TMI Blog2019 (7) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... nment was later superseded by another notification issued on 17.06.2016. We have elaborately discussed these notifications in preceding para s of this order while adjudicating disallowance of credit card charges. We are of the view that charges for cash pick up ( or also called as cash management services) paid by assessee to Banks are analogous to credit card charges so far as requirements of Chapter XVII-B of the 1961 Act is concerned. We have adjudicated in preceding para s of this order issue of allowability of credit card charges on which no income-tax was deducted at source under Chapter XVII-B of the 1961 Act. Our decision while adjudicating disallowance of credit card charges in preceding para s of this order shall apply mutatis mutandis to the disallowance of charges for cash pick up facility( or also called as cash management services) paid by assessee to banks for availing these services. Thus this issue being covered by ground no. ix raised by Revenue in its appeal filed with tribunal is effectively decided in favour of the assessee. The Revenue fails on this ground Disallowance of expenses u/s 14A r.w.r. 8D - HELD THAT:- No additions by way of disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions? iii) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that there is no relationship of a Principal and Commission Agent between the assessee and the acquired bank, without appreciating the fact that the acquirer bank, without appreciating the fact that the acquirer bank acts as a conduit or middleman between the assessee and the issuing bank for credit card processing services iv) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that there must be a Principal and Commission Agent relationship between the assessee and acquirer bank to be a commission u/s.194H, by relying on the decision of the Hon'ble ITAT, Mumbai in the case of SKOL Breweries Ltd Vs. ACIT(ITA No. 6175/Mum/2011), without appreciating that in the case cited supra, it was held that Section 194H talks about the payment to a recipient which is the income by the Hon'ble ITAT the way of commission or brokerage and no finding has been given therein by the Hon'ble ITAT that the relationship between the payer and the payee must necessarily be of a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate craves leave to amend or alter any grounds or add a new ground which may be necessary. 3. The brief facts of the case are that the assessee is engaged in the business of readymade garments and other products. 3.2 During the course of assessment proceeding conducted by the AO u/s 143(3) read with Section 143(2) of the 1961 Act, on perusal of P L account of the assessee for the year under consideration, it was observed by the AO that the assessee had claimed credit card charges of ₹ 34,36,22,786/- under head Other expenses and on which the assessee had not deducted Income-tax at source under the provisions of Chapter XVII-B of the 1961 Act keeping in view provisions of Section 194H of the 1961 Act. The AO was of the view that since assessee has not deducted income-tax at source on these payments made towards credit card charges u/s 194H of the 1961 Act, thus these credit card charges to the tune of ₹ 34,36,22,786/- cannot be allowed keeping in view provisions of Section 40(a)(ia) r.w.s. 194H of the 1961 Act, vide assessment order dated 29.03.2015 passed u/s 143(3) of the 1961 Act, by holding as under:- 4.2 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em evolves. Acquiring banks often enlist the help of third-party independent sales organizations (ISO) and membership service providers (MSP) to conduct and monitor the day-to-day activities of their merchant accounts. Issuing Bank (Cardholder Bank) - An issuing bank issues credit cards to consumers. The issuing bank is also a member of the card associations (Visa and MasterCard). Issuing banks pay acquiring banks for purchases that their cardholders make. It is then the cardholder's responsibility to repay their issuing bank under the terms of their credit card agreement. Card Associations (Visa and MasterCard) - Visa and MasterCard aren't banks and they don't issue credit cards or merchant accounts. Instead, they act as a custodian and clearing house for their respective card brand. They also function as the governing body of a community of financial Institutions, ISOs and MSPs that work together in association to support credit card processing and electronic payments. Hence the name, card associations. The primary responsibilities of the Card Association are to govern the members of their associations, In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and can be briefly explained as under:- Processing a payment card transaction involves two stages; Authorization, where an electronic request is sent through various parties to either approve or decline the transaction; and Clearing and Settlement, where all parties settle their accounts and get paid. Authorization: 1. Cardholder presents payment card as payment at Merchant Point-of-Sale 2. Merchant enters card into a physical Point-of-Sale Terminal or submits a credit card transaction to a Payment Gateway on behalf of a customer via secure connection from a web site, retail location, MOTO center or a wireless device. 