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Dy. Commissioner of Income-Tax, Cen. Cir. 8 (2) , Mumbai Versus M/s. Unity Realty & Developers Ltd.

2017 (9) TMI 830 - ITAT MUMBAI

Disallowance u/s 14A - no exempt income earned or receivable by the assessee in the instant year - Held that:- The controversy before us is directly covered by the judgments of the Hon'ble Madras High Court in the case of Redington (India) Ltd.(2017 (1) TMI 318 - MADRAS HIGH COURT) as well as Chettinad Logistics (P) Ltd., (2017 (4) TMI 298 - MADRAS HIGH COURT). - The provisions of Rule 8D of the Rules does not come to the rescue of the Revenue in order to make disallowance under section 14A .....

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- ITA No.496/Mum/2017 - Dated:- 23-8-2017 - SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER For The Appellant : Shri V. Justin For The Respondent : Shri Rakesh Mohan ORDER PER G.S.PANNU,A.M: The captioned appeal filed by the Revenue pertaining to assessment year 2012-13 is directed against an order passed by CIT(A)-50, Mumbai dated 07/10/2016, which in turn, arises out of order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short the .....

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n law, the Ld.CIT(A) erred in deleting the disallowance u/s 14A for A.Y.2012-13 without appreciating the fact that the circular No.5 of 2014 dated 11th February, 2014, issued by the Central Board of Direct Taxes clearly provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income . 3. A perusal of the Grounds of appeal reveal that the grievance of the Revenue is against the decision of the CIT(A) in holding that disallowance under section .....

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disallowance of the expenditure in relation to the exempt income as required under section 14A of the Act. The explanation of the assessee was that it has not earned any exempt income by way of dividend or long term capital gain exempt under section 10(38) of the Act and, therefore, no disallowance was required to be made in terms of section 14A of the Act . Further, assessee pointed out that the investments in question were in the Special Purpose Vehicles(SPV s)/Joint Ventures/ Associates/Subs .....

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pted the plea of the assessee that in the absence of any exempt income in the instant year, there cannot be any disallowance of expenditure under section 14A of the Act. In coming to such a decision, the CIT(A) relied upon the decision of the Mumbai Bench of the Tribunal in the case of Delite Enterprises (P) Ltd vs. ITO in ITA Nos.433,2983-4887 &5708/Mum/2005. Accordingly, the CIT(A) deleted the disallowance made by the Assessing Officer. 5. In this background, the rival parties have been he .....

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isions of section 14A of the Act, even in cases where no income has been earned by the assessee, which is claimed to be exempt during a particular year. 7. We have carefully considered the rival submissions. Quite clearly, the controversy before us is directly covered by the judgments of the Hon'ble Madras High Court in the case of Redington (India) Ltd.(supra) as well as Chettinad Logistics (P) Ltd., (supra). In fact, the CBDT circular sought to be relied upon by the Ld. Departmental Repres .....

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The issue to be decided thus lies within the short compass of whether a disallowance in terms of s.14A of the Act read with Rule 8D of the Rules can be contemplated even in a situation where no exempt income has admittedly been earned by the assessee in the relevant financial year. 7. Per contra, Sri. T. Ravikumar appearing on behalf of the revenue drew our attention to the marginal notes of s.14 A pointing out that the provision would apply not only where exempted income is 'included' .....

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nce to be triggered. According to the Learned Standing Counsel, the provisions of s.14A are made applicable, in terms of sub section (1) thereof to income 'under the act' and not 'of the year' and a disallowance under s.14A r.w.Rule 8D can thus be effected even in a situation where a tax payer has not earned any taxable income in a particular year. 9. We are unable to subscribe to the aforesaid view. The provisions of section 14A were inserted as a response to the judgments of th .....

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curred in relation to the earning of income exempt from taxation. As observed by the Supreme Court in the judgment in the case of Commissioner of Income tax v. Walfort Share and Stock Brokers (P) Ltd. [2010] 326 ITR 1 '.... The mandate of s.14A is clear. It desires to curb the practice to claim deduction of expenses incurred in relation to exempt income against taxable income and at the same time avail of the tax incentive by way of an exemption of exempt income without making any apportionm .....

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