TMI Blog2017 (12) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... inst an order dated 30.12.2016 of the ld. Commissioner of Income Tax (Appeals)-1, Coimbatore, has taken altogether four grounds of which ground No.1 4 are general in nature needing no specific adjudication. 2. Assessee has filed this appeal with a delay of forty eight days. Condonation petition has been filed. Reason shown for the delay seems to be justified. Ld. Departmental Representative did not raise any serious objection. Delay is condoned. Appeal is admitted. 3. Vide its grounds No.2, grievance raised by the assessee is on a disallowance of ₹ 2,43,182/- being belated remittances of employees contribution towards ESI and PF. 4. Ld. Counsel for the assessee submitted that by virtue of judgment of Hon ble Jurisdictional High Court in the case of CIT vs. M/s. Industrial Security Intelligence India Pvt. Ltd, Tax Case (Appeal) Nos.585 and 586 of 2015, dated 24.07.2015, employees contribution to ESI PF remitted prior to due date of filing of the return, had to be allowed. 5. Per contra, ld. Departmental Representative placed reliance on Circular No.22/2015, dated 17.12.2015 of Central Board of Direct Taxes. 6. We have considered the rival contentions and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Representative placed reliance in Circular No.5/2014, dated 11.02.2014. 10. We have considered the rival contentions and perused the orders of the authorities below. It is not disputed by the Revenue that assessee had not claimed any exempt income in the impugned assessment year. Their lordships in the case of Redington India Ltd (supra) held in paras 5 to 16 of its judgment is reproduced hereunder:- 5. Whether the Tribunal erred in not appreciating that the Rule 8 D was inserted by Income Tax (fifth amendment) Rules, 2008 with effect from 24th March 2008 and accordingly can have prospective application? Though several questions have been raised in the Appeal, only substantial questions 1 and 2 have been pursued at the time of hearing and consequently, answered by us. 2. The assessment year involved is 2007-2008. The assessee had investments in Indian Companies to the tune of ₹ 177.56 crores that had not yielded any returns in the previous year relevant to the present assessment year. An order of draft assessment in terms of s.143(3) r.w.s.144C of the Income Tax Act 1960 (hereinafter referred to as Act ) was issued by the assessing officer, interalia proposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (Gujarath High Court) and Commissioner of Income Tax, Vs. Lakhani Marketinng Incl (272 CTR 265); Chem Investments Limited vs Commissioner of Income Tax (94CCH (2)) Delhi High Court (reversing the decision of the Special Bench of Income tax Appellate tribunal relied on by the assessing officer in this case) 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 in the total income, but also where exempt income is includable in total income. 8. He relied upon a Circular issued by the Central Board of Direct taxes in Circular No. 5 of 2014 dated 11.2.2014 to the effect that s. 14A was intended to cover even those situations whether there is a possibility of exempt income being earned in future. The Circular, at paragraph 4, states that it is not necessary for exempt income to have been included in the income of a particular year for the disallowance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Kerala High Court in South Indian bank Limited Vs. Commissioner of Income Tax (2014) (49 taxmann.com 100) and Commissioner of Income Tax Vs. Catholic Syrian Bank Limited and others (2012) (344 ITR 0259) as well as the decision of the Division Bench of the Calcutta High Court in Dhanuka and Sons Vs. Commissioner of Income Tax, (2011) (12 Taxmann.com 227) in all of which the assessee did, as a matter of fact, earn dividend income. The aforesaid decisions are thus factually distinguishable and do not advance this proposition of the revenue. 13. Reliance is also placed on a decision of the jurisdictional High Court in the case of Beach Minerals Company Pvt. Ltd. Vs. Assistant Commissioner of Income Tax in TCA No.681 of 2013, dated 2.12.2013. In that case, payments of interest by the assessee were sought to be disallowed invoking the provisions of s.14A on the premise that the same related to borrowings that had been invested and would yield exempt returns. The assessee contested the disallowance u/s 14A on multiple grounds. It was contended that there were sufficient reserves and surpluses available for the purpose of investments, and borrowed funds, for which the payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing the total income of a previous year, any income falling within any of the following clauses shall not be included..... 15. The exemption extended to dividend income would relate only to the previous year when the income was earned and none other and consequently the expenditure incurred in connection therewith should also be dealt with in the same previous year. Thus, by application of the matching concept, in a year where there is no exempt income, there cannot be a disallowance of expenditure in relation to such assumed income. (Madras Industrial Investment Corporation Ltd vs. CIT (225 ITR 802)). The language of s.14A (1) should be read in that context and such that it advances the scheme of the Act rather than distort it. 16. In conclusion, we are of the view that the provisions of s. 14A read with Rule 8D of the Rules cannot be made applicable in a vacuum i.e. in the absence of exempt income. The questions of law are answered in favour of the assessee and against the department and the appeal allowed. No costs. Accordingly, we are of the opinion that there could be no disallowance when there is no exempt income. As such disallowance stands dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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