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TMI Blog2017 (2) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-13 in Revenue's ITA No.373/RJT/2016. 2. Since the grounds raised by the Revenue in both the AYs are identical and facts being similar both the appeals and assessee's CO are disposed of by common order. ITA No.373/RJT/2016 3. The grounds of appeal raised by the Revenue relevant to AY 2012- 13 read as under:- 1. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 17.66,181/- made on account of disallowance u/s.14A of the I.T. Act as per Circular No.5 of 2014, dated 11.07.2014 wherein it is clearly stated that "legislative intent (for introduction of section 14A) is to allow only that expenditure which is relatable to earning of income and it therefore follows that the expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me earned during the year however stands at NIL. It was submitted by the assessee before the AO that its investment in 100% subsidiary company or any other company was not made for earning dividend income per se. The capital gains arising at the time of sale of shares is not tax-free because the investment has been made in a private limited company and not a listed company. The assessee has not received any tax exempted dividend income during the year. It was submitted that the investment in 100% subsidiary company is a strategic investment solely for carrying on business activities as a separate vehicle. The AO however, relied upon the CBDT Circular No.5 of 2014 dated 11/07/2014 on the issue and observed that the presence of actual receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/7/2014 by CBDT which highlights the word "includible" and "income under the act". It was also stated by AO that the investment in the subsidiary company was fresh investment made during the current year which has also seen raising of fresh interest bearing loan and thus indirectly the interest bearing loan are the source of the these investments. Accordingly be computed disallowance u/s.14A under rule 8D at Rs. 17,66,181/-. During the appellate proceedings same argument were reiterated i. 1) there is direct nexus of loan taken with other specific business purpose and as such no interest bearing loan was utilized for share investment as there was sufficient Reserve & Surplus [Reliance was placed on judgement of Hon'ble Gujarat High Court 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .36(va) of an amount of Rs. 76,500/- when AO noted that assessee has made belated payment employee's contribution towards provident fund for the month of March 2012. No explanation was submitted before the AO nor was any submission made before me. I do not find any fault in AO's action in making such disallowance. This ground is dismissed. 5.0 In the result, the appeal is allowed." 6. Aggrieved thereto, the Revenue is in appeal before the Tribunal. 7. In appeal before Tribunal by the Revenue against the impugned order of CIT(A), the Ld.DR for the Revenue Mr.Pravin Verma relied upon the order of the AO and in furtherance submitted that CBDT Circular No.5 of 2014 dated 11/07/2014 squarely covers the issue against the assessee. Thus, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4A and Rule 8D have no application and consequently no disallowance can be made. Although the judgement of the Hon'ble Gujarat High Court in the case of Corretech Energy Pvt.Ltd.(supra) and many of the other High Courts have been rendered prior to introduction of Rule 8D, we observe that Rule 8D is only a machinery/mechanism to compute the disallowance. It is trite that the Rules are sub servient to the main enactment. Rules can never override the main provisions of the Act. If the facts of the case warrants no disallowance, the computational provision does not come into picture at all. Further, the Circulars of the CBDT prejudicial to Assessee do not exert binding force on the assessee. Accordingly, where no exempt income is received or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue, i.e. the Bombay High Court's decision in the case of Godrej & Boyce Mfg. Co.Ltd., 328 ITR 81 and High Court decisions following the Bombay High Court decision on rule 8D w.e.f. A.Y. 2008-09. 3. On the facts and circumstances of the case and in law, the ld.CIT(A) has erred in deleting the disallowance u/s.14A read with Rule 8D while relying upon the decisions in the cases of Suzlon Energy Ltd. 354 ITR 630 (Gujarat) and Corrtech Energy Pvt.Ltd. 363 ITR 474 (Gujarat) simply because these cases are not applicable here as they pertain to assessment years prior to A.Y. 2008-09 [AY 2005-06 and AY 2006-07 respectively] when Rule 8D 2as not applicable at all. 12. The facts and the issue involved in this appeal are identical to Revenue's IT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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