TMI Blog2017 (11) TMI 1953X X X X Extracts X X X X X X X X Extracts X X X X ..... 238 - DELHI HIGH COURT] held that no disallowance u/s 14A can be made if there is no exempt income earned during the year. The co-ordinate bench further observed that there would be no adjustment of disallowance u/s 14A can be made on this score in the book profit u/s 115JB. We are of the view that there cannot be any disallowance u/s 14A r.w.r. 8D, if there is no exempt income earned during the relevant financial year. Therefore, we direct the AO to delete addition made u/s 14A r.w.r. 8D of I.T. Rules, 1962. We direct the AO to restrict disallowance u/s 14A to the extent of exempt income earned by the assessee. - Decided in favour of assessee. - I.T.A No. 5792 & 5834/Mum/2016 - - - Dated:- 8-11-2017 - SHRI SAKTIJIT DEY (JUDICIAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring total income of ₹ 19,04,19,240. The case was selected for scrutiny and while completing the assessment, the AO made addition of ₹ 2,88,93,452 by partly disallowing the expenses claimed by the assessee as per the provisions of section 14A of the Act, r.w.r. 8D of I.T. Rules. Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A). Before CIT(A), assessee has filed elaborate written submissions and also relied upon certain judicial precedents to argue that it has not earned any exempt income from its investment; therefore, the question of disallowance of expenditure u/s 14A r.w.r.8D does not arise. The CIT(A), considering the explanation of the assessee and also relying upon the decision of ITAT, De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly disallowed expenditure incurred in relation to exempt income by invoking Rule 8D and his order should be upheld. 6. We have heard both the parties, perused the materials available on record and gone through the orders of authorities below. The limited issue that came up for our consideration is whether the AO was right in disallowing expenditure incurred in relation to exempt income even though the assessee has not earned any exempt income for the year under consideration. A similar issue has been considered by the co-ordinate bench of ITAT, Mumbai F Bench in assessee s own case for the assessment year 2010-11 in ITA No.5786/Mum/2014. The co-ordinate bench, after considering the relevant provisions and also relying upon the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned by the Assessee in .the relevant AY and since the genuineness of the expenditure incurred by the Assessee is not in doubt, the question framed is required to be answered in favour of the Assessee and against the Revenue. 20. Since the Special Bench has relied upon the decision of the Supreme Court in Rajendra Prasad Moody (supra), it is considered necessary to discuss the true purport of the said decision. It is noticed to begin with that the issue before the Supreme Court in the said case was whether the expenditure under Section 57 (iii) of the Act could be al lowed as a deduction against dividend income assessable under the head income from other sources . Under Section 57 (iii) of the Act deduction is allowed in respect of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, where the expression used is for the purpose of making or earning such income . Section 14A of the Act on the other hand contains the expression in relation to income which does not form part of the total income. The decision in Rajendra Prasad Moody (supra) cannot be used in the reverse to contend that even if no income has been received, the expenditure incurred can be disallowed under Section 14A of the Act. 22. In the impugned order, the ITAT has referred to the decision in Maxopp Investment Ltd. (supra) and remanded the matter to the AO for reconsideration of the issue afresh. The issue in Maxopp Investment Ltd. (supra)was whether the expenditure (including interest on borrowed funds) in respect of investment in shares of op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the co-ordinate bench in assessee s own case for the earlier year, we are of the view that there cannot be any disallowance u/s 14A r.w.r. 8D, if there is no exempt income earned during the relevant financial year. Therefore, we direct the AO to delete addition made u/s 14A r.w.r. 8D of I.T. Rules, 1962. 8. Coming to appeal for AY 2013-14, in this case, facts are identical to the assessment order for AY 2012-13, except to the extent of exempt income. During the financial year relevant to AY 2013-14, the assessee has earned exempt income of ₹ 30,524 from investments. The Ld.AR referring to the decision of co-ordinate bench in assessee s own case for the assessment year 2011-12 in IT No.5787/Mum/2014 submitted that disallowance u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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