TMI Blog2015 (3) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... For The Respondent : Mr. M.Karunagaran, Advocate ORDER Per Challa Nagendra Prasad, JM: This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-VI, Chennai dated 22.02.013 for the assessment year 2009-10. The only grievance of the Revenue in this appeal is that the Commissioner of Income Tax (Appeals) erred in deleting disallowance made under section 14A read with Rule 8D holding that assessee has not received any exempt income and hence disallowance is unwarranted. 2. The Assessing Officer while completing the assessment disallowed ` 19,28,666/- under section 14A read with Rule 8D of the Act as expenditure incurred for earning exempt income as the assessee was holding investments worth `14.05 crores and incurred interest expenses of ` 34.80 lakhs. On appeal the Commissioner of Income Tax (Appeals) deleted the disallowance holding that assessee has not derived income out of investments and investments are made from his own source which did not suffer any interest. The Commissioner of Income Tax (Appeals) also observed that Assessing Officer should have excluded share application money from the working of the qualifying amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cheminvest Ltd. Vs. ITO (supra), the Special Bench held that disallowance under section 14A can be made even in the year in which no exempt income has been earned or received by the assessee. This decision of Special Bench of the Tribunal has been impliedly overruled by the decisions of High Courts in the following cases: 6. In the case of M/s. Shivam Motors P.Ltd. (supra), before the Hon ble Allahabad High Court, the Revenue raised the following question of law:- Whether on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal was justified in upholding the decision of CIT(A) in deleting the disallowance of ` 2,03,752/- u/s.14A ignoring the fact that there is difference of opinion of various courts on the view taken by the ITAT that in the absence of tax free income, no disallowance u/s.14A is permissible. 7. The High Court while answering the said question held as under:- As regards the second question, Section 14A of the Act provides that for the purposes of computing the total income under the Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s basis that the tribunal held that disallowance under section 14A of the Act could not be made. In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of Commissioner of Income Tax v Winsome Textile Industries Ltd reported in (2009) 319 ITR 204 (Punj Har) in which also the Court had observed as under: 7. We do not find any merit in this submission. The judgement of this court in Abhishek Industries Ltd (2006) 286 ITR 1 was on the issue of allowability of interest paid on loans given to sister concerns, without interest. It was held that deduction for interest was permissible when loan was taken for business purpose and not for diverting the same to sister concern without having nexus with the business. The observations made therein have to be read in that context. In the present case, admittedly the assesse did not make any claim for exemption. In such a situation section 14A could have no application. 5. We do not find any question of law arising, Tax appeal is therefore dismissed. 9. The Hon ble Bombay High Court in the case of CIT Vs.Delite Enterprises(supra) held as under:- The Revenue is in appeal on the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 10. Vide order dated 16.5.2008, Annexure A.III, the Tribunal on appeal by the revenue while upholding the finding recorded by the CIT(A) noticed as under:- We have heard rival submissions and have perused the material on record. From the reading of section 14A of the Act, it is clear that before making any disallowance the following conditions are to exist:- a) That there must be income taxable under the Act, and b) That this income must not form part of the total income under the Act, and c) That there must be an expenditure incurred by the assessee, and d) That the expenditure must have a relation to the income which does not form part of the total income under the Act. 9. Therefore, unless and until, there is receipt of exempted income for the concerned assessment years (dividend from shares), we are of the view, Section 14A of the Act cannot be invoked. In this appeal, the revenue has not dispelled the findings of the CIT(A), nor the statement of the assessee before AO that assessee is not in receipt of any dividend income and hence according to us, the Assessing Officer has erred in invoking Section 14A of the Act, to disallow various interest payment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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