No Section 14A without exempt income

The Kerala High Court reaffirmed that no disallowance under Section 14A of the Income-tax Act can be made where the assessee has not earned any exempt income during the relevant assessment year. 

Rejecting the Revenue’s reliance on CBDT Circular No. 5 of 2014, the Court held that the issue stood covered by judicial precedents and that, in the absence of exempt income, the machinery provisions under Section 14A could not be invoked. 

Consequently, the Revenue’s appeal was dismissed and the orders of the CIT(A) and ITAT were upheld.