3. Payment Gateway receives the secure transaction information and passes it via a secure connection to the Merchant Acquirer's Front-End Processor 4. The Merchant Acquirer's Front-End Processor submits the transaction to the Association Network (a network of financial entities that communicate to manage the processing, clearing and settlement of credit card transactions) 5. The Association Network rout ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2.3 In the case of the assessee, the abovementioned Key Players gets full amount from the customer through credit cards and remit the amount to the assessee's account after deducting their commission. This is a different mode of payment in which the assessee is not making any payment but the service provider itself deduct the commission from the amount payable. This mode of payment between the assessee and the Banks is clearly covered by the provisions of section 194H which says that payment by any other mode . There is no doubt that the Banks provide credit card facilities to the assessee company and for that commission Is charged by them, but there was no bar on the assessee to deduct TDS on such payments / expenses debited in the Profit Loss Account Therefore, provisions of section 194H of the Act is clearly attracted to the transactions between the Banks and the assessee for charging commission on providing credit card services. The assessee is liable to deduct tax on the payment of commission (one mode is to send debit note to the concerned Bank after depositing TDS amount to the Government Account), which assessee did not do. According to section 40(a) (ia) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amounts retained by the banks in respect of the air tickets booked through credit cards. The appellant during the course of proceedings stated that the provisions of section 194H of the Act are not applicable on the above mentioned amounts retained by the banks as it was in the nature of discounting in consideration of immediate payment made by the banks to the assessee. However, the AO held that such a payment made for the use of the credit card, internet payment gateway to enable the assessee to collect the payments made by the customers to it for orders placed through facility by the said customers is squarely covered by the definition of commission or brokerage given in explanation (i) below the third proviso to section 194H of the Act. 6.2.3 Further, it is also pertinent to mention that identical issue in Appellant s own case under appeal no. CIT(A)-16-Addl.CIT-8(1)/IT-207/2013-14 was there in the previous year pertaining to AY 2011-12 and my Ld. predecessor had allowed the claim of the Appellant vide order dated 09.03.2015. The relevant part of said order are reproduced below: The ITAT, Mumbai noted that similar issue has been cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edecessor. Therefore, ground No.2 raised by the appellant is allowed. 5. Aggrieved by appellate order dated 23.08.2016 passed by learned CIT(A), the Revenue has filed an appeal before the tribunal and this issue of disallowance u/s 40(a)(ia) read with Section 194H of the 1961 Act is raised by Revenue in memo of appeal filed with tribunal vide ground number (ii) to (viii). The Ld. CIT-DR opened the argument and fairly submitted before the Bench that this issue is squarely covered by decision of Mumbai-tribunal in the case of Jet Airways India Ltd.(supra). The Ld. Counsel for the assessee also submitted that the issue is covered by decision of coordinate benches of the tribunal in the case of Jet Airways India Ltd.(supra). Further, it is also brought to our notices by learned counsel for the assessee that Mumbai-tribunal in assessee s own case for AY 2011-12 in ITA no. 3968/Mum/2015 AY 2011-12 vide appellate order dated 31.05.2017 has now adjudicated this issue in favour of the assessee.The said appellate order is filed by the assessee which is placed in the file. Our attention was also drawn by learned counsel for the assessee to Notification No. 56/2012 (F.No. 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellate order passed by Ld. CIT(A) stood confirmed/upheld by Mumbai-tribunal in assessee s own case in ITA no. 3968/Mum/2015 vide orders dated 31.05.2017 for AY 2011-12, by holding as under:- 4. In so far as the first issue is concerned, the Assessing Officer noted that assessee had debited an expenditure of ₹ 24,64,25,637/- in the P L Account on account of credit card charges. On being asked to explain, assessee explained that it is engaged in the business of sale of readymade garments and other products and it receives payments from customers through credit cards. The aforesaid expenditure reflects the charges paid to the banks for collecting payments and is on account of service fees/ discount/ merchant discount rate/ commission, etc. The Assessing Officer was