ACIT Vs HLL Lifecare Limited (Kerala High Court)
The Revenue filed an appeal before the Kerala High Court challenging the order of the Income Tax Appellate Tribunal (ITAT), Kochi Bench, for Assessment Year 2016-17.
The assessee, a Government of India undertaking, filed its original return on 12.10.2016 and a revised return on 31.03.2018. Following scrutiny assessment under Section 143(2) of the Income Tax Act, the Assessing Officer made various additions and disallowances, including disallowance under Section 14A. The assessee appealed before the Commissioner of Income-tax (Appeals) [CIT(A)], who deleted all the disallowances.
The Revenue then appealed before the ITAT. The Tribunal dismissed the appeal, relying on its earlier decisions in the assessee’s own cases for Assessment Years 2010-11 and 2011-12. It reiterated that no disallowance under Section 14A can be made when no exempt income is earned during the relevant year. The Tribunal relied on decisions of the Delhi High Court in Pr. CIT v. IL & FS Energy Development Corporation Ltd. and the Madras High Court in Redington (India) Pvt. Ltd. v. Additional CIT.
Before the High Court, the Revenue argued that CBDT Circular No. 5 of 2014 clarified that expenditure could be disallowed under Section 14A read with Rule 8D even where no exempt income was earned, and that the Tribunal and CIT(A) failed to consider this circular.
