TMI Blog2018 (10) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... Lakhani Marketing Inc.[2014 (7) TMI 44 - PUNJAB AND HARYANA HIGH COURT] had held that Section 14A of the Act cannot be resorted to in the year in which no exempt income had been earned. However, the revenue relied upon the CBDT Circular dated 11.2.2014 to contend that Section 14A of the Act can be invoked even in the year in which no exempt income had been earned. Accordingly, the Tribunal had dismissed the appeal of the revenue holding that unless and until there is receipt of exempted income for the concerned assessment year, Section 14A of the Act is not attracted. - decided in favour of assessee. - ITA-322-2016 (O&M) - - - Dated:- 28-8-2018 - MR AJAY KUMAR MITTAL AND MR AVNEESH JHINGAN, JJ. For The Respondent : Mr. Surjeet Bha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order dated 3.1.2014 (Annexure A-1) at an income of ₹ 4,86,08,810/- after making the following additions:- (i) ₹ 33,92,141/- on account of disallowance under Section 36(1)(iii) of the Act; (ii) ₹ 40,28,526/- disallowance under Section 14A of the Act; and (iii) ₹ 64,37,342/- on account of non-deduction of TDS on L/C. 3. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity the CIT(A) ] who vide order dated 27.2.2016 (Annexure A-2) upheld addition at Sr. No. (i), deleted the addition at Sr. No. (ii) and remitted back the addition at Sr. No. (iii) to the file of the Assessing Officer. Against the order, Annexure A-2, the assessee filed appeal against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the Tribunal had rightly dismissed the appeal of the revenue. Reliance was placed upon the following judgments:- I. CCE, Bolpur v. Ratan Melting and Wire Industries, (2008) 12 STR 416 SC; II. Commissioner of Income Tax v. Lakhani Marketing Inc. (2014) 111 DTR 149 (P H); III. Commissioner of Income Tax v. Holcim India (P) Ltd. (2014) 272 CIT 282 (Del); IV. Cheminvest Ltd. v. Commissioner of Income Tax (2015) 281 CTR 447 (Del); V. Redington (India) Ltd. v. Additional Commissioner of Income Tax (2017) 392 ITR 633 (Mad); and VI. Principal Commissioner of Income Tax v. IL FS Energy Development Company Limited (2017) 399 ITR 482 (Del). 6. After hearing the learned counsel for the parties, we do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 14A of the Act provides for disallowance of expenditure in relation to income not 'includible' in total income. 8. Now, we proceed to examine the judgments relied upon by the learned counsel for the revenue. In Rajendra Prasad Moody's case (supra) , the Supreme Court had held as under:- The plain and natural construction of the language of Sec. 57(iii) of the Income Tax Act 1961 irresistibly leads to the conclusion that to bring a case within the section, it is not necessary that any income should in fact have been earned as a result of the expenditure. What Sec. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w to be allowed only with reference to income which was brought under one of the heads of income and was chargeable to tax and if an income like dividend income was not part of the total income, the expenditure/deduction related to such income, though of the nature specified in Sections 15 to 59 could not be allowed against another income which was includible in the total income for the purpose of chargeability to tax. Further, it was pronounced by the Supreme Court in Godrej and Boyce Mfg. Co. Ltd's case (supra) that computation of income, disallowance of expenditure incurred in earning income not forming part of total income, Section 14A of the Act was applicable to dividend income and income from mutual funds exempt under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court had laid down that Section 14A of the Act cannot be invoked when no exempt income was earned. Identical view was expressed by Madras High Court in Redington (India) Ltd's case (supra), where it was enunciated that no disallowance under Section 14A read with Rule 8(d) of the Income Tax Rules, 1962 (in short 1962 Rules ) can be made in respect of an assessment year in which no exempt income is earned. In IL FS Energy Development Company Limited's case (supra), the Delhi High Court had expressed that the CBDT Circular dated 11.2.2014 cannot override the express provisions of Section 14A read with Rule 8 D of the 1962 Rules. In Cheminvest Ltd's case (supra), it was reiterated that Section 14A of the Act envi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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