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2016 (6) TMI 1077 - ITAT MUMBAI

2016 (6) TMI 1077 - ITAT MUMBAI - TMI - Disallowance u/s 14A - Held that:- Respectfully following the decision of Tribunal in assessee company’s own case in immediately preceding assessment year 2009-10 whereby the issues were decided in favour of the assessee company as set out above , we also hold that no disallowance u/s 14A of the Act is called for , once there is no exempt income received or receivable by the assessee company during the relevant previous year. - Decided in favour of assesse .....

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2010-11, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 18-01-2013 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income Tax Act,1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by the assessee company in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) read as under:- 1. The learned Commissioner of Income Tax (Appeals) erred in confirm .....

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tion contractors. During the course of assessment proceedings u/s. 143(2) read with Section 143(3) of the Act, it was observed by the A.O. from the audited financial statements and details filed that the assessee company has made investments to the tune of ₹ 55,12,50,000/- and had incurred an amount of ₹ 2.49 crores by way of interest on loans. It was observed by the AO that as per clause 17(B)(1) to Form 3CD of the Tax Audit report, the auditors have reported ₹ 80,10,897/- as .....

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bsidiary of the company and no income has been earned during the previous year relevant to the assessment year from such investments, even it is not profitable in future also was the contention of the assessee company. The A.O. considered the submissions of the assessee company but rejected the same on the ground that a company cannot earn dividend without its existence and management and the investment decisions are very complex in nature. He held that the investment decisions require substanti .....

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isions are generally taken in the Board of Directors meeting. Thus, the A.O. worked out the disallowance u/s 14A of the Act read with Rule 8D of Income Tax Rules, 1962 in the light of the decision of Hon ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. v. DCIT & Anr., (2010) 234 CTR (Bom) 1. The A.O. also relied on the decision of Special Bench of ITAT in the case of Cheminvest Ltd. v. ITO , 317 ITR 86 (AT) and worked out the disallowance as under , vide assessment order .....

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interest expenses[A*B/C] 5,379,647 3 ½ % of the average value of investment 2,631,250 Disallowance under section 14A(1+2+3) 8,010,897 4. Aggrieved by the assessment orders dated 18-01-2013 passed by the A.O. u/s 143(3) of the Act, the assessee company has filed its first appeal before the learned CIT(A). 5. The learned CIT(A) After considering the submissions and the other contentions of the assessee company decided the issue by following his predecessor s decision for the immediately pr .....

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t in that case the Chennai Tribunal has held that the provisions of section 14A would not be applicable where there is no income which does not form part of the total income under the Act. In this regard, the Tribunal relied upon the decision of the Supreme Court in the case of Walfort Shares & Stock Brokers Pvt. Ltd. and that of the Bombay High Court in the case of Godrej and Boyces Mfg. Co. Pvt. Ltd. and also in the case of Winsome Textiles Industries Ltd. However, I find that a similar is .....

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tive then that expenditure cannot be allowed irrespective of the fact that it was allowable under different provisions of the Act where a different phraseology is used in allowing that expenditure as the focus as to on disallowance within parameters of section 14A and overriding provisions over allowance provisions. It would result in disallowance even if no income has resulted or made or earned by the assessee in the year under consideration. Thus, I find that the issue has been directly consid .....

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re, dismissed. 1.32. Following the above decision of my Ld. Predecessor, the ground of appeal is therefore dismissed. 2. In the result, the appeal is dismissed 6. Aggrieved by the appellate orders dated 31/07/2013 of the learned CIT(A), the assessee company is in appeal before the Tribunal. 7. The ld. Counsel for the assessee company submitted that the assessee company had invested ₹ 55,12,50,000/- in its subsidiary company M/s Marino Shelters Pvt. Ltd. which is also in the field of constr .....

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company s own case in ITA No. 6191/Num/2012 for the assessment year 2009-10 vide orders dated 20th January, 2016 in favour of the assessee company, whereby the Tribunal has allowed the appeal of the assessee company for the assessment year 2009-10 following the decision of Hon ble Delhi High Court in the case of Cheminvest Limited v. CIT (2015) 378 ITR 33 (Delhi HC) . It is also submitted that the issue is also covered by the decision of Hon ble Delhi High Court in the case of Cheminvest Limite .....

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77; 55,12,50,000/- in its 100% subsidiary company M/s Marino Shelters Pvt. Ltd. which is also in the field of business of construction and real investment development business. The assessee company has not earned any exempt income or any dividend income during the previous year relevant to the assessment year on these investments made by the assessee company. We find that the Hon ble Delhi High Court in the case of Cheminvest Limited (supra) has overruled the decision of ITAT Special Bench in th .....

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-2016 by following the decision of Hon ble Delhi High Court in the case of Cheminvest Limited (supra) and hence the issues in the instant appeal are squarely covered by the decisions of the Tribunal in assessee s company own case in immediately preceding assessment year i.e. 2009-10 in ITA no 6191/Mum/2015 vide orders dated 20-01-2016. The relevant findings of the Tribunal in ITA No 6191/Mum/2015 vide orders dated 20-01-2016 in assessee company s own case for the assessment year 2009-10 i.e. imm .....

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Delhi High Court, wherein it has been held that if no exempt income has been received or is receivable in the relevant previous year, then no disallowance could be made u/s 14A . the relevant observation and the finding by the Hon ble High Court after considering the decision of the Hon ble Supreme Court in the case of CIT v. Rajendra Prasad Moody ., reported in (1978) 115 ITR 519 is as under:- The plain and natural construction of the language of Sec. 57(iii) of the Income Tax Act 1961 irresist .....

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