INCOME TAX ACT, 1961

Section 14A Rule 8D

Disallowance under section 14A - Expenditure incurred on exempted income - Proof of earning exempt income -

AO issued a show cause notice to assessee as to why the disallowance under section 14A read with rule 8D of the Rules should not be made. Assessee filed a detailed reply and submissions of assessee was found not acceptable on the ground that CBDT Circular No. 5/2014 had clarified that “even if there is no exempt income, disallowance under section 14A read with rule 8D of the Rules can be made.” Hence, AO made addition under section 14A and assessed taxable income. On appeal, CIT(A) deleted the addition. Held: Revenue had not pointed out that during the year under appeal, assessee had earned dividend income. CIT(A) had followed the decision of jurisdictional High Court rendered in the cases of Cheminvest Limited v. CIT-VI (2015) 234 Taxman 761 (Del) : 2015 TaxPub(DT) 3520 (Del-HC) and CIT-IV v. Holcim India (P) Ltd. (2015), 57 taxmann.com 28 (Delhi) : 2014 TaxPub(DT) 3780 (Del-HC), wherein it was held that disallowance made by AO was not sustainable as there was no exempt income earned by assessee. Therefore, the finding of CIT(A) deleting the addition made on account of disallowance under section 14A, was affirmed.

Followed:Cheminvest Limited v. CIT-VI (2015) 234 Taxman 761 (Del) : 2015 TaxPub(DT) 3520 (Del-HC) and CIT-IV v. Holcim India (P) Ltd. (2015) 57 taxmann.com 28 (Delhi) : 2014 TaxPub(DT) 3780 (Del-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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