TMI Blog2015 (8) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Commissioner of Income Tax (Appeals)-II, Chennai dated 17.01.2014 for the assessment year 2010-11. The only issue in the appeal of the assessee is that Commissioner of Income Tax (Appeals) erred in sustaining the addition made under section 14A read with rule 8D of the Income Tax Rules. 2. At the outset, counsel for the assessee submits that in this case assessee has not received any dividend income which was claimed as deduction in the assessment year 2010-11. Counsel submits that in such circumstances when no dividend income was earned by the assessee and made any claim, the co-ordinate Bench of this Tribunal held that provisions of section 14A have no application in the case of ACIT Vs. M.Baskaran in ITA No.1717/Mds/2013 dated 31.07.2014, a copy of the said order is placed on record. Counsel further submits that out of the total investments of ₹ 6,08,78,812/-, ₹ 4,94,78,812/- represents share application money with Jones Foundation Pvt. Ltd. which is not an investment or asset yielding tax free income but is only a debt due to the assessee till the date of allotment of shares, therefore the same would have to be excluded in working out the disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 could not be worked out for disallowance. The view of the CIT(A), which has been affirmed by the Tribunal, hence does not give rise to any substantial question of law. Hence, the deletion of the disallowance of ₹ 2,03,752/- made by the Assessing Officer was in order. 8. The Gujarat High Court in the case of CIT Vs. Corrtech Energy Pvt. Ltd.(supra) held as under:- We have given our thoughtfu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting 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 following questions:- Whether on the facts and in the circumstance of the case and in law the Hon 'ble Tribunal was right in deleting the disallowance made by the Assessing Officer of interest paid by the Assessee Company on borrowed funds amounting to ₹ 241.10 lakhs overlooking the fact that the borrowed funds were used by the Assessee Company to invest in the Capital of another Partnership Firm and since profits derived by the Assessee Company from a Partnership firm were exempt from tax u/s.10(2A) of the Income-tax Act, the interest expense related to such tax free profits is to be disallowed u/s.14A of the Income Tax Act? (B) Whether on the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elation 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 interestpayments on capital account, security deposits and unsecured loans. This conclusion of ours finds support in the decision of Bombay Bench of the Tribunal in the case of Joint Commissioner of Income Tax v. Holland Equipment Co. B.V. reported in (2005) 3 SOT 810 (Mumbai) and the relevant portion of the order of the Bombay Bench of the Tribunal is reproduced below:- 'Regarding application of Section 14A of the Act, the contention of the learned Department Representative has to be rejected on the face of it inasmuch as the entire income of the assessee is taxable under the Act. Section 14A is applicable only when ..... X X X X Extracts X X X X X X X X Extracts X X X X
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