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Judgment
N.K. Billaiya, Accountant Member
This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals], Faridabad dated 24.05.2016pertaining to assessment year 2012-13.
The short grievance of the assessee is that the ld. CIT(A) erred in confirming the disallowance of administrative expenses of Rs. 11,47,420/- in terms of Rule 8D(2)(iii) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'].
None appeared on behalf of the assessee. We, therefore, decided to proceed exparte qua the assessee after hearing the ld. DR.
Facts emanating from the assessment order show that during the course of scrutiny assessment proceedings, the Assessing Officer noticed that invoices in equity shares of several companies. The assessee was asked to explain why disallowance u/s 14A r.w.r 8D be not made since it has not disallowed any expenditure for earning exempt income.
The assessee in its replied explained that during the year, the assessee has not received any dividend income from these companies which are exempt. Therefore, there is no question of any disallowance u/s 14A of the Act.
Reply of the assessee did not find any favour with the assessee who proceeded by computing the disallowance by invoking the provisions of section 14A r.w.r. 8D of the Act and made disallowance of Rs. 2,59,63,959/-.
The assessee carried the matter before the ld. CIT(A) but could get part relief only.
As mentioned elsewhere, since during the subject assessment year there is no exempt income earned by the assessee during the year, there cannot be any disallowance u/s 14A r.w.r 8D. This issue is by now well settled in favour of the assessee and against the revenue by the decision of the Special Bench of the Tribunal in the case of M/s Cheminvest Ltd 121 ITD 318 which was affirmed by the Hon'ble High Court of Delhi. Same view is taken by the Hon'ble Gujarat High Court in the case of Corrtech Energy (P) Ltd 372 ITR 97. In view of the above, the impugned disallowance is directed to be deleted. Accordingly, the Ground raised by the assessee is allowed.
In the result, the appeal of the assessee in ITA No. 4124/DEL/2016 is allowed.