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TMI Blog2015 (6) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... income of Rs. 4,17,60,770/- and the assessment was completed u/s.143(3) of the Act, on 21.12.2010, assessing the total income at Rs. 4,70,77,660/-. In the said assessment, disallowance of Rs. 16,896/- was made in relation to claim of depreciation on computers, for a reason that a part of such claim were on computer peripherals. 03. Thereafter on 28.03.2013, Notice u/s.263 of the Act was issued by the CIT citing two reasons. First was that interest expenditure of Rs. 73,12,500/- claimed on a loan of Rs. 6.5 crores raised from State Bank of India was not allowable since the loan was intended for starting a new amusement park at Mumbai and assessee had dropped the plan. The second reason cited by the CIT was that assessee had made an investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the administrative and other expenditure relating to tax free investments. As per the CIT, the AO had failed to take into consideration these issues and therefore, he considered the assessment order to be erroneous insofar as it was prejudicial to the interests of Revenue. 06. Now before us, Ld. AR submitted that in so far as the issue, viz., interest on loan from SBI was concerned, he was not pressing the relevant grounds. However, in so far as the disallowance contemplated u/s.14A of the Act, Ld.AR submitted that there was no error in the order of the AO since there was no scope for any such disallowance, assessee having not received any exempt dividend income from the investments during the relevant previous year. 07. Per contra, Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he High Court while answering the above 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 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 income, the corresponding expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 13. The Hon'ble Bombay High Court in the case of CIT Vs.Delite Enterprises(Tax Appeal 110 of 2009 dated 26-2-2009) held as under:- "The Revenue is in appeal on the following questions ; "A-Whether on the facts and in the circumstance of the case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in view the above facts and circumstances of the case it is held that the AO was not correct in applying section 14A of the IT Act in disallowing the expenditure on account of interest amounting to Rs. 46,91,684/-. It was incumbent on the AO to establish a nexus between the expenditure incurred and the income which was exempt under the Act. Facts clearly do not support the action of the AO. Disallowance is accordingly deleted. The AO is directed to recompute the income accordingly." 15. We are, therefore, of the opinion that in so far as the issue relating to disallowance u/s.14A is concerned, there was no error in the assessment order, which could be considered as prejudicial to the interests of Revenue. Therefore, while sustaining the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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