TMI Blog2020 (11) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... Accountant Member And Shri George George K, Judicial Member For the Assessee : Smt.Suman Lunkar, C.A. For the Revenue : Dr. A. Shankar Prasad K, Addl. CIT. ORDER PER SHRI GEORGE GEORGE K, JM : This appeal at the instance of assessee is directed against the order of Commissioner of Income Tax (Appeals)-7, Bangalore dt.29.10.2019. The relevant Assessment Year is 2013-14. 2. The grounds raised by the assessee read as follows : 1. The ld. Assessing Officer had erred in passing the order as passed by him and the learned CIT (Appeals) has erred in confirming the same. The orders passed being bad in law, and are required to be quashed in toto. 2. The ld. Assessing Officer had erred in holding that a sum of ₹ 13,31,421 is disallowable under Section 14A r.w. Rule 8D of the Act and ultimately disallowing a sum of ₹ 10,01,000 over and above disallowance made by the appellant amounting to ₹ 3,30,421 and the learned CIT (Appeals) has erred in confirming the same. On the facts and circumstances of the case and the law applicable, the disallowance as made / confirmed is wholly erroneous is to be deleted. 3. In any case and without pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we admit the additional ground and proceed to dispose off the issue on merits. In this context, we place reliance on the judgemnet of Hon'ble Apex Court, in case National Thermal Power Co. Ltd. Vs. CIT reported in 229 ITR 383 (SC). 5. The brief facts of the case are as follows : The assessee is a company. It is engaged in land development and apartment construction. The Return of Income for the Assessment Year 2013-14 was filed on 28.09.2013, declaring total income of ₹ 5,70,06,240. The assessee in the Return of Income had suo moto disallowed under Section 14A of the Act, an amount of Rs.;3,30,421 as expenditure incurred for earning exempt income. During the course of scrutiny assessment, the Assessing Officer did not accept the suo moto disallowance made by the assessee under Section 14A of the Act and issued show cause notice to the assessee. The assessee contended before the Assessing Officer that investment made in equity shares of Windsor Edifices Pvt. Ltd., Windsor Malind Developers Citizen Co-op. Society Ltd. did not yield any income and hence Section 14A of the Act was not applicable in respect to these investments. The Assessing Officer however rejected t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has held that even if no income was earned from the shares for which moneys were borrowed, even then interest expenditure was allowable. The Hon'ble Supreme Court rejected the argument of the Department that the earning of income was sine qua non for admissibility of deduction. It was observed that it was the purpose of the expenditure which is relevant for determining the application of Sec. 57(iii) of the Act. The same logic is applicable in the case of Sec.14A. Once the assessee is purchasing the shares, naturally the income would come only in the form of dividend which is ultimately exempt and will not form part of the total income and, therefore, the expenditure for the purpose of earning such income would not be eligible. Whether any such exempt income has been earned or not is of no consequence . 4.3 In view of the above, even if no dividend is earned claimed as exempt during the year, disallowance u/s 14A could be made. Also the Hon'ble High Court of Kerala in the case of CIT vs SBT as quoted in 16 taxmann.com 289 (Ker.) (2011) has ruled that the purpose of investment is immaterial In any case, we do not think that the object or purpose of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant that provisions of section 14A will not be applicable since no exempt income is received during the year, is not correct. 7. Aggrieved by the order of CIT (Appeals), the assessee has preferred this appeal before the Tribunal. The ld. AR relied on the judgement of the Hon'ble Jurisdictional High Court in the case of Pragathi Krishna Gramin Bank Vs. JCIT (supra). The learned Departmental Representative, on the other hand, supported the orders of the Income Tax authorities. 8. We have heard both the parties and perused the material on record. The Hon'ble Jurisdictional High Court in the case of Pragathi Krishna Gramin Bank Vs. JCIT (supra) has held the disallowance under Section 14A of the Act cannot exceed the exempt income. The relevant finding of the Hon'ble Jurisdictional High Court reads as follows : 10. .Apparently, the expenditure, so calculated to the extent of ₹ 2,48,85,000 which was disallowed by Assessing Authority is far in excess of the dividend income of ₹ 1,80,30,965. The same prima facie appears to be incorrect. While the assessee claimed that no expenses was incurred in this regard, the assessing authority has disallowed th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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