TMI Blog2017 (11) TMI 1688X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the order of the CIT(Appeals)-7, Bengaluru inter alia on the following grounds:- 1. The order of the learned C1T(A} is opposed to law and facts of the case. 2. Whether on the facts and circumstances of the case, the C1T(A) was justified in law in holding that the order passed by the AO u/s 143(3} was not erroneous and thereby it could not be considered as prejudicial to the interest of the revenue. 3. Whether on the facts and circumstances of the case, the C1T(A) was justified in law in allowing the expenditure incurred in earning tax free income. 4. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracted hereunder:- 15. Turning to the central question that arises for consideration, the court finds that the complete answer is provided by the decision of this court in CIT v. Holcim India (P) Ltd. (decision dated 5th September 2014, in I. T. A. No. 486 of 2014). In that case, a similar question arose, viz., whether the Income-tax Appellate Tribunal was justified in deleting the disallowance under section 14A of the Act when no dividend income had been earned by the assessee in the relevant assessment year? The court referred to the decision of this court in Maxopp Investment Ltd. (supra) and to the decision of the Special Bench of the Income-tax Appellate Tribunal in this very case, i.e., Cheminvest Ltd. v. CIT [2009] 317 ITR (AT) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urity transaction tax has been paid, but a private sale of shares in an off market transaction attracts capital gains tax. It is an undisputed position that respondent assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private placement etc. cannot be ruled out and is not an improbability. Dividend may or may not be declared. Dividend is declared by the company and strictly in legal sense, a shareholder has no control and cannot insist on payment of dividend. When declared, it is subjected to dividend distribution tax. 17. On facts, it was noticed in CIT v. Holcim India (P.) Ltd. (supra) that the Revenue had accepted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a deduction against dividend income assessable under the head Income from other sources . Under section 57(iii) of the Act, deduction is allowed in respect of any expenditure laid out or expended wholly or exclusively for the purpose of making or earning such income. The Supreme Court explained that the expression incurred for making or earning such income, did not mean that any income should in fact have been earned as a condition precedent for claiming the expenditure. The court explained (page 522 of 115 ITR): What section 57(iii) requires is that the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income. It is the purpose of the expenditure that is relevant in determining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra) and remanded the matter to the Assessing Officer for reconsideration of the issue afresh. The issue in Maxopp Investment Ltd. (supra) was whether the expenditure (including interest on borrowed funds) in respect of investment in shares of operating companies for acquiring and retaining a controlling interest therein was disallowable under section 14A of the Act. In the said case, admittedly there was dividend earned on such investment. In other words, it was not a case, as the present, where no exempt income was earned in the year in question. Consequently, the said decision was not relevant and did not apply in the context of the issue projected in the present case. 23. In the context of the facts enumerated hereinbefore the court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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