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D Veerabhadra Reddy (HUF) Versus Dy. Commissioner of Income-Tax Circle I, Kakinada

2017 (8) TMI 478 - ITAT VISAKHAPATNAM

Disallowance u/s 14A - revision u/s 263 - Held that:- When the assessee has no exempt income, the question of disallowance u/s14A r.w.Rule 8D is not called for. The same view is expressed by the decision of Hon’ble Madras High Court in Redington (India) Ltd. Vs. Addl.CIT, [2017 (1) TMI 318 - MADRAS HIGH COURT], Hon’ble Delhi High Court in Chem Investments Vs. CIT, [2015 (9) TMI 238 - DELHI HIGH COURT] and Principal CIT Vs. Sintex Industries Ltd.,[2017 (5) TMI 1160 - GUJARAT HIGH COURT] held that .....

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ronouncements no disallowance is called for when there is no exempt income. Therefore, we are of the considered opinion that there is no case for revision of order u/s 263 and accordingly we set aside the orders of the CIT and allow the appeal of the assessee. - I.T.A.No.263/Vizag/2014 - Dated:- 23-6-2017 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N.Hari, AR For The Respondent : Shri M Bhupal Reddy, DR ORDER PER D.S. SUNDER SIN .....

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. For ready reference, we extract para 3 and 4 of notice issued u/s 263. 3. It is seen from the computation of total income and copies of profit & loss account annexed to the original return of income filed on 29.09.2009 that the assessee has received an amount of ₹ 40,41,399/- towards rent from godowns and arrived at income from house property at ₹ 27,51,775/- after claiming deduction of ₹ 11,79,332/- u/s 24 and ₹ 1,10,292/- towards municipal taxes. Further, under th .....

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income from house property , claiming of interest paid on unsecured loans and depreciation as business loss is not correct since these loans were neither used for business activity nor for acquiring the asset / godown. Therefore, the claim of loss under the business head is incorrect. 3. The Ld. CIT after considering the submission made by the assessee passed an order u/s 263 directing the assessing officer to verify the disallowance required to be made u/s 14A of IT Act since the assessee has m .....

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g officer dated 13.09.2011. The assessing officer proposed to disallow the loss claimed by the assessee vide show cause notice since there was no business carried on by HUF. However, the assessee replied vide letter dated 20.10.2011 explaining that he was carrying on the business and the loss was due to the payment of interest to firms, in which the assessee was a partner and hence resulting loss was business loss which was claimed as set off against the other sources. The assessing officer afte .....

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issued show cause notice for incorrect set off of loss of ₹ 10,11,822/- relating to the business against the income from house property. This issue has been examined by the assessing officer in the original assessment order passed u/s 143(3) which is evident from the show cause notice issued by the assessing officer dated 13.09.2011. The assessing officer proposed to disallow the loss claimed by the assessee vide show cause notice since there was no business carried on by HUF. However, the .....

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issue and taken a conscious decision not to make any addition, hence the action u/s 263 is not permissible on the same issue. Therefore, the Ld.AR argued that the notice u/s 263 is required to be quashed. The Ld.AR further argued that the Ld.CIT has directed the assessing officer to verify the disallowance of expenditure u/s 14A(3) which is not forthcoming from the notice, hence the Ld.CIT has no jurisdiction to direct the assessing officer to examine this issue. 5. On the other hand, the Ld.DR .....

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quired by Rule 8D. The Ld.CIT has given an opportunity to the assessee and after considering the objections, the Ld.CIT has directed the assessing officer to verify the disallowance required to be made u/s 14A r.w.Rule 8D of Income Tax Rules. Since the assessing officer has not examined the issue with regard to the investments made in shares and bonds and did not give any finding with regard to the disallowance u/s14A, the CIT 6. We have heard the rival submissions and perused the material on re .....

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ssing officer. During the course of revision proceedings, it has come to the notice of Ld.CIT that the assessee has made investments in shares and bonds and did not make disallowance which was required to be made u/s14A of IT Act. The assessee explained that there were no expenses incurred in relation to the exempt income which was claimed as deduction for the assessment year 2009-10. Hence, the assessee argued before the Ld.CIT that Section 14A is not applicable in a assumed the jurisdiction, h .....

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cation of the material on record, the Ld.CIT has dropped the issue with regard to incorrect set off of business loss against the income from property which was examined by the assessing officer. During the course of revision proceedings, it has come to the notice of Ld.CIT that the assessee has made investments in shares and bonds and did not make disallowance which was required to be made u/s14A of IT Act. The assessee explained that there were no expenses incurred in relation to the exempt inc .....

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CIT opined that the expenditure relating to the earning of dividend income required to be disallowed, there was no finding given by the CIT in his order with regard to earning of dividend income. The CIT also did not rebut the explanation offered by the assessee stating that no expenditure was incurred for making the investments. The Ld. DR did not make any clarification with regard to the quantum of dividend income earned by the assessee. The Ld.AR submitted paper book enclosing the copy of st .....

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