No Disallowance u/s 14A if assessee has not earned any exempt Income

In the matter of the Assistant Commissioner of Income Tax (ACIT) vs M/s. ETA Star Property Developers Limited Income-Tax Appellate Tribunal (ITAT) has retreated the order of CIT v. Chettinad Logistics (P) Ltd. (supra), by the Hon’ble Jurisdictional High Court where it was observed and held that when there was no dividend income earned in the relevant assessment year, the disallowance made by the Assessing Officer in view of the provisions of section 14A of the Act read with Rule 8D was completely contrary to the provisions of that section as Rule 8D only provides for a method to determine the amount of expenditure incurred in relation to income, which does not form part of total income of the assessee.

Against the decision of the Hon’ble High Court, the Department preferred Special leave Petition, which was dismissed by the Hon’ble Supreme Court [2018] 95 taxmann.com 250 (SC).

In view of the above decision in the case of CIT v. Chettinad Logistics (P) Ltd. (supra), ITAT found no infirmity in the order passed by the ld. CIT(A) in directing the Assessing Officer to delete the addition made towards disallowance of ₹. 2,36,66,025/- under section 14A of the Act.

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