted that the assessee had surplus funds of its own and the investments in securities were made out of such surplus funds. Not convinced, the AO invoked the provisions of section 14A and, accordingly, made disallowance to the tune of Rs.45,46,631/-. The ld. CIT(A) upheld the impugned order.
The assessee is aggrieved against the addition.
3. I have heard the rival submissions and perused the relevant material available on record. It is observed from the submissions made by the assessee before the AO that no exempt income was earned during the year. This contention raised by the assessee has not been rebutted by the AO. Despite that, the AO proceeded to compute disallowance u/s 14A read with Rule 8D. In the absence of any exempt income, there can be no disallowance u/s 14A. The Hon’ble jurisdictional High Court in CIT vs. Holcim India Pvt. Ltd. (2014) 90 CCH 081 Del-HC, has held that no disallowance u/s 14A can be made in the absence of any exempt income. In Joint Investments Pvt. Ltd. Vs. CIT (2015) 372 ITR 694 (Del), it has been held that disallowance u/s 14A cannot exceed the exempt income. Since the assessee admittedly did not earn any exempt income during the relevant year, respectfully following the precedents, I hold that no disallowance u/s 14A can be made.
4. In the result, the appeal is allowed.
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