No Disallowance u/s 14A Where No Exempt Income Earned: ITAT Upholds Deletion of ₹15.42 Cr Addition for Adani Logistics [Read Order]

The Income Tax Appellate Tribunal, Ahmedabad Bench, held that no disallowance under Section 14A of the Income Tax Act, 1961 can be made where no exempt income is earned during the relevant assessment year. The Tribunal upheld the order of the Commissioner of Income Tax (Appeals) (CIT(A)) in deleting the addition of ₹15,42,24,483 made against Adani Logistics Ltd.

The appellant, Deputy Commissioner of Income Tax, filed an appeal against the order dated 04.08.2025 for the Assessment Year (AY) 2020-21.

The respondent, Adani Logistics Ltd., filed its return of income for the AY 2020-21 on 29.01.2021, declaring total income as ₹160,81,00,830. During the assessment, the Assessing Officer (AO) made the addition of ₹15,42,24,483 under section 14A read with Rule 8D of Income Tax Rules. The assessment was completed under section 143(3) on 29.02.2022 at a total income of ₹178,06,26,060.

Adani Logistics filed an appeal before CIT(A). CIT(A) deleted the addition made by the AO. The Revenue Department preferred an appeal before the Tribunal.

The counsel for the appellant, R.P.Rastogi, contended that the respondent has made huge investments which could yield exempt income and the AO had made the addition of ₹15,42,24,483 being 1% of the annual average of investment towards administrative expense, in accordance with the provision of Rule 8D of the IT Rules.

The counsel for the respondent, Dhrunal Bhatt, submitted that the respondent did not earn any exempt income during the year. It was further submitted that the provision of section 14A of the Act, was amended with effect from AY 2022-23 is prospective in nature and does not apply to the A.Y. 2020-21.

TR Senthil Kumar, Judicial Member and Narendra Prasad Sinha, Accountant Member, noted that no exempt income was earned by the respondent during the year. The tribunal observed in the case of Williamson Financial Services Limited vs. CIT, which held that the Explanation inserted to Section 14A of the Act is prospective in nature and cannot be presumed to have retrospective effect and applied to assessment years prior to 01.04.2022.

In light of facts and circumstances, the tribunal held that CIT(A) had rightly deleted the addition made under Section 14A of the Act, as the respondent did not earn any exempt income during the year. Accordingly, the ground taken by the Revenue was dismissed.

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