Case Law Details
ITO Vs Moonrock Hospitality (P) Ltd. (ITAT Delhi)
It is observed from the assessee’ s Profit & Loss Account that there is only one item of expenditure of Rs.6,230/- which has been booked in the accounts and there is no exempt income earned by the assessee. We find that the question of disallowance u/s 14A when there is no exempt income is no more res integra in view of the judgment of the Hon’ble jurisdictional High Court in the case Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Del), wherein it has been held that if there is no exempt income, there can be no question of making any disallowance u/s 14A. Similar view has been taken by the Hon’ble jurisdictional High Court in CIT vs. Holcim India P. Ltd. (2014) 90CCH 081-Del-HC. In view of these binding precedents providing for not making any disallowance u/s 14A in the absence of any exempt income, which are squarely applicable to the facts of the instant case, we uphold the view taken by the ld. CIT(A) on this issue.
FULL TEXT OF THE ITAT JUDGMENT
This appeal filed by the Revenue and the Cross Objection by the assessee arise out of the order passed by the CIT(A) on 24.10.20 16 in relation to the assessment year 2013- 14.
2. The only issue raised by the Revenue in its appeal is against deletion of the disallowance of Rs.1,08,61,430/- made by the Assessing Officer u/s 14A of the Act.
3. Briefly stated, the facts of the case are that the assessee is doing hospitality business. However, no business activity was carried out during the year. The assessee obtained a loan of Rs.7.02 crore from M/s Moneywise Financial Services (P) Ltd. A part of the same was paid during the year which was financed by taking a fresh loan from M/s Fuzone System (P) Ltd. This loan obtained was non-interest bearing. The loan was taken for investing in the purchase of shares of two subsidiary companies, namely, M/s TSM Polymers (P) Ltd. and M/s National Capital Region Electronics (P) Ltd. at a high rate of interest. The Assessing Officer opined that the investment was made with a view to earn exempt income. Applying the provision of section 14A read with Rule 8D, he computed disallowance at Rs. 1,08,67,661/-. Here it is pertinent to mention that the assessee had incurred only an expenditure of Rs.6,230/- during the year, being payment of audit fees etc., which was shown as loss. The disallowance of Rs. 1.08 crore was added to the declared loss of Rs.6,230/- . The ld. CIT(A) deleted the disallowance by observing that the asses see had not earned any exempt income during the year.
4. We have heard the rival submissions and perused the relevant material on record. It is observed from the assessee’ s Profit & Loss Account that there is only one item of expenditure of Rs.6,230/- which has been booked in the accounts and there is no exempt income earned by the assessee. We find that the question of disallowance u/s 14A when there is no exempt income is no more res integra in view of the judgment of the Hon’ble jurisdictional High Court in the case Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Del), wherein it has been held that if there is no exempt income, there can be no question of making any disallowance u/s 14A. Similar view has been taken by the Hon’ble jurisdictional High Court in CIT vs. Holcim India P. Ltd. (2014) 90CCH 081-Del-HC. In view of these binding precedents providing for not making any disallowance u/s 14A in the absence of any exempt income, which are squarely applicable to the facts of the instant case, we uphold the view taken by the ld. CIT(A) on this issue.
5. The assessee’s Cross Objection assails the view point of the ld. CIT(A) on certain aspects of the disallowance u/s 14A. Since such disallowance has been deleted in entirety on the above legal aspect, there is no need to look into the aspects concerning the computation of Thus, the Cross Objection has been rendered infructuous.
6. In the result, the appeal as well as the Cross Objection stand
The order pronounced in the open court on 03 .01.2018.
