TMI Blog2021 (5) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) ] relevant to the A.Y.2012-13. 2. The revenue has raised the following grounds: - 1. Whether on the facts and circumstances of the case and in Ian', the Ld. CIT(A) was right in deleting the disallowance u/s 14A winch was computed as per Rule 8D of I.T. Rules 1962 on the basis of CBDT Circular No.5/2014 dated 11.02.2014 which clearly states that it is not necessary to earn exempt income in a particular year in which the disallowance is made? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in restricting the disallowance u/s 14A holding that no disallowance is to be made when the assessee not earned any exempt income which is contrary to CBDT Circular No.5/2014 which clarifies that the Rule 8D r.w.s. 14A of the Act provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income? 3. Whether on the facts and circumstances of the case and in Jan', the Ld. CIT(A) was rig/it in deleting the disallowance of ₹ 3,00,40,824/- made u/s 14A r.w. Rule 8D without appreciating the fact that the amount of disallowance u/s.14A of the l.T. Act, 1961 has to be comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred interest expenditure in respect of borrowed funds to the tune of ₹ 2,98,96,686/- and debited expenses of ₹ 1,74,643/- to the Profit and Loss A/c. The AO was of the opinion that the investments made in shares/securities had a potential of earning exempt income in future, hence expense attributable to investment needs to be disallowed. The assessee during the assessment proceedings submitted that section 14A cannot be invoked when no exempt income was earned. The AO rejected the assessee's contention that no expenditure was incurred to maintain the investment portfolio which has the potential to earn exempt income in the future period. Placing reliance on the Bombay High Court decision in the case of M/s Godrej Boyce Mfg. Co. Ltd, Mumbai, the assessee's plea for no disallowance u/s HA was rejected by the Assessing Officer. The AO invoked provisions of section 14A r.w. Rule 8D and accordingly an amount of ₹ 2,98,75,181/- was disallowed under Rule 8D2(ii) and ₹ 1,74,643/- under Rule 8D2(iii). The total disallowance u/s 14A of the Act worked out to ₹ 3,00,49,824/-. 4.3 The appellant has provided elaborate arguments in the submission. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 14A r. w. Rule 8D At this juncture, the attention of your Honor is invited to para no. 4.1 at page 2 of the assessment order, wherein the AO formed the belief that the motive of the assessee for doing investment was to earn dividend income. The relevant gist of AO observation is dotted hereunder- D. Principle of Res Judicata - Assessee's own case -It is submitted that your good office in the assessee s own case for Assessment year 2011-12, your good office had accepted assessee s contention that no disallowance is called for in absence of any dividend income. 4.4 - The fact that, the assessee was not having any exempt income during the year under consideration is undisputed one. The AO has noted in the assessment order that the assesse has not earned any exempt income from the said investment during the year under consideration. The core issue required to be decided is about the validity of the disallowance under section 14A of the Act, when there was no exempt income during the year. There are catena of decisions wherein it was held that no disallowance u/s. 14A r.w. Rule 8D can be made when the assessee has not earned any exempt income. The de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. (2009)319 FIR 204 (Punjab Haryana), to hold that no dis-allowance under Section 14.4 can be made in the absence of the Assessee claiming any income to the exempt in the subject Assessment Year. 4. The aforesaid finding by the Tribunal has been accepted by the Revenue. Therefore, it is not a subject matter of challenge before us. in fact, a similar issue had been raised by the Revenue in the case of Pr. CIT Vs. M/s. Rivian International (P.) Ltd. ITXA No. 693 of2015 decided on 21st November 2017 201 7-TIOL-2575-HC-MUM-IT, where this Court following the decision of the Delhi High Court in the case of CIT Vs. Holcim India (P.) Ltd. (2015) 57 Taxman.com 28 2014TI0L- I 586-HC-DEL-IT and decision in the case of CIT Vs. Shivam Motors (P.) Ltd. (2015)230 Taxman 0063 2014-TIOL-754-HC-ALL-IT has held that iffor the relevant Assessment Year, Assessee has not earned any tax free income, the corresponding expenditure incurred cannot be taken into consideration for dis-allowance. 5. In view of the fact that, the Revenue is not challenging the above finding of the Tribunal on the above issue the questions as framed for our consideration by the Revenue become academic. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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