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TMI Blog2017 (11) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... material to establish the direct nexus between the expenditure incurred and the income not forming part of total income." 2. The brief facts of the case are that the assessee filed return of income on 27.09.2012 showing loss of Rs. 2,06,37,666/-. The assessee company is engaged in the business of providing operating voice and broad band/network service in the field of telecommunication and Information technology and entertainment. The case was selected for scrutiny and statutory notices were issued to the assessee. The total business profit in the year was Rs. 7,86,19,745/- and the same had been adjusted against the earlier year's loss. During the assessment proceedings, the AO observed from the balance sheet of the assessee that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the submissions of the assessee and the provisions of section 14A read with Rule 8D and relying on case laws, calculated the disallowance u/s. 14A r/w Rule 8D(2)(iii) of Rs. 64,00,223/- representing to half percent of the average value of investment. In appeal before the ld. CIT(A), the first appellate authority after considering the submissions of the assessee and the facts of the case, allowed the appeal of the assessee by following the decision of CIT(A) for assessment year 2010-11 and 2011-12 in the case of assessee itself, in which similar disallowances were made by the Assessing Officer. Aggrieved by the order of ld. CIT(A), the Revenue is in appeal before the Tribunal. 3. The ld. DR relied on the order of the Assessing Officer an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has invoked Section 14A and Rule 8D on investments made in subsidiary company even though there is no dividend income earned by the appellant company during the year. In the case of appellant similar disallowances were made in preceding assessment years on the investments made in the subsidiary company and in that year also no dividend income was received by the appellant company. Such disallowances of expenses was deleted for A.Y. 2010-11 vide order dated 10.07.2014 in Appeal No.32/13-14. Similar disallowances were made in A.Y. 2011-12 which have been also deleted by the CIT(A) vide its order dated 26.05.2015 in Appeal No.33/14-15. Since the facts of this year's case is identical with the facts of A.Y. 2010-11 and 2011-12, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above submission of the appellant. I find that Hon'ble ITAT Mumbai in the case of Garware Wall Ropes Ltd. (supra) has held that where the primary object of investment is holding controlling stake in the group concern and not earning any income out of investment, Section 14A will have no application. It was held that the object of section 14A is not allowing to reduce tax payable on the non exempt income by deducting the expenditure incurred to earn the exempt income. It is not the case of the AO that the assessee has incurred any direct expenditure or any interest expenditure for earning the exempt income or keeping the investment in question. If there is expenditure directly or indirectly incurred in relation to exempt income, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of CIT vs Corrtech Energy Pvt. Ltd. vide their judgment dated 24.3.2014 has held that where the assessee did not make any claim for exempt income, section 14A would have no application. Similar view has been expressed by Hon'ble Allahabad High Court in the case of CIT vs M/s Shivam Motors Pvt. ltd. (supra). 5.2.3 In the case under consideration, it is an admitted fact that the appellant did not claim any exempted income during the year under consideration. Therefore, respectfully following the above judicial pronouncements, I hold that the AO was not justified in making the disallowance u/s 14A. The same is therefore, directed to be deleted. Grounds of appeal are allowed." I further find that similar issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee in relation to income which does not form part of the total income under the Act. Hence, what Section 14A provides is that if there is any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction. For the year in question, the finding of fact is that the assessee had not earned any tax free income. Hence, in the absence of any tax free income, the corresponding expenditure could not be worked out for disallowance. The view of the CIT(A), which has been affirmed by the Tribunal, hence does not give rise to any substantial question of law. Hence, the deletion of the disallowance of Rs. 2,03,752/-made by the Assessing Officer was in order". Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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