INCOME TAX ACT, 1961

Section 14A

Disallowance under section 14A - Validity - Absence of exempt income earned -

Issue arose as to whether Tribunal was justified in deleting disallowance under section 14A ignoring the fact that investments in group companies will also yield exempt income which will attract disallowance under section 14A read with rule 8D. Further, revenue contended that Tribunal failed to appreciate that it is not the object for which investment was made, but quality of income, tax-exempt or otherwise, that arises from the investment, needs to be considered for purpose of section 14A. Held: Issue was decided by Supreme Court against revenue and in favour of assessee in CIT v. Essar Teleholdings Ltd. That apart, on identical issue Delhi High Court upheld order passed by Tribunal that in absence of any exempt income, disallowance under section 14A was not permissible. An SLP filed by revenue against said decision has been dismissed by Supreme Court in Pr. CIT v. Oil Industry Development Board.

Followed:CIT 5 Mumbai v. M/s. Essar Teleholdings Ltd. Through Its Manager (2018) 401 ITR 445 (SC) : 2018 TaxPub(DT) 0652 (SC); Pr. CIT 18 v. M/s. Oil Industry Development Board (2019) 103 taxmann.com 326 (SC) : 2019 TaxPub(DT) 1945 (SC)

REFERRED : Commissioner v. Essar Teleholdings Ltd., 401 ITR 445

FAVOUR : In assessee's favour

A.Y. :

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