M/S. ASHOK MAGNETICS LTD.,CHENNAI V. ITO, CORPORATE WARD-1(1), CHENNAI

ITA 2301/CHNY/2025

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The case involves M/s. Ashok Magnetics Limited, represented by Shri V. Nagarajan as the Official Liquidator, appealing against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi. The primary issue was the disallowance made by the Assessing Officer under section 14A of the Income Tax Act, 1961, concerning expenses related to earning exempt income. The Assessing Officer had disallowed an amount of ₹2,14,74,050, which was confirmed by the CIT(A). However, the Tribunal found that there was no exempt income earned in the relevant assessment year and that the Explanation to section 14A applicable from AY 2023-24 did not apply to AY 2014-15.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784991 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 20-08-2025
• Other Referred Cases: PCIT v. Era Infrastructure (India) Ltd. 448 ITR 674 (Delhi), CIT v. Chettinad Logistics (P) Ltd. [2017] 80 taxmann.com 221 (Madras), [2018] 95 taxmann.com 250 (SC)
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. V. AROON PRASAD
• Assessee Lawyers: R. VIJAYARAGHAVAN
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

"आयकर अपीलीय अिधकरण, ’ए’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ŵी एस.एस. िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी अिमताभ शुƑा, लेखा सद˟ क े समƗ Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri Amitabh Shukla, Accountant Member आयकर अपील सं./I.T.A. No.2301/Chny/2025 िनधाŊरण वषŊ/Assessment Year: 2014-15 M/s. Ashok Magnetics Limited, (Represented by Shri V. Nagarajan, in the capacity of the Official liquidator), Corporate Office – No. 9, 6th Street, Gopalapuram, Chennai 600 086. [PAN:AAACA4304Q] Vs. The Income Tax Officer, Corporate Ward 1(1), Chennai. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri R. Vijayaraghavan, Advocate ŮȑथŎ की ओर से/Respondent by : Shri R.V. Aroon Prasad, Addl. CIT सुनवाई की तारीख/ Date of hearing : 12.11.2025 घोषणा की तारीख /Date of Pronouncement : 13.11.2025 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order dated 04.06.2025 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi for the assessment year 2014-15. 2. The assessee raised 5 grounds of appeal amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) Printed from counselvise.com I.T.A. No.2301/Chny/25 2 is justified in confirming the disallowance made by the Assessing Officer under section 14A of the Income Tax Act, 1961 [“Act” in short] r.w. Rule 8D(2) of the Income Tax Rules, 1962. 3. At the outset, it is noted that the Assessing Officer proceeded to determine the disallowance under Rule 8D(2)(ii) & (iii) to an extent of ₹.2,14,74,050/-. The assessee contended the proposal for disallowance is not justified when there is no exempt income earned, inspite of the same, the Assessing Officer added the above said amount to the total income of the assessee. The ld. CIT(A) confirmed the same while placing reliance of Explanation to section 14A of the Act. 4. After hearing both the parties, it is noted that there is no dispute with regard to earning of no exempt income by the assessee, which is clear from para (a) of the assessment order and para 5.2.2 of the impugned order, but, however, the ld. CIT(A) proceeded to confirm the disallowance by placing reliance of Explanation to section 14A of the Act, which came into effect from 01.04.2022. 5. The ld. AR Shri R. Vijayaraghavan, Advocate placed reliance on the decision of the Hon’ble High Court of Delhi in the case of PCIT v. Printed from counselvise.com I.T.A. No.2301/Chny/25 3 Era Infrastructure (India) Ltd. 448 ITR 674 (Delhi) and argued that the Explanation, which was inserted under section 14A of the Act is applicable from AY 2023-24, but, not to the year under consideration. 6. The ld. DR Shri R.V. Aroon Prasad, Addl. CIT relied on the order of the ld. CIT(A). 7. While taking into consideration the said amendment in the case of PCIT v. Era Infrastructure (India) (P.) Ltd. (supra), the Hon’ble High Court Delhi was pleased to hold that it is settled law that the assessment has to be made with reference to the law, which is in existence at the relevant time. We find the year under consideration is AY 2014-15 and has no applicability of Explanation inserted to section 14A of the Act. Therefore, the disallowance computed by the Assessing Officer under Rule 8D(2) and as confirmed by the ld. CIT(A) is not justified. Further, when there is no exempt income earned in the relevant assessment year, section 14A of the Act cannot be invoked in view of the decision of the Hon’ble High Court of Madras in the case of CIT v. Chettinad Logistics (P) Ltd. [2017] 80 taxmann.com 221 (Madras), which was affirmed by the Hon’ble Supreme Court as Printed from counselvise.com I.T.A. No.2301/Chny/25 4 reported in [2018] 95 taxmann.com 250 (SC) dated 02.07.2018. Thus, the grounds raised by the assessee are allowed. 8. In the result, the appeal filed by the assessee is allowed. Order pronounced on 13th November, 2025 at Chennai. Sd/- Sd/- (AMITABH SHUKLA) ACCOUNTANT MEMBER (S.S. VISWANETHRA RAVI) JUDICIAL MEMBER Chennai, Dated, 13.11.2025 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF. Printed from counselvise.com "