of the view that such charges are in the nature of commission , for which the requisite tax is required to be deducted at source under section 194H of the Act. Since the assessee company has not deducted the requisite tax at source, the expenditure was liable to be disallowed under section 40(a)(ia) of the Act. Hence, a disallowance of ₹ 24,64,25,637/-/- The CIT(A) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other person. In the case of commission retained by the credit card companies however, it cannot be said that the bank acts on behalf of the merchant establishment or that even the merchant establishment conducts the transaction for the bank. The sale made on the basis of a credit card is clearly a transaction of the merchants establishment only and the credit card company only facilitates the electronic payment, for a certain charge. The commission retained by the credit card company is therefore in the nature of normal bank charges and not in the nature of commission/brokerage for acting on behalf of the merchant establishment. Accordingly, payments made to the banks on account of utilization of credit card facilities would be in the nature of bank charges and not in the nature of commission within the meaning of section 194H of the Act and hence no TDS is required to be deducted u/s 194H of the Act. Respectfully following the jurisdictional Mumbai ITAT decision as above, the addition made u/s 40(a)(ia) is deleted. 5. Before us, it was a common point between the parties that the issue in question is directly covered by the decision of the Mumbai Tribunal in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces for commodities; (v) underwriting service charges; (vi) clearing charges (MICR charges); (vii) credit card or debit card commission for transaction between the merchant establishment and acquirer bank. 2. This notification shall come into force from the 1st day of January, 2013. [F. NO. 275/53/2012-IT(B)] 6.2.1. The aforesaid notification issued on 31-12-2012 by Central Government was later superseded by another notification issued on 17.06.2016, which is reproduced hereunder: MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION New Delhi, the Dated: 17th June, 2016 Notification No. 47/2016 INCOME TAX S.O. 2143(E).-In exercise of the powers conferred by sub-section (1F) of section 197A of the Income-tax Act, 1961 (43 of 1961) and in supersession of the notification of the Government of India, Ministry of Finance (Department of Revenue) number S.O. 3069 (E) dated 31st December, 2012, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Commission or brokerage. 194H. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent : Provided that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed five thousand rupees : Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any service rendered in the course of buying or selling of goods; and, (iii) in relation to any transaction relating to any asset, valuable article or thing, not being securities. The expression 'securities' has been defined clause (iii) to the Explanation. 8. The High Court of Gujarat in Ahmedabad Stamp Vendors Association v. Union of India [2002] 257 ITR 202/124 Taxman 628 examined clause (i) of the explanation and whether it would be applicable to persons carrying on the business of stamp vendors who purchase stamps from the government treasury and sell them to the public. The Gujarat High Court drew a distinction between a contract of sale and a contract of agency by which an agent is authorized to buy or sell on behalf of the principal. In a case of agency, the agent is not the owner of the property and does not sell the same of his own accord but as per the directions and instructions of the principal, who is the owner of the property. The profit and loss is that of the principal, and what is paid to the agent is the commission or brokerage. The expressions commission and discount were distinguished after making reference to the definitions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there should be an element of agency in all the three situations as envisaged in clause (i) of the Explanation to Section 194H of the Act. 9. On appeal before the Supreme Court, the decision was upheld by a short order, which is reported as Ahmedabad Stamp Vendors Association (supra) observing that the stamp vendors had purchased stamps in bulk and had received a cash discount. The Supreme Court concurred with the judgment of the High Court that the transaction was of sale and Section 194H of the Act had no application. Thus, holding that a contract of agency did not exist. 10. Similar view has been expressed by the Kerala High Court in Kerala State Stamp Vendors Association v. Office of the Accountant General [2006] 282 ITR 7/150 Taxman 30 wherein it held:- No doubt, payment of commission or brokerage in relation to sale or purchase of goods also would attract deduction of tax at source under section 194H of the Act. However, such situation arises only when there is involvement of services of a third party on payment other than the seller and the purchaser of goods or when the recipient of the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Peerless General Finance and Investment Co. Ltd. [1987] 1 SCC 424). Thus, in a particular context the word includes when used, may only mean comprise of or consist of . 