TMI Blog2017 (12) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals)- 14 [CIT(A)], Mumbai, Appeal No. CIT(A)-14/IT-114/15-16 dated 10/08/2016 qua deletion of Section 14A disallowance of ₹ 30,58,921/- made by Ld. AO. The assessment for the impugned AY was framed u/s 143(3) of the Income Tax Act by Ld. Assistant Commissioner of Income Tax-8(2)(1) [AO] on 21/03/2015. None has appeared for assessee despite notice and no adjournment application is on record. Left with no option, we proceed to dispose-off the same on the basis of material available on record and after hearing Ld. Departmental Representative [DR]. 2. Facts leading to the same are that the assesse being resident corporate assessee engaged in the business of re-rolling mill was assessed u/s 143(3) for impugned AY at ₹ 395.04 La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FS Energy Development Co. Ltd. [84 Taxmann.com 186 dated 16/08/2017] where the Hon ble court has discussed the issue elaborately in the light of statutory provisions and CBDT circular dated 11/05/2014. We are inclined to reproduce here-inbelow the relevant observations made by Hon ble court in the said judgment:- 11. At the outset, it requires to be noticed that we are concerned with the AY 2011- 12 and, therefore, the question of the applicability of Rule 8D, which was inserted with effect from 24th March 2008, is not in doubt. 12. Section 14A of the Act, which was inserted with retrospective effect from 1st April 1962, provides for disallowance of the expenditure incurred in relation to income exempted from tax. From 11th May 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat no deduction shall be made in respect of any expenditure incurred by the Assessee in relation to income which does not form part of the total income under the Income Tax Act . 15. What is taxable under Section 5 of the Act is the total income which is neither notional nor speculative. It has to be 'real income'. The subsequent amendment to Section 14A does not particularly clarify whether the disallowance of the expenditure would apply even where no exempt income is earned in the AY in question from investments made, not in that AY, but earlier AYs. 16. Rule 8D (1) of the Rules is helpful, to some extent, in understanding the above issue. It reads as under: 8D. (1) Where the Assessing Officer, having regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the considered view of the Court, this will be a truncated reading of Section 14 A and Rule 8D particularly when Rule 8D (1) uses the expression 'such previous year'. Further, it does not account for the concept of 'real income'. It does not note that under Section 5 of the Act, the question of taxation of 'notional income' does not arise. As explained in Commissioner of Income Tax v. Walfort Share and Stock Brokers Pvt. Ltd [2010] 326 ITR 1 (SC), the mandate of Section 14A of the Act is to curb the practice of claiming deduction of expenses incurred in relation to exempt income being taxable income and at the same time avail of the tax incentives by way of exemption of exempt income without making any apportionmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner Of Income Tax, West v. Rajendra Prasad Moody [1978] 115 ITR 519 (SC) explained that deduction is allowable even where income was not actually earned in the AY in question. This aspect of the matter was dealt with by this Court in M/s Cheminvest Ltd. (supra) where it reversed the decision of the Special Bench of the ITAT by observing as under: 20. Since the Special Bench has relied upon the decision of the Supreme Court in Rajendra Prasad Moody (supra), it is considered necessary to discuss the true purport of the said decision. It is noticed to begin with that the issue before the Supreme Court in the said case was whether the expenditure under Section 57 (iii) of the Act could be allowed as a deduction against dividend in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in Rajendra Prasad Moody (supra) was rendered in the context of allowability of deduction under Section 57(iii) of the Act, where the expression used is for the purpose of making or earning such income. Section 14A of the Act on the other hand contains the expression in relation to income which does not form part of the total income. The decision in Rajendra Prasad Moody (supra) cannot be used in the reverse to contend that even if no income has been received, the expenditure incurred can be disallowed under Section 14A of the Act. 23. The decisions of the ITAT in ACIT v. Ratan Housing Development Ltd. (supra) and Relaxo Footwear Ltd. v. Addl. CIT (supra), to the extent that they are inconsistent with what has been h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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