Facts of the Case

  • The Revenue filed appeals against a common order of the Income Tax Appellate Tribunal (ITAT) dated 02.08.2022.
  • The Tribunal had deleted disallowance made under Section 14A for multiple assessment years (AY 2014–15 to AY 2017–18).
  • The Revenue challenged the deletion, contending that disallowance was justified despite absence of exempt income.
  • There was also delay in filing and re-filing the appeals, which was condoned by the Court.

Issues Involved

  1. Whether Section 14A disallowance is applicable in absence of exempt income.
  2. Whether the ITAT was justified in deleting such disallowance.

Petitioner’s Arguments (Revenue)

  • The Revenue argued that Section 14A disallowance should apply irrespective of whether exempt income was actually earned.
  • It challenged the Tribunal’s reliance on judicial precedents deleting such disallowance.

Respondent’s Arguments (Assessee)

  • The assessee did not appear; however, the Tribunal’s reasoning (upheld indirectly) was:
    • No exempt income was earned, hence Section 14A cannot be invoked.
    • Relied on settled judicial precedents supporting this proposition.

Court’s Findings / Order

  • The Court held that the issue is no longer res integra and is covered by binding precedents:
    • Cheminvest Ltd. v. CIT
    • CIT v. Chettinad Logistics (P.) Ltd.
    • PCIT v. IL&FS Energy Development Co. Ltd.
  • It noted that the Supreme Court had dismissed the SLP against Chettinad Logistics on merits.
  • Therefore, no substantial question of law arose.
  • Appeals were dismissed.

Important Clarification

  • Section 14A cannot be invoked in a vacuum.
  • Disallowance is permissible only when exempt income is actually earned.
  • This judgment reinforces a consistent judicial view across High Courts and Supreme Court affirmation.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/60828072023ITA4092023_114451.pdf

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