Issues Involved

Whether disallowance under Section 14A of the Income Tax Act, 1961 can be made when the assessee has not earned any exempt income during the relevant assessment year.

 Petitioner’s Arguments (Revenue)

The Revenue sought to challenge the Tribunal’s order deleting the disallowance under Section 14A and contended that such disallowance was justified despite absence of exempt income.

 Respondent’s Arguments (Assessee)

The assessee supported the order of the Tribunal and submitted that no exempt income was earned during the relevant year, and therefore, no disallowance under Section 14A could be made.

 Court’s Findings / Order

The Hon’ble Delhi High Court held that the issue raised in the present appeal is already covered by judicial precedents, including:

  • Cheminvest Ltd. v. CIT (2015) 378 ITR 33
  • CIT v. Chettinad Logistics Pvt. Ltd. [2017] 80 taxmann.com 221 (Madras)
  • Principal Commissioner of Income Tax – 4 Delhi v. Modern Info Technology Pvt. Ltd. (ITA 250/2023)

It was further noted that the Special Leave Petition against Chettinad Logistics Pvt. Ltd. was dismissed by the Supreme Court.

Accordingly, the Court held that no substantial question of law arises for consideration and dismissed the appeal filed by the Revenue.

 Important Clarification

The judgment reinforces the settled legal position that:

👉 No disallowance under Section 14A can be made in the absence of exempt income.

This principle continues to be consistently upheld by various High Courts and affirmed by the Supreme Court through dismissal of SLPs.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS09052023ITA2662023_162520.pdf

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