13. It is apparent from the decision of the Supreme Court in the case of Ahmedabad Stamp Vendors Association (supra) that clause (i) of the Explanation to Section 194H of the Act has been read as exhaustive and not as expansive. This is the reason why the Supreme Court in the short order drew distinction between a transaction of sale and a contract of agency and also between discount and commission/brokerage. Otherwise, the expression any service rendered in the course of buying or selling of goods possibly would have encompassed and included the discount given to the stamp vendors, who render service during the course of buying and selling of goods, i.e. the stamp papers. 14. Contention could be raised that payment received or receivable directly or indirectly for any services in course of buying or selling of goods need not arise out of a contract of agency or from a relationship of a principal and an agent. The said contention has to be rejected in view of the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principal basis. HDFC was also acting and equally protecting the interest of the customer whose credit card was used in the swiping machines. It is noticeable that the bank in question or their employees were not present at the spot and were not associated with buying or selling of goods as such. Upon swiping the card, the bank made payment of the bill amount to the respondent-assessee. Thus, the respondent assessee received the sale consideration. In turn, the bank in question had to collect the amount from the bankers of the credit card holder. The Bank had taken the risk and also remained out of pocket for sometime as there would be a time gap between the date of payment and recovery of the amount paid. 16. The amount retained by the bank is a fee charged by them for having rendered the banking services and cannot be treated as a commission or brokerage paid in course of use of any services by a person acting on behalf of another for buying or selling of goods. The intention of the legislature is to include and treat commission or brokerage paid when a third person interacts between the seller and the buyer as an agent and thereby renders services in the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re equally capable of more than one construction, the one not inflicting the penalty or deterrent may be preferred. In Maxwell's The Interpretation of Statutes, 12th edition (1969) it has been observed:- The strict construction of penal statutes seems to manifest itself in four ways: in the requirement of express language for the creation of an offence; in interpreting strictly words setting out the elements of an offence; in requiring the fulfilment to the letter of statutory conditions precedent to the infliction of punishment; and in insisting on the strict observance of technical provisions concerning criminal procedure and jurisdiction. 18. The aforesaid principles and interpretations can apply to taxing statutes. In the present case we further feel the said principle should be applied as HDFC would necessarily have acted as per law and it is not the case of the Revenue that the bank had not paid taxes on their income. It is not a case of loss of revenue as such or a case where the recipient did not pay their taxes. 19. In these circumstances, we do not find any merit in the present appeal and the same is dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have reported an amount of ₹ 6,78,10,485/- as inadmissible u/s 40(a)(ia) of the 1961 Act. The AO observed that the assessee has only disallowed and added back ₹ 1,64,368/- to income of the assessee which are expenses other than cash pick up charges while filing its return of income with Revenue. The AO made additions to the income of the assessee by disallowing cash pick up charges u/s 40(a)(ia) of the 1961 Act for failure to deduct income-tax at source on these payments made by assessee for services received for cash pick up from a contractor, vide assessment order dated 29.03.3015 passed by AO u/s 143(3) of the 1961 Act. 8. The assessee being aggrieved by an assessment framed by AO vide assessment order dated 29.03.2015 passed u/s 143(3) of the 1961 Act, filed first appeal before learned CIT(A). The assessee has claimed before learned CIT(A) that cash pick up facility or cash management services is an standard as well ancillary services offered by Banks to all its customers. It is up-to customers to avail these facilities at certain cost or not. There is no separate contract or agreement with the customers for such facilities. The assessee also submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the Jaipur Bench of the Tribunal in the case of Bhandari Jewellers ITA No. 745/JP/2011 (AY-2008-09) dated 02/02/2012 wherein it was also held that no TDS is required to be deducted on the fees charged by the banks on credit