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2016 (5) TMI 576 - ITAT MUMBAI

2016 (5) TMI 576 - ITAT MUMBAI - TMI - Disallowance made u/s. 14A r. w. Rule 8D - Held that:- There is no doubt that the assessee had not earned exempt income during the year under consideration, so, in our considered opinion, no disallowance can be made u/s. 14A of the Act. - Decided in favour of assessee. - I. T. A. /3378/Mum/2013, I. T. A. / 4170 /Mum/2013 - Dated:- 11-5-2016 - Sh. Joginder Singh, Judicial Member And Rajendra, Accountant Member For the Petitioner : Shri Love Kumar-DR For the .....

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-. 2. The effective Ground of appeal is about disallowance made u/s. 14A r. w. Rule 8D of the Income tax Rules, 1962, (Rules). During the assessment proceedings the AO found that the assessee had made an investment of ₹ 52 crores in equity shares of Western MP Infrastructures, that it had paid interest of ₹ 2. 22crores, that it had not made any disallowance u/s. 14A of the Act. He directed the assessee to explain as to why disallowance should not be made invoking the provisions of th .....

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assessee preferred an appeal before the First Appellate Authority (FAA). Before him, it was argued that the assessee had made strategic investment in unquoted equity shares out of the non interest bearing funds, that nexus was proved with bank statement submitted during the course of assessment proceedings, that the income from such investment was taxable under the head capital gains, that it had not earned/received any exempt income during the year under appeal, that it had not incurred any exp .....

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not the exempt income was received, that the investment was made out of its own funds and the same were not interest bearing funds , that the possibility of utilisation of borrowed funds for the purpose of making investment could not be ruled out. He directed the AO to work out the disallowance as per the formula provided in sub clause(ii) of Rule 8D(2). Further he directed the AO to adopt the average value of assets to ₹ 153. 54 crores. He further directed the AO to restrict the disallowa .....

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he assessee had not earned exempt income during the year under consideration, so, in our considered opinion, no disallowance can be made u/s. 14A of the Act. We find that in the case of M/s Gateway Distriparks Ltd. (supra), identical issue was adjudicated by us, as under: 3. The next ground pertains to deleting the disallowance made u/s 14A of the Act ignoring the ratio of the Tribunal in Cheminvest Ltd. (121 ITD 318)(Del. ). The crux of argument on behalf of the assessee is that no income was e .....

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e coming to this conclusion, the Hon ble High Court relied upon following decisions:- i. Cheminvest Ltd. v. CIT [2009] 317 ITR (AT) 86 (Delhi) [SB] (para 15) ii. CIT v. Chugandas and Co. [1964] 55 ITR 17 (SC) (para 14) iii. CIT v. Cocanada Radhaswami Bank Ltd. [1965] 57 ITR 306 (SC) (para 14) iv. CIT v. Corrtech Energy (P. ) Ltd. [2015] 372 ITR 97 (Guj) (para 15) v. CIT v. Holcim India (P. ) Ltd. (I. T. A. No. 486 of 2014 decided on 5- 9-2014) (para 15) vi. CIT v. Hero Cycles Ltd. [2010] 323 ITR .....

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