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TMI Blog2015 (6) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) gravelly erred in upholding the disallowance made by the Ld. Assessing Officer amounting to Rs. 4,09,675/- by invoking the provisions of Section 14 A of the Income Tax Act, 1961. b) Without prejudice to the Ground No. 2 (a), the disallowance sustained by the Hon'ble Commissioner of Income Tax (Appeals), is highly excessive. 3. a) That in the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) gravelly erred in sustaining the addition of Rs. 2,22,110/- made by the Ld. Assessing Officer by capitalizing the interest on fixed assets. b) Without prejudice to the Ground No. 3(a), the addition sustained by the Hon'ble Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or business purposes comes to Rs. 33.75 lacs. The AO observed that the assessee company has invested Rs. 33.75 lacs in agricultural land and the income earned from this agricultural land is exempt u/s 10(1) of the I.T. Act. He further observed that assessee company has shown agricultural income of Rs. 32,000/- for the year under consideration, which has been claimed as exempt u/s 10(1) of the Act. Since, the agricultural income and dividend income is exempt from income tax under section 10 of the Act, the AO asked the assessee to explain as to why addition should not be made on this account as per last year's impugned order. When confronted, assessee furnished reply on 19.12.2011 stating interalia that there is no agricultural income during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empt income as per Rule 8 D. In my considered opinion the stand of the Revenue is contrary to the decision rendered by the Hon'ble Jurisdictional High Court on this issue in the case of CIT Vs. Deepak Mittal 2013, (38 Taxman 83) (Hon'ble High Court of Punjab & Haryana) wherein the Hon'ble Court held that the disallowance under section 14 A requires finding of incurring of expenditure where it is found that for earning exempted income no expenditure has been incurred, disallowance under section 14 A can not stand. When the assessee claims that he had not made any expenditure on earning exempt income, the AO in terms of sub section (2) of section 14 A is required to collect such material evidence to determine expenditure, if any, incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e alternative submission of Ld. Counsel for the assessee that in view of the judgment of Hon'ble Delhi High Court in the case of Joint Investment Pvt Ltd. Vs. CIT (ITA 117/2015 dt. 25/02/2015) (DHC), disallowance under section 14 A read with Rule 8 D can not exceed the exempt income. The Hon'ble Delhi High Court in the case of Joint Investment Pvt. Ltd. Vs. CIT(supra) made the following important observations: " 7. During the course of hearing, counsel for the petitioner had relied upon a decision of this Court in Commissioner of Income Tax VI v. Taikisha Engineering India Ltd., (ITA 115/2014, decided on 25.11.2014). The court had, in that judgment, highlighted the necessity in view of the peculiar wording of Section 14 A (2) that computat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The third, and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs. 48,90,000/-, the disallowance ultimately directed works out to nearly 110% of that sum,i.e., Rs. 52,56,197/-. By no stretch of imagination can Section 14A or Rule 8 D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14 A, and is only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income". This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case. 10. For the above reasons, the impugned order of the ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X
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