No disallowance can be made u/s 14A of Income – tax Act, 1961 if there is no exempt income is earned during the year

No dis­al­lowance can be made u/s 14A of Income – tax Act, 1961 if there is no exempt income is earned dur­ing the year.

ACIT Vs. Mr . M.Baskaran, ITA No. 1717/Mds/2013, Date of Order: 31.07.2014, ITAT — CHENNAI

Facts of the case are that dur­ing assess­ment AO noticed that assessee hold invest­ment and no dis­al­lowance on account of inter­est and finan­cial charge was made by the assessee. There­fore AO in his assess­ment order, made dis­al­lowance u/s 14A of Income – tax Act, 1961 in accor­dance with rule 8D of Income – tax Rule, 1962. Assessee filed an appeal against such order on ground that he has not earn any exempt income dur­ing the year and also sub­mit that invest­ments were made out of own funds which did not suf­fer any interest.

Hon’ble ITAT placed reliance on deci­sion of Pun­jab & Haryana High Court in case of CIT Vs. Win­some Tex­tiles Indus­tries Ltd. (319 ITR 204) and held that when no exempt income is earned by assessee no dis­al­lowance can be made u/s 14A of Act. Hence, in the absence of any tax free income, the cor­re­spond­ing expen­di­ture could not be worked out for disallowance.
In the result, appeal of the Rev­enue is dismissed.

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