IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, KOLKATA SHRI SONJOY SARMA, JUDICIAL MEMBER SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER (Assessment Year 2018-2019)

Compact Agencies Pvt. Ltd., Room No. 1A, 20B, West Bengal, East India House, BBD Bag, West Bengal - 700069 [PAN: AADCC6607K] ……..…...…………….... Appellant vs.

DCIT/ACIT, Circle – 3(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata - 700069 ................................ Respondent Appearances by:

Assessee represented by : Manish Tiwari, FCA Department represented by : Sima Das Biswas, JCIT, Sr. DR Date of concluding the hearing : 12.08.2025 Date of pronouncing the order : 13.08.2025

O R D E R

PER SANJAY AWASTHI, ACCOUNTANT MEMBER

1. The present appeal arises from order u/s 250 of the Income Tax Act, 1961 (hereafter “the Act”), passed by Ld. Commissioner of Income Tax (Appeals), [hereinafter “the Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide order dated 01.05.2025.

1.1 In this case, the Ld. AO has made an addition of Rs. 19,22,407/- under Section 14A of the Act read with Rule 8D of the IT Rules. It is a matter of record that the assessee has consistently being arguing that no exempt income has been earned during the year under consideration and hence there should be no addition under Section 14A of the Act. However, the Ld. AO has relied on CBDT Circular No. 5/2014, dated 11.02.2014, which states that the legislative intent is to disallow appropriate amounts from even those investments which have a potential for yielding exempt income. This circular also mandates that such disallowance has to be worked out even though no exempt income has been earned during a particular year.

1.2 Aggrieved with this action of Ld. AO, the assessee approached the CIT(A) where also he could not succeed mainly on account of CBDT’s Circular (supra). Reliance has also been placed on the case of Maxopp Investment Ltd. reported in 402 ITR 640 (SC) and reliance has also been placed on the case of Williamson Financial Services Ltd. reported in 140 taxmann.com 164 (Guwahati-Tribunal) by the Ld. CIT(A).

1.2 In light of the adverse findings in the impugned order, the assessee has approached the ITAT with the following grounds:

“1.) That on the facts and in the circumstances of the case, the order u/s 250 dated 01.05.2025 passed by Ld. CIT(A)-NFAC, Delhi is erroneous and bad in law.

2.) That on the facts and in the circumstances of the case, Ld. CIT(A) erred in confirming the disallowance to the tune of Rs. 19,22,407/- u/s 14A of the Income Tax Act, 1961 made by the AO.

3.) That on the facts and in the circumstances of the case, Ld. CIT (A) erred in confirming the disallowance of Rs. 19,22,407/- u/s 14A of the Act made by AO while calculating the book profit u/s 115JB of the IT Act, 1961.

4.) That on the facts and in the circumstances of the case, Ld. CIT(A) erred in confirming the disallowance of Rs. 19,22,407/- u/s 14A of the Act without considering the judicial decisions relied upon by the appellant.

5.) That the appellant craves leave to add, amend, alter and / or delete any of the forgoing grounds of appeal before or during the course of appeal proceedings.”

2. Before us, the Ld. AR argued that it was duly informed at all stages that there was no exempt income earned during the year and hence there could not be any addition on account of section 14A read with Rule 8D.

The Ld.AR mentioned that the Williamson Financial Services Ltd. case of the Guwahati Tribunal was subsequently reversed by the Hon'ble Gauhati High Court in the same case reported in 166 taxmann.com 607 (Gauhati). It was further argued by the Ld. AR that it is also a settled position that any disallowance under Section 14A of the Act cannot be used to enhance income for the purposes of section 115JB of the Act.

2.1 The Ld. DR relied on the orders of authorities below and laid subject emphasis on CBDT Circular number 5/2014 (supra).

3. We have carefully considered the rival submissions and have gone through the records.