TMI Blog2016 (12) TMI 1399X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 - - - Dated:- 23-12-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri C. Subrahmanyam, AR For The Respondent : Shri R.S. Aravindakshan, DR ORDER PER G. MANJUNATHA, Accountant Member: These cross appeals filed by the assessee as well as revenue are directed against order of the CIT(A), Vijayawada dated 31.10.2014 and it pertains to the assessment year 2011-12. Since, the facts are identical and issues are common, they are clubbed, heard together and disposed-off by way of this common order for the sake of convenience. ITA No.20/Vizag/2015: 2. The brief facts of the case are that assessee is an individual carrying business in manufacture of vest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. disallowed interest paid on loan u/s 14A of the Act for the reason that the assessee has made investments in shares of sister companies without earning any dividend income. The A.O. was of the opinion that any expenditure incurred in relation to exempt income is not allowable deduction. The A.O. further was of the opinion that even if no dividend income is received, any expenditure incurred in relation to such exempt income is not allowable as deduction. It is the contention of the assessee that the provisions of section 14A of the Act are applicable only when there is an exempt income, which is includible in total income of the assessee. In case there is no exempt income received or there is no exempt income includible in total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as erred in disallowing interest paid on loans, borrowed for the purpose of investment in shares of sister companies by invoking the provisions of section 14A of the Act. 5. Coming to the case laws relied upon by the assessing officer. The A.O. relied upon the decision of Hon ble High Court of Kerala in the case of Smt. Leela Ramachandran (2010) 36 (I) ITCL 223 and also Hon ble High Court of Delhi, in the case of Maxopp Investment Ltd. Others Vs. CIT Others (2011) 347 ITR 272 and observed that since section 14A of the Act bars any deduction pertaining to any expenditure incurred by the assessee for earning any income, which does not form part of the total income, any expenditure incurred in relation to earning exempt income cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring right to manage Possibility of sale of shares by private placement etc. cannot be ruled out and was r improbability. Dividend may or may not be declared. Dividend is declared by the corn par strictly in legal sense, a shareholder has no control and cannot insist on payment of dividend. declared, it was subjected to dividend distribution tax. (Para 16) On facts, it was noticed in CIT v. Holcim India (P) Ltd . that the Revenue had accept genuineness of the expenditure incurred by the Assessee in that case and that expenditure ha( incurred to protect investment made. (Para 17) In the present case, the factual position that had not been disputed was that the investment Assessee in the shares of Max India Ltd. was in the form of a st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld in fact have been earned as a c precedent for claiming the expenditure. Natural construction of the language of s. 57(iii) irresistibly leads to the conclusion that to bring a case within the section, it is not necessary that any should in fact have been earned as a result of the expenditure. (Para 20) There was merit in the contention of Mr. Vohra that the decision of the Supreme Court in Rajendra Prasad Moody was rendered in the context of allowability of deduction u/s 57(iii), wh expression used was 'for the purpose of making or earning such income Section 14A on the hand contains the expression 'in relation to income which does not form part of the total income . The decision in Rajendra Prasad Moody cannot be use ..... X X X X Extracts X X X X X X X X Extracts X X X X
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