TMI Blog2015 (6) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the extent of 70% of disallowance. Ld. CIT(A) has passed a well reasoned and speaking order and, therefore, we are in agreement with his findings - Decided against revenue. - I.T.A. No.2364 /Del/2012 - - - Dated:- 25-3-2015 - Shri G. C. Gupta And Shri T.S. Kapoor JJ. For the Appellant : Shri P Dam Kanunjha, Sr. DR For the Respondent : Shri Sachin Vasudeva, FCA ORDER Per T.S. Kapoor, AM: This is an appeal field by Revenue against the order of Ld. CIT(A) dated 28.02.2012. The Revenue has raised 2 grounds of appeal, one of which relates to the action of Ld. CIT(A) by which he had deleted the addition of ₹ 12,56,610/- made by A.O. on account of disallowance u/s 14A. The other grievance of Revenue is the action of Ld. CIT(A) by which he had deleted an addition of ₹ 52,193/- out of total addition of ₹ 1,73,796/- made by A.O. u/s 36(1)(iii) of I. T. Act, 1961. 2. At the outset, Ld. D.R. submitted that the assessee had made investment in shares and the income from which is exempt and, therefore, as per the provisions of Section 14A, disallowance was mandatory and in view of the application of Rule 8D, the A.O. had rightly mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ero Cycles Limited, [2010] 323 ITR 518 and CIT Vs. Winsome Textile Industries Limited, [2009] 319 ITR 204 to hold that Section 14A cannot be invoked when no exempt income was earned. The second decision is of the Gujarat High Court in Commissioner of Income Tax-I Vs. Corrtech Energy (P.) Ltd. [2014] 223 Taxmann 130 (Guj.). The third decision is of the Allahabad High Court in Income Tax Appeal No. 88 of 2014, Commissioner of Income Tax (Ii) Kanpur, Vs. M/s. Shivam Motors (P) Ltd. decided on 05.05.20 14. In the said decision it has been held: 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 part of the total income under the Act. Hence, what Section 14A provides is that if there is any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction. For the year in question, the finding of fact is that the assessee had not earned any tax free income. Hence, in the absence of any tax free inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance was not sustainable and, therefore, we dismiss ground No.1. 6. Now, coming to ground No.2, we find that Ld. CIT(A) has allowed part relief of ₹ 52,193/- out of disallowance of ₹ 1,73,796/- by holding as under: 6. I have considered the submissions of ld. counsel for the appellant and gone through the documents filed on record as well as the judicial rulings relied upon by the Ld. Counsel and the A.O. In ground No.1 of appeal, the appellant has challenged the disallowance of interest of ₹ 1,73,796/ - made by the AO by invoking the proviso to section 36(l)(iii) of the Act in respect of interest paid on term loan and the funds utilized out of CC account for acquisition of assets. As per the proviso to section 36(1)(iii), any amount of the interest paid in respect of capital borrowed for acquisition of an asset for extension of existing business, whether capitalized in the books of account or not, for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction. Therefore, the disallowance of interest pertaining to term loan is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd.'s case (134 ITR 219) where a similar issue had arisen. Before the Supreme Court it was argued that it should have been presumed that in essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft account for the running of the business and in these circumstances the appellant was entitled to claim the deductions. The Supreme Court noted that the argument had considerable force, but considering the fact that the contention had not been advanced earlier it did not require to be answered. It then noted that in Woolcombers of India Ltd.'s case (supra) the Calcutta High Court had come to the conclusion that the profits were sufficient to meet the advance tax liability and the profits were deposited in the overdraft account of the assessee and in such a case it should be presumed that the taxes were paid out of the profits of the year and not out of the overdraft account for the running of the business. It noted that to raise the presumption, there was sufficient material and the assessee had urged the contention before the High Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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