DABWALI TRANSPORT COMPANY LIMITED,MOHALI V. ASSISTANT COMMISSIONER OF INCOME TAX, CHANDIGARH

ITA 41/CHANDI/2024

AI Insights

The case involves Dabwali Transport Company Limited appealing against the order of the CIT (A)/NFAC, Delhi, which sustained a disallowance of Rs. 33,56,578 under Section 14A of the Income Tax Act for the Assessment Year 2017-18. The primary contention was that the assessee did not earn any exempt income during the year, and thus, no related expenditure should be disallowed. The Tribunal considered various judicial precedents which supported the assessee's position that no disallowance under Section 14A could be made if no exempt income was earned. The Departmental Representative did not contest the factual position but relied on the lower authorities' decisions.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 107813 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Other Referred Cases: CIT Vs. Lakhani Marketing (2014) 49 taxmann.com 257 (P& H), Pr. CIT-1 Vs M/s Vardhman Chemtech (P) Ltd. (2020) 423 ITR 241 (P&H), Pr. CIT(Central) Vs. Era Infrastructure (India) Ltd. (2022) 141 taxmann.com 289
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN
• Assessee Lawyers: ASHWANI KUMAR; C.A
• Keywords: Retrospective amendment; Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

"आयकर अपीलीय अिधकरण,च᭛डीगढ़ ᭠यायपीठ “ए” , च᭛डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE ᮰ी िवᮓम ᳲसह यादव, लेखा सद᭭य एवं ᮰ी परेश म. जोशी, ᭠याियक सद᭭य BEFORE: SHRI. VIKRAM SINGH YADAV, AM &SHRI. PARESH M. JOSHI, JM आयकर अपील सं./ ITA NO. 41/Chd/2024 िनधाᭅरण वषᭅ / Assessment Year : 2017-18 Dabwali Transport Company Limited, SOF-84, Phase-2, Sector-54 Mohali, Punjab – 160055 बनाम The Asst. CIT, Chandigarh ᭭थायी लेखा सं./PAN NO: AAACT5071B अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent िनधाᭅᳯरती कᳱ ओर से/Assessee by : Shri Ashwani Kumar, C.A राज᭭व कᳱ ओर से/ Revenue by : Shri Vivek Vardhan, JCIT, Sr. DR सुनवाई कᳱ तारीख/Date of Hearing : 18/12/2024 उदघोषणा कᳱ तारीख/Date of Pronouncement : 30/12/2024 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. CIT (A)/NFAC, Delhi dt. 28/12/2023 pertaining to Assessment Year 2017-18 wherein the sole ground of appeal relates to sustenance of disallowance of Rs. 33,56,578/- under Section 14A of the Act. 2. During the course of hearing, the Ld. AR submitted that it is an undisputed fact that the assessee has not earned any exempt income during the year under consideration and in such a situation, where no exempt income has been earned, the question of disallowance of any expenditure in relation to earning of the exempt income does not arise for consideration. It was submitted that it is now a settled position as supported by the decision of various authorities and in this regard, our reference was drawn to the decision of Hon’ble Punjab & Haryana High Court in case of CIT Vs. Lakhani Marketing (2014) 49 taxmann.com 257 (P& H) and Pr. CIT-1, Vs M/s Vardhman Chemtech (P) Ltd. (2020) 423 ITR 241 (P&H). It was further submitted that the Hon’ble 2 Delhi High Court in case of Pr. CIT(Central) Vs. Era Infrastructure (India) Ltd. (2022) 141 taxmann.com 289 has held that up to and including A.Y. 20121-22, no disallowance could be made under section 14A if no exempt income was earned by the Assessee. It was further held in the said case that the amendment made by the Finance Act, 2022 by inserting the non-obstante clause and explanation will take the effect from 01/04/2022 and cannot be presumed to have retrospective effect. It was accordingly submitted that the addition so made and confirmed by the Ld. CIT(A) be directed to be deleted. 3. Per contra, the Ld. DR couldn’t rebut the factual position that no exempt income has been earned by the assessee. Further, he has relied on the order of the lower authorities. 4. We have heard the rival contentions and perused the material available on the record. Admittedly, the assessee has not earned any exempt income during the financial year relevant to impugned assessment year 2017-18, in such a situation, the question of disallowance of any expenditure under section 14A r.w. Rule 8D does not arise for consideration. The matter is squarely covered by the decisions of Hon’ble Jurisdictional High Court as referred supra. In light of the same, the addition so made and upheld by the Ld. CIT(A) is hereby directed to be deleted. 5. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 30/12/2024 Sd/- Sd/- परेश म. जोशी िवᮓम ᳲसह यादव (PARESH M. JOSHI) ( VIKRAM SINGH YADAV) ᭠याियक सद᭭य / JUDICIAL MEMBER लेखा सद᭭य/ ACCOUNTANT MEMBER AG आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. आयकर आयुᲦ (अपील)/ The CIT(A) 5. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 6. गाडᭅ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "