ITAT Upholds CIT(A) Deletion of Rs. 1.67 Cr u/s 14A Due to No Exempt Income[Read Order]

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the Commissioner of Income Tax (Appeals) [CIT(A)] decision to delete a disallowance of Rs. 1.67 crores under Section 14A of Income Tax Act,1961. The tribunal concluded that the disallowance was inappropriate due to the absence of any declared exempt income during the assessment year ( AY ) 2014-15.

The Revenue-appellant challenged the decision of the CIT(A) regarding Uniparts India Ltd., the respondent-assessee, particularly focusing on the disallowance under Section 14A of the Act for the AY 2014-15.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The appellant contested the CIT(A) ruling that deleted an addition of Rs. 1,66,97,147 made under Section 14A, asserting that the assessee had not adequately considered exempt income when determining this disallowance.

During the hearing, the Departmental Representative ( DR ) for the appellant argued that the CIT(A) based the deletion solely on the finding that the assessee had not declared any exempt income during the year. The DR insisted that this finding was insufficient, as the provisions of the Act and relevant Central Board of Direct Taxes ( CBDT ) circulars should have been applied. The DR sought to emphasize the necessity of assessing disallowances in accordance with the statutory requirements, regardless of the lack of exempt income.

Conversely, the Assessee's Authorized Representative ( AR ) countered these claims by noting that the issue had been settled in favor of the assessee in a prior ruling by the ITAT, specifically in ITA No. 6056/Del/2017 for the assessment year 2010-11. The AR referenced the tribunal's conclusion that without any declared exempt income, Section 14A disallowances could not be justified.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Upon reviewing the submissions and the relevant material, the tribunal affirmed that the assessee had indeed not declared any exempt income during the assessment year. Citing various judicial precedents, particularly from the jurisdictional High Court, the tribunal underscored that disallowance under Section 14A was not applicable when exempt income was absent.

The two member bench comprising Sudhir Pareek ( Judicial Member ) and S.Rifaur Rahman ( Accountant Member ) upheld the CIT(A) decision and dismissed the Revenue's ground regarding the disallowance under Section 14A of the Act.

To Read the full text of the Order CLICK HERE

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