TMI Blog2022 (7) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... e of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. The aforesaid judgment has held field since 2015 and has been consistently applied by the ITAT and followed by this Court in all subsequent matters. ITAT admitting additional ground raised by the assessee regarding the treatment of subsidy - HELD THAT:- No error was committed by the ITAT by permitting the assessee to raise the additional ground at the stage of the appeal because there is no dispute raised by the department to the fact that the said subsidy given by State of Jammu Kashmir to the assessee is liable to be treated as a capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11th February, 2014 to hold that even if in the relevant assessment year, no exempt income has been earned by the taxpayer, disallowance of expenditure is to be provided. 3. The assessee had then filed an appeal before the CIT(A)against the aforesaid order dated 11th February, 2014, which was dismissed and the aforesaid addition made by the AO was upheld. 4. The assessee being aggrieved by the order of the CIT(A) had approached the ITAT and challenged the addition made in consequence of disallowance under Section 14A of the Act read with Rule 8D(iii). Pertinently, in the said appeal, the assessee further raised an additional ground with respect to subsidy received by it from the State of Jammu Kashmir. It was stated that the subsidy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional issues at the appellate stage. 7. The ITAT in its impugned order after relying upon the judgment of this Court reported in the case of Cheminvest Ltd. v. CIT (2015) 378 ITR 33 set aside the disallowance made by the AO, holding that since no exempt income was earned by the assessee, no disallowance was called for. With respect to the Circular No. 5/2014 dated 11th February, 2014, relied upon by the AO, the ITAT relied upon the judgment dated 16th August, 2017 of this High Court in the case of IL FS Energy Development Company Ltd (2017) 399 ITR 483 wherein this Court has held that the circular of the CBDT cannot override the provisions of Section 14A of the Act. The ITAT accordingly set aside the disallowance made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 14A of the Act read with Rule 8D, b) Permitted the assessee to treat the subsidy received from the State of Jammu and Kashmir as capital receipt instead of revenue receipt , c) Allowed the deduction of education cess as an allowable expenditure. 11. The department in the present appeal has challenged the order of the ITAT. It has challenged the deletion of the disallowance made under Section 14A of the Act by relying upon circular no. 5/2014 dated 11th February, 2014. However, the said challenge of the department cannot be accepted in view of the judgment of this Court in Cheminvest Ltd. v. CIT (supra) wherein this Court has held as follows:- 23. In the context of the facts enumerated hereinbefore the Court answ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e correct legal principle. As noted above, no facts on merits have been brought on record to disallow the claim of subsidy. 14. In opinion of this Court, no error was committed by the ITAT by permitting the assessee to raise the additional ground at the stage of the appeal because there is no dispute raised by the department to the fact that the said subsidy given by State of Jammu Kashmir to the assessee is liable to be treated as a capital receipt in view of the judgment of Shri Balaji Alloys (supra). 15. The issue of deletion of education cess was not pressed during the course of arguments. 16. In view of the above, it is seen that no substantial questions of law arise for consideration in the present appeal. Accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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