TMI Blog2021 (9) TMI 1093X X X X Extracts X X X X X X X X Extracts X X X X ..... for years under consideration for categorising the income earned by assessee under the 3 categories. For that assessee is directed to file the bifurcation of income generated from growing, processing and sale of seeds from owned and leased lands as well as contract lands. AO is then directed to disallow of the deduction claimed under section 10 (1) in respect of the income earned from growing, processing and sale of seeds from contract lands as per the observations of Hon ble Karnataka High Court (supra)in assessee s own case. Disallowance made under section 14A read with Rule 8D(iii) - no suo moto disallowance was made by the assessee towards earning of exempt income - HELD THAT:- Disallowance under section 14A read with Rule 8D shall not exceed exempt income earned for the year. This principle is supported by the decision of Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] where it was clearly held that disallowance of expenditure u/s 14A shall not exceed exempt income earned for the year. Respectfully following the same we direct the Ld. AO to restrict the disallowance under section 14A read with rule 8D to the extent of dividend income earned by assessee during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by him and the learned Commissioner of Income tax (Appeals) has erred in confirming the same. The impugned orders being bad in law are required to be quashed. 11 The learned Assessing Officer has erred in disallowing the exemption claimed U/s. 10(1) of the Act to the extent of ₹ 14,61,47,901.00 and the learned Commissioner of Income tax (Appeals) has erred in confirming the same. The exemption as claimed by the appellant is to be allowed as such. 2.2 In any case, the authorities below have erred in not following the binding directions of the honourable High court and erred in denying the benefit of exemption claimed u/s 10(1) of the Act by the appellant. On proper appreciation of facts and the judicial decision rendered by the hoourable High court, the appellant is eligible for substantial relief with respect to agricultural income and same is to be granted to the appellant. 2.3 In any case and without prejudice, the various observations made/conclusions drawn by the authorities below being totally contrary to available facts and the law applicable are to be ignored. 3.1 The learned Assessing Officer had erred in making disallowance U/s. 14A r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - by denying exemption under section 10(1) of the Act in respect of agricultural income from contract farming. Ld.AO also disallowed provision for guarantee amounting to ₹ 16,21,8/-. Relevant order placed at page 21-36 of appeal memo 2. Against order passed by Ld.AO, assessee preferred appeal before Ld.CIT(A) disputed the disallowance made by Ld.AO in respect of alleged agricultural income of ₹ 3,84,13,288/-. Ld.CIT(A) allowed the claim of assessee. Relevant order is placed at page 92-96 of paper book filed on 10/07/2019. 3. Revenue preferred appeal before this Tribunal against the order of Ld.CIT(A). This Tribunal while considering the claim of assessee s observed that 10% of the said income is only attributable to the business of assessee and the balance 90% amounts to agricultural income. This Tribunal thus restricted the disallowance to 10% of ₹ 3,84,13,288/- in its order dated 14/07/2006. Relevant order is placed at page 99 to 133 of paper book filed on 10/07/2019. 4. Revenue and assessee further carried the issue before Hon ble High Court. Revenue alleged treatment of ₹ 3,84,13,288/- by this Tribunal. The question raised before Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convenience we reproduce para 58 of the order passed by orderable Karnataka High Court in this regards: 58. Therefore the view of the 1st appellate authority that hundred percent of the operations up to conversion of the foundation seed as agricultural activities conducted by the assessee company and therefore income deserves to be exempted from tax under section 10(1) of the act is erroneous. Similarly exemption given by the tribunal for 90% of the income is also erroneous. We opine that the tribunal was justified in treating 10% of the income as business income which involved in processing foundation seeds to certified seeds. In that view of the matter, we hold that the entire income amounts to business income of the assessee and assessing officer was justified in treating the total income as business income. .. 2.3 Adverting to the present facts of the case for year under consideration, it is noted that the authorities below in the present facts of the case made categorical observation that assessee has not provided any details regarding about the revenue generated out of each streams of land. Admittedly, assessee still carries out the activities under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any fresh investments during the year under consideration. 3.5 On the contrary the Ld.CIT.DR placed reliance on observations of the authorities below. 3.6 We have perused submissions advanced by both sides in light of records placed before us. 3.7 We note that no suo moto disallowance was made by the assessee towards earning of exempt income. It is also submitted that assessee had not made any fresh investments during the year under consideration that has yielded any dividend income. We are therefore of the view that this disallowance under section 14A read with Rule 8D shall not exceed exempt income earned for the year. This principle is supported by the decision of Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT reported in (2015) 378 ITR 33, where it was clearly held that disallowance of expenditure u/s 14A shall not exceed exempt income earned for the year. Respectfully following the same we direct the Ld. AO to restrict the disallowance under section 14A read with rule 8D to the extent of dividend income earned by assessee during the year under consideration. Accordingly, this issue raised by assessee stands partly allowed. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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