card transactions, further, Hyderabad Bench of the Tribunal in the case of DCIT v. Vah Magna Retail (P) Ltd. In ITA No.905/Hyd/2011 (AY=2007-Q8) dated 10/04/2012 has held that Even though the definition of the term Commission or Brokerage used in the said section is an inclusive definition, it is clear that liability to make TDS under the said section arises only when a person acts on behalf of another person. In the case of commission retained by the credit card companies however, it cannot be said that the bank acts on behalf of the merchant establishment or that even the merchant establishment conducts the transaction for the bank. The sale made on the basis of a credit card is clearly a transaction of the merchants establishment only and the credit card company only facilitates the electronic payment, for a certain charge. The commission retained by the credit card company is therefore in the nature of normal bank charges and not in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, when the instruction expressly states that benefit of the said policy is prospective, still can the Courts place a construction on such instruction so as to make it retrospective. In this context, the Apex Court in the case of CCE v. Mysore Electrical Industries Ltd., [2006] 204 ELT 517 (SC) dealing with the question how a beneficial circular is to be construed, has approached this question in the following manner. At paragraph 13 of the judgment, it is stated that the learned Counsel further submitted that the circular being oppressive and against the respondent, has to apply only prospectively and cannot be applied retrospectively. In other words, a beneficial circular has to be applied prospectively. Thus, when the circular is against the assessee they have a right to claim the enforcement of the same prospectively. It is further submitted that for the period in question, trade notices had been issued classifying the circuit breakers under Heading No. 85.35 or 85.36. When the approved classification was proposed to be revised to reclassify the Single Panel Circuit Breakers under Heading No. 85.37 of the tariff, such re-classification can take effect only p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that the 'cash pick up charges' is similar to the nature of credit card charges and drawing similarities from the judgment of Hon'ble ITAT bench, Mumbai in the case of Jet Airways (India) Limited (supra), also keeping in view the judgment pronounced by the Hon'ble Bombay High Court in the case of 'East India Hotels Ltd V. CBDT [2009] 179 Taxman 17', and forgoing discussion; this ground of appeal of the appellant is allowed. 9. Aggrieved by an appellate order dated 23.08.2016 passed by learned CIT(A) granting relief to assessee on disallowances earlier made by AO of charges paid to Bank for cash pick up facility, Revenue has filed an appeal before tribunal. Similar contentions are raised by learned counsel for the assessee as well by learned CIT-DR as were raised in preceding issue of disallowance of credit card charges. 10. We have heard both the rival parties and perused the material on record including cited case laws. We have observed that Central Government has issued notification no. 56/2012 dated 31.12.2012 (F.No. 275/53/2012-IT(B)), wherein cash management services charges are also covered as an exemption from de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssesssee rejected the contentions of the assessee that no expenditure was incurred in relation to earning of an exempt income and made disallowance of expenditure incurred in relation to earning of an exempt income by invoking provisions of Section 14A of the 1961 Act read with Rule 8D of the 1962 Rules, vide assessment order dated 29.03.2015 passed by AO u/s 143(3) of the 1961 Act, which disallowance was computed by AO as under:- 5.8 Accordingly, the amount disallowable as per the formula prescribed vide Notification No. 45/ 2008 dated 24.03.2008, is worked out as under: S.N. Particulars Amount (Rs.) Amount (Rs.) 1 Amount of expenses directly related to the income. - A Amount of interest expenses other than 1 (A) 2,50,06,00,000 B1 Investments as on 01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue who is aggrieved by appellate order passed by learned CIT(A) granting relief to the assessee.At the outset contention has been raised by Ld. Counsel for the assessee that assessee has not earned any exempt income during the year under consideration. The learned counsel for the assessee relied upon decision of Hon ble Delhi High Court in the case of Cheminvest Limited v. CIT reported in (2015) 378 ITR 0033(Del.), wherein Hon ble Delhi High Court has held that in case no exempt income is received by assessee, no disallowance of expenses u/s 14A are warranted. It was also submitted by learned counsel for the assessee that the issue is squarely covered in favour of the assessee by decision of Hon ble Bombay High Court in the case of PCIT v. Ballarpur Industries Limited in ITA No. 51 of 2016, vide judgment dated 13.10.2016, wherein Hon ble Bombay High Court after considering the decision