TMI Blog2018 (11) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... d s India Pvt. Ltd (the respondent-assessee, for short) relates to the assessment year 2008-09 and arises from the order of the Income-tax Appellate Tribunal (the Tribunal, for short) dated 28th November, 2017. 2. Revenue submits that the Tribunal has erred in deleting disallowance of ₹ 1,64,44,211/- made by the Assessing officer under Section 14A of the Act on the ground the respondent-assessee had not earned any exempt income during the assessment year. 3. The Tribunal in the impugned order on the said aspect has observed: 4. Having heard both the sides and perused the relevant material on record, we find that the legal position is no more res integra in view of the judgment of the Hon ble jurisdictional High Court in the case Cheminvest Ltd vs. CIT (2015) 378 ITR 33 (Del), wherein it has been held that if there is no exempt income, there can be no question of making any disallowance u/s 14A. Similar view has been taken by the Hon'ble jurisdictional High Court in CIT vs. Holcim India P. Ltd. (2014) 90CCH 081-Del-HC . In view of these binding precedents providing for not making any disallowance u/s 14A in the absence of any exempt income, we hold in princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A by Finance Act, 2001 with retrospective effect from 1st April, 1962 and the proviso to Section 14A by Finance Act, 2002 with retrospective effect from 11th May, 2001. One or two sentences that Section 14A clarifies that expenses incurred can be allowed only to the extent that they are relatable to earning of taxable income cannot be read out of context, for the Supreme Court in Walford Share Stock Brokers Pvt. Ltd. (Supra) has emphatically held and observed that Section 14A would apply when an income does not form part of the total income. Then the related expenditure would not be allowed. This decision did not directly examine and answer the issue in question i.e. whether any disallowance under Section 14A can be made when the assessee has not earned any exempt income during the year in question. 8. The decision in the case of Maxopp Investment Ltd. (Supra) is significant and does answer the question in issue. This decision does not support the Revenue as the Assessing Officer in the case of Maxopp Investment Ltd. (Supra) had himself restricted the disallowance to the extent of exempt income. After referring to Walford Share and Stock Brokers P. Ltd. (Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if no dividend income was earned, yet Section 14A can be invoked and disallowance of expenditure can be made, there are three decisions of the different High Courts directly on the issue and against the appellant-Revenue. No contrary decision of a High Court has been shown to us. The Punjab and Haryana High Court in Commissioner of Income Tax, Faridabad Vs. M/s. Lakhani Marketing Incl., ITA No. 970/2008, decided on 02.04.2014 , made reference to two earlier decisions of the same Court in CIT Vs. Hero Cycles Limited, [2010] 323 ITR 518 and CIT Vs. Winsome Textile Industries Limited, [2009] 319 ITR 204 to hold that Section 14A cannot be invoked when no exempt income was earned. The second decision is of the Gujarat High Court in Commissioner of Income Tax-I Vs. Corrtech Energy (P.) Ltd. [2014] 223 Taxmann 130 (Guj.). The third decision is of the Allahabad High Court in Income Tax Appeal No. 88 of 2014, Commissioner of Income Tax (Ii) Kanpur, Vs. M/s. Shivam Motors (P) Ltd. decided on 05.05.2014 . In the said decision it has been held: As regards the second question, Section 14A of the Act provides that for the purposes of computing the total income under the Chapter, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no exempt income has been earned by the assessee in the financial year relevant to the assessment year in issue. The order of assessment records a finding of fact to that effect. The issue to be decided thus lies within the short compass of whether a disallowance in terms of section 14A of the Act read with Rule 8D of the Rules can be contemplated even in a situation where no exempt income has admittedly been earned by the assessee in the relevant financial year. 7. Per contra, Sri T. Ravikumar appearing on behalf of the revenue drew our attention to the marginal notes of s. 14A 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 section 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 disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue would result in the imposition of an artificial method of computation on notional and assumed income. We believe this would be carrying the artifice too far. (emphasis is ours) 13. We have been informed that SLP preferred by the Department against the decision in Chettinad Logistics (Supra) has been dismissed. Counsel appearing for the respondent-assessee has submitted that the Supreme Court while deciding the batch of appeals in Maxopp Investment Ltd. (Supra) had also heard arguments and decided SLP (Civil) No.27054/2016 arising from the judgment of the Gujarat High Court dated 16th February, 2016 in Tax Appeal No. 206/2016, Principal Commissioner of Income-tax (1) Vs. D.B. Corp Limited. In this case the Gujarat High Court had refused to admit the appeal on proposed question no.2 - whether disallowance under Section 14A could be made when assessee during the particular assessment year had not earned any exempt income, observing that there was no infirmity in the approach adopted by the Tribunal warranting interference. The Tribunal had restored the matter to the file of the Assessing Officer to verify the claim of the assessee that it did not claim an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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