TMI Blog2018 (8) TMI 2118X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee : Shri. V. Srinivasan, Advocate For the Revenue : Dr. P. V. Pradeep Kumar, Addl. CIT ORDER PER BENCH: These are appeals filed by the Revenue against the separate orders of the CIT (A), Bengaluru-6, dt. 30.11.2017, for the assessment year 2010-11, 2011-12 and 2014-15, on the following common effective ground of appeal : 2. On the facts and in the circumstances of the case, the learned CIT (A) erred in directing the Assessing Officer to delete the addition since the assessee should have made disallowances even if the company did not earn any tax exempt income in a particular year. The Board vice circular no. 5/2015 has clarified that disallowance have to be made u/s.14 r.w. Rule 8D even when the assessee in a particular year did not earn any exempt income. 02. In this regard, the CIT (A) in para 4, 4.1 and 4.2 has noted the submissions of the assessee to the following effect : 4. The next issue in appeal relates to the disallowance made by the learned A. 0. by invoking the provisions of section 14A of the Act. The total disallowance made by the learned A.O. is Rs. 3,81,32,243/-. Initially, while filing the return of income, the appellant computed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng tax free income. 4.2 In course of assessment proceedings for the earlier assessment years starting with assessment year 2006-07, the issue relating to the deployment of borrowed funds for making the investment in both, earning tax exempt income as well as for nonbusiness purposes was considered in ex-tenso. Ultimately, while concluding the assessment proceedings for the assessment year 2008-09, the following disallowances out of the interest claimed by the appellant under the head Business were made: Interest paid pertaining to investment in capital account of M/s. Padmavathi Associates 86,12,500/- Interest paid pertaining to the amount advanced to M/s. Sastri Family Benefit Trust 67,40,024/- Interest paid pertaining to the investment made in share of Sterling Urban Development Pvt. Ltd. 11,26,250/- Interest paid pertaining to the investment made in the debenture of Sterling Urban Development 2,52,41,251/- Total Interest disallowed under the head Business for the assessment year 2008-09 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip or business of the hotel (or the business of repairs to ocean going vessels or other powered craft) were the only source of income of the assessee during the previous years relevant to the initial assessment year and to every subsequent assessment year upto and including the assessment year for which the determination is to be made. Let us also peruse and consider the provisions of section 80 IA(5) of the Act which is relied on by the Assessing Officer which is also extracted hereunder : Section 80-IA(5) - Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. 5.3.2 From a perusal and comparis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non obstante clause appearing in section 80-I(6) of the Act, is applicable only to the quantum of deduction, whereas, the gross total income under section 80B(5) which is also referred to in section 80- I(1) is required to be computed in the manner provided under the Act which presupposes that the gross total income shall be arrived at after adjusting the losses of the other division against the profits derived from an industrial undertaking. If the interpretation as suggested by the appellant is accepted it would almost render the provisions of section 80A(2) of the Act nugatory and therefore the interpretation canvassed on behalf of the appellant cannot be accepted. It is true that under section 80-I(6) for the purpose of calculating the deduction, the loss sustained in one of the units, cannot be taken into account because sub-section (6) contemplates that only the profits shall be taken into account as if it was the only source of income. However, section 80A(2) and section 80B(5) are declaratory in nature. They apply to all the sections falling in Chapter VI-A. They impose a ceiling on the total amount of deduction and therefore the non obstante clause in section 80-I(6) canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction for the initial assessment year and for every subsequent year thereafter. The incentive deductions both under section 80 IA and 80 IB of the Act have the concept of initial assessment year in respect of almost all eligible business. However, with respect to the eligible business to which the provisions of section 80 IB(10) of the Act apply, there is no concept of initial assessment year. The deduction is granted to undertakings engaged in the business of developing and building housing projects on certain conditions being fulfilled. The provisions of section 80 IB (13) of the Act, that makes the provisions of section 80 IA(5) applicable to section 80 IB also, applies only so far as may be . Thus, by virtue of the fact that there is no concept of initial assessment year under section 80IB(10) of the Act, we are also of the view that the provisions of section 80 IA(5) of the Act would not be applicable to the deduction claimed under section 80 IB(10) of the Act. From this angle of the matter also, we find no merit in the view taken by revenue. Following the above view, we dismiss the appeal filed by Revenue. 05. On the other hand the Ld. DR supported the order passed lowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular assessment year, may not have been exempt earlier and can become taxable in future years. Further, whether income earned in a subsequent year would or would not be taxable, may depend upon the nature of transaction entered into in the subsequent assessment year. For example, long term capital gain on sale of shares is presently not taxable where security transaction tax has been paid, but a private sale of shares in an off market transaction attracts capital gains tax. It is an undisputed position that respondent assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private placement etc. cannot be ruled out and is not an improbability. Dividend may or may not be declared. Dividend is declared by the company and strictly in legal sense, a shareholder has no control and cannot insist on payment of dividend. When declared, it is subjected to dividend distribution tax. 17. On facts, it was noticed in Holcim India (P.) Ltd's. case (supra) