TMI Blog2017 (3) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... VI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Revenue : Smt. Suman Malik For The Assessee : Shri K.A. Sai Prasad ORDER PER S. RIFAUR RAHMAN, A.M.: This appeal filed by the Revenue is directed against the order of CIT(A) - 6, Hyderabad, dated 22/07/2016 for AY 2012-13 wherein the revenue has raised the following grounds of appeal: 1. The learned CIT(A) erred both on facts and in law. 2. The learned CIT(A) erred in deleting the disallowance made under Section 14A of I.T. Act holding that the assessee has not earned any exempt income during the relevant Assessment Year. 3. A similar issue for the A.Y. 2011-12 is pending before the Hon'ble ITAT and the same has not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share application money of M/s. Autofin Ltd and though no dividends were stated to have been declared by the company, the share application, when converted to share capital would earn dividends, which was exempt from taxation. That being the case, any expenditure incurred by way of interest in share capital/share application money would attract the mischief of Section 14A. The Assessing Officer held that the claim of the assessee that investment was not made to earn dividend had no merit and as the investment was made towards share application money, the income from which did not form part of total income, the claim of deduction of interest expenditure was not allowable u/s. 14A of the Act. He, accordingly, disallowed the entire interest ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held as under: 6. Having regard to the rival contentions and the material on record, we find that section 14A clearly stipulates that the expenditure incurred for earning of any income which does not form part of the total income alone can be disallowed. In the case before us, when the assessee has not earned any exempt income, there can be no disallowance under section 14A of the Act. The Hon ble Delhi High Court in the case of Cheminvest Ltd., reported in (2015) 378 ITR 33 (Del.) has held that section 14A will not apply where no exempt income is received or receivable during the relevant assessment year. In view of the same, assessee s appeal on this ground is allowed. 6.1 In the case of Madhucon Infra Ltd. (ITA No. 410/Hyd/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttempted to justify the disallowance made u/s 14A, however, on careful analysis of the decisions cited by assessee including the decision of the Hon ble P H High Court in case of CIT Vs. M/s Lakhani Marketing Inc. in ITA No. 970 of 2008 dated 02/04/2014, we find that the principle laid down by different High Courts are to the effect that unless assessee has earned exempt income in a particular FY, provisions of section 14A will not apply. In view of the aforesaid, we do not find any merit in the ground raised by the department. Accordingly, we dismiss the same by upholding the order of ld. CIT(A) on this issue. 10.3 In the case of CIT Vs. Corrtech Energy (P) Ltd., (supra), the Hon ble Gujarat High Court has held as under: 4. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing nexus with the business. The observations made therein have to be read in that context. In the present case, admittedly the assessee did not make any claim for exemption. In such a situation section 14A could have no application. 10.3 Respectfully following the above decisions, we set aside the order of the CIT(A) and allow the Ground Nos. 3 4 raised by the assessee. 6.2 In the case under consideration, we find that the investments were made purely on account of commercial necessity and as no exempt income was earned from the investment so made, the provisions of Section 14A will not applicable to the case of assessee. Therefore, following the said decisions of the coordinate bench, we find no infirmity in the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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