of Hon ble Delhi High Court in the case of Cheminvest Limited(supra) held that no disallowance of expenses u/s 14A are warranted in case no exempt income is received by the tax-payer during the relevant period. It is also brought to our notice that the tribunal in the case of group company in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest expenditure, assessee made varied submissions, which, inter-alia, included an assertion that the total own non-interest bearing funds were in excess of the investments made during the year under consideration, and thus, no interest expenditure was attributable to such investments. Therefore, it was contended that no interest expenditure can be subjected to disallowance under section 14A of the Act. The CIT(A) accepted the aforesaid plea and has recorded a finding that the own non-interest bearing funds of the assessee are sufficient to cover the investment in the tax free securities, therefore, following the judgment of the Hon'ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Ltd., 313 ITR 340(Bom), it has to be inferred that the investments have been made out of interest free funds available with the assessee. In this background, the CIT(A) deleted the disallowance made out of interest expenditure of ₹ 23,31,350/- and retained the disallowance of ₹ 2,55,750/- suo-motu made by the assessee. Against such a decision of the CIT(A), Revenue is in appeal before the Tribunal. 8. At the time of hearing, the Ld. Departmenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c investments, keeping in view decision of Hon ble Supreme Court in the case of Maxopp Investment Limited(supra). Thus, so far as plea of non applicability of provisions of Section 14A on strategic investments made by assessee, the said plea stands dismissed in view of decision of Hon ble Supreme Court in the case of Maxopp Investments Limited(supra). 14.2 The assessee has undisputedly not earned any exempt income during the year under consideration. Even learned CIT-DR also admitted this position before us. Perusal of the audited financial statements for the year ended 31.03.2012, will reveal that interest free own funds comprising of share capital and reserves were to the tune of ₹ 1161.48 crores as at 31.03.2012, while the same were to tune of ₹ 1100.86 crores as at 31.03.2011. The investments are at ₹ 9.99 crores as at 31.03.2012 and also at same level as at 31.03.2011. The factum of availability of own interest free funds available with assessee and also investments made by assessee are also emerging from orders of authorities below. The AO being not satisfied with the contentions of the assessee has made disallowance of expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -interest bearing funds were in excess of the investments made during the year under consideration, and thus, no interest expenditure was attributable to such investments. Therefore, it was contended that no interest expenditure can be subjected to disallowance under section 14A of the Act. The CIT(A) accepted the aforesaid plea and has recorded a finding that the own non-interest bearing funds of the assessee are sufficient to cover the investment in the tax free securities, therefore, following the judgment of the Hon'ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Ltd., 313 ITR 340(Bom), it has to be inferred that the investments have been made out of interest free funds available with the assessee. In this background, the CIT(A) deleted the disallowance made out of interest expenditure of ₹ 23,31,350/- and retained the disallowance of ₹ 2,55,750/- suo-motu made by the assessee. Against such a decision of the CIT(A), Revenue is in appeal before the Tribunal. 8. At the time of hearing, the Ld. Departmental Representative has not controverted the factual finding of the CIT(A) to the effect that the own non-interest bearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Limited in ITA no. 246 of 2018 vide judgment dated 28.05.2018 reported in (2019) 106 taxmann.com 180(Del.HC) has held that no disallowance u/s 14A are warranted when no exempt income are received by tax-payer, by holding as under: 1. The Revenue's appeal is with respect to the disallowance made by the Assessing Officer ('AO') under Section 14A of the Income-tax Act, 1961 (hereafter 'the Act'). The AO had proceeded to calculate the disallowance based upon the investments made by the assessee. The CIT(A) and the Income Tax Appellate Tribunal (ITAT) allowed the assessee's appeals by following the ruling in Cheminvest Ltd. v. CIT [2015] 61 taxmann.com 118/234 Taxman 761/378 ITR 33 (Delhi); the Court had then held that in the absence of any exempt income disallowance was impermissible. For the relevant Assessment Year (2013-14), concededly, the assessee did not report any exempt income. Consequently, no substantial question of law arises; the appeal is therefore dismissed alongwith the pending application. The revenue fails in this ground. 14.5 The Revenue filed an SLP against the af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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