Is deduction admissible in respect of expenditure which has proximate nexus with income that does not form part of total income?

The Income Tax Appellate Tribunal has recalled a previous order concerning Dhanuka Labs Limited. The original order had restored an issue regarding Section 14A of the Income Tax Act to the Assessing Officer for fresh consideration, based on the incorrect premise that the assessee earned exempt dividend income. The Tribunal acknowledged that the assessee had indeed not earned any such income, deeming it a mistake apparent on the record. Consequently, the order was recalled to ensure justice.

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘FRIDY’ NEW DLEHI

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER
AND
SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER

M.A. No. 770/Del/2018
(in ITA No. 3898/Del/2014)
AND
ITA No. 3898/Del/2014
Assessment Year: 2009-10

Dhanuka Labs Limited, 
861-862, Joshi Road, 
Karol Bagh, 
New Delhi.
PAN : AAACD2877R
(Applicant) 

vs. 

DCIT, Central Circle-2,
New Delhi.
(Respondent)

 Applicant by : Sh. S.S. Nagar, CA
 Respondent by: Ms. Aman Preet, Sr. DR

 Date of hearing: 23/07/2021
 Date of order : 23/07/2021

ORDER

PER K. NARASIMHA CHARY, J.M.

Assessee preferred this Miscellaneous Application to recall the order dated 18/08/2017 passed by this Tribunal in ITA No. 3898/Del/2014 for the assessment year 2009-10, stating that the Tribunal set aside the impugned order passed by the Ld. CIT(A) and restored the issue relating to section 14A of the Income Tax Act, 1961 (for short “the Act”) read with Rule 8D of the Income Tax Rules1962 (“the Rules”) to the file of the learned Assessing Officer for fresh consideration, on the premise that during the relevant financial year the assessee earned certain amount of dividend income claimed as exempt, whereas, as a matter of fact, the assessee did not earn any such income.

2. Our attention is drawn to para No. 3 of the order of the Ld. CIT(A) wherein learned Ld. CIT(A) noted that the assessee raised the contention that no exempt income was earned by them. It could be seen from the assessment order at paragraph No. 4 and at page No. 6 thereof that it was contended so before the Assessing Officer also. Both the authorities did not take note of the same. In the order dated 18/8/2017 at paragraph No. 3, this Tribunal also started with the exemption that the assessee earned a certain amount of dividend income during the relevant financial year which was claimed as exempt.

3. We have heard the Ld. DR also. There is no dispute on this fact. In the circumstances, we are of the considered opinion that there is a mistakeapparent on the face of record and on this ground, ends of Justice would demand the recall of the order dated 18/8/2017. We accordingly, recall the said order and restore the appeal to file. Miscellaneous application, filed by the assessee, is accordingly allowed. 

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