Case Law Details
NCC Infrastructure Holding Limited Vs ACIT (ITAT Hyderabad)
Introduction: In a landmark ruling, the Income Tax Appellate Tribunal (ITAT) Hyderabad stated that no disallowance of deduction under Section 14A of the Income Tax Act can be made if no exempt income is earned by the assessee. The case was brought forward by NCC Infrastructure Holdings Limited, who disputed an addition made by the Assessing Officer under the said section.
Analysis: The judgement of the ITAT Hyderabad is rooted in the premise that the amendment to Section 14A of the Act by the insertion of an explanation is prospective in operation and can’t be applied to the year under consideration. The ruling also referenced the verdicts of the Delhi High Court in similar cases, emphasizing that the disallowance of Section 14A cannot be applied when no exempt income is earned during the year under scrutiny.
Conclusion: This verdict from the ITAT Hyderabad in favor of NCC Infrastructure Holdings Limited sets a significant precedent. It clarifies the conditions under which deductions under Section 14A of the Income Tax Act can be disallowed, particularly stating that in the absence of any exempt income earned by the assessee, no such disallowance can be made. However, the orders passed in this appeal shall abide by the final decision of the Supreme Court in the pending SLP in the case of IL&FS Energy Development Co. Ltd.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
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