TMI Blog2016 (5) TMI 863X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income-tax (Appeals-8) dated 29.02.2016 pertaining to assessment year 2012-13. 2. The assessee has raised the following grounds. 1. The order of the Ld.CIT(A) is contrary to the law, facts and circumstances of the case. 2. The Learned Commissioner of Income Tax (Appeals) erred in confirming disallowance of ₹ 2,61,96,790/- u/s.14A of Income Tax Act, 1961 read with rule 8D(2)(iii) of Income Tax Rules, 1962 when the appellant had not earned any exempt income during the year. 3. The Learned Commissioner of Income Tax (Appeals) erred in confirming disallowance u/s. 14A of Income Tax Act, 1961 read with rule 8D(2)(iii) of Income Tax Rules, 1962 without considering the precedents set by the Jurisdictional High Court Tribunal in the following cases a. CIT Vs. Tube Investments of India Ltd in TCA No.524 of 2007 (Mad HC) b. EID Parry India Vs. ACIT in TCA No.2287 of 2006 (Mad HC) c. Simpson Co Ltd Vs. DCIT in TCA No.2621 of 2006 (Mad HC) d. ACIT Vs. The Nungambakkam Saswatha Ohana Rakshaka Nidhi Ltd in ITA No.1138/Mds/2013 (Chennai ITAT) 4. The Learned Commissioner of Income Tax (Appeals) erred in confirming disallowance u/s.14A of Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the income, has to be disallowed. In the present case, 0.5% of average value of entire investment is disallowed. 2) Ruling of Delhi High Court in the case of Cheminvest Ltd Vs. CIT was not considered in the ITAT Order. Where no exempt income is earned during the year, no disallowance can be made u/s.14A. 3) ITAT has not considered various decisions where it is was held that disallowance cannot be made for investment in subsidiary companies. 4) ITAT has not considered decisions where it was held investment in companies which have not yielded any dividend during the year should not be considered for the purpose of calculation of disallowance u/r. 8D(2)(iii) 5) ITAT has not considered whether CIT(A) has applied in mind in answering various /contentions raised by the appellant during the appellate proceedings before CIT(A) Accordingly the ld.A.R pleaded that the Tribunal has to re-consider the issue in dispute as the order relied by Tribunal in earlier years have no application to the assessee s case. 5. On the other hand, the ld.D.R submitted that the issue is squarely covered by the earlier order of the Tribunal in assessee's own case cited supra. 6. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in ITA No.2083/Mds/2011 dated 2.3.2012, wherein it was held as under: 6. We considered the arguments of both the sides in detail. Sec.14A(1) declares the law that the expenditure incurred by the assessee in relation to the income which does not form part of the total income under the Act shall not be allowed as a deduction in computing the taxable income of the assessee. Sec.14A(2) provides for determining the quantum of such expenditure which shall not be allowed as a deduction. That is the machinery provision as far as sec.14A is concerned. In that provision, it has been provided that if the Assessing Officer is not satisfied with the correctness of the computations made by an assessee, he shall compute the quantum in accordance with the method that may be prescribed. For this matter, Rule 8D has already been prescribed. Sub-sec.(3) further provides that even in a case where an assessee claims that no expenditure was incurred, the assessing authority has to presume the incurring of such expenditure as provided under sub-sec.(2) read with Rule prescribed. Therefore, it becomes clear that even in a case where the assessee claims that no expenditure was so incurred, the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing authority and the Tribunal are erroneous and contrary to the aforementioned decisions. Therefore, she submits that substantial questions (i) and (ii) framed in the appeal memorandum arise for consideration of this court and requested to set aside the order passed by the Tribunal. The substantial questions of law framed in the appeal are extracted as hereunder. (i) Whether or not the Tribunal was right in not allowing the interest incurred by the assessee as expenditure in computing income of the assessee? (ii) Whether or not the Tribunal was right in reversing the findings of the Commissioner of Income-tax (Appeals), which was based on a Supreme Court's decision by relying on the decision of other Tribunals? (iii) Whether or not the Tribunal was justified in not affording an opportunity of hearing to the assessee before deciding the issue on hand by placing reliance on judgments, which were not cited by either side? (iv) Whether or not the Tribunal was right in relying on the decisions inapplicable to the facts on hand by distinguishing the decision of the Hon'ble Supreme Court, which is squarely applicable? With reference to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 14A of the Act and which has no application to the fact situation. The Tribunal has rightly set aside the order of the first appellate authority. It cannot be disputed that dividend income is exempted under section 10(33) of the Act from the tax liability and the same cannot be computed for income under the head Other sources . Exempted income is not allowable for deduction in view of section 14A of the Act. In view of these two provisions, the claim of the assessee is wholly untenable and the decisions relied upon by the learned counsel on behalf of the appellant are not applicable to the fact situation. We are in agreement with the orders passed by the assessing authority and the Tribunal and differ from the view taken by the first appellate authority. For the reasons stated supra, interference with the impugned order of the Tribunal is not warranted in this case. No substantial questions of law much less the questions of law framed by the appellant will arise for consideration of this court. The appeal is devoid of merit and liable to be dismissed. Accordingly, the appeal is dismissed. 7. Similarly, in the case of CIT v. Smt. Leena Ramachandran 7339 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of investment and the only benefit the assessee derived was the dividend income which was not assessable under the Act, the disallowance under section 14A was squarely attracted and the Assessing Officer rightly disallowed the claim. 6.6 It is pertinent to note that the judgment relied on by the ld. AR in the case of Simpson Co. Ltd. cited supra is relating to the asst. year 2007-08 before the introduction of Rule 8D of the I.T. Rules, which is introduced w.e.f. 24.3.2008. Hence, it cannot be applied to the facts and circumstances of the present case. Accordingly, this ground of appeal is dismissed. 7. However, the A.R strongly agitated that the above cited order is not required to be followed by this Bench for this assessment year. In our opinion, the argument of assessee is having no merit and as it is admitted fact that the assessee has diverted interest bearing funds to the subsidiaries and the Bench asked a specific question with the ld.A.R to show whether there is any case wherein decided the similar issue in favour of assessee, when the assessee has diverted interest bearing funds to the subsidiaries while invoking the provisions of the section 14A of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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