2025 (5) TMI 1164 - AT - Income Tax

Addition u/s 14A - disallowance of expenditure incurred to earn exempt income - HELD THAT - CIT(A) vide his order held that provisions of section 14A of the Act are not applicable in the instant case as no exempt income has been earned by the appellant for the year under consideration and accordingly no expenditure should be disallowed as no part of it has been incurred for the purpose of earning exempt income. In view of above specific observations the arguments of Learned Authorised Representative for the Revenue being de void of merit are untenable. Ground of appeal no. 1 is dismissed.

Summary

The Appellate Tribunal (ITAT Delhi) dismissed the Revenue's appeal against the CIT(A)'s order dated 03.09.2024 concerning the assessment year 2020-21 under Sections 143(3) r.w.s. 144B of the Income-Tax Act, 1961. The primary issue involved the applicability of Section 14A relating to disallowance of expenditure incurred to earn exempt income. The AO had disallowed Rs. 5,00,00,000 under Section 14A, but the CIT(A) set aside this addition, holding that "the provisions of section 14A of the Act are not applicable in the instant case as no exempt income has been earned by the appellant for the year under consideration." The ITAT upheld this finding, stating the Revenue's contention was "devoid of merit" and dismissed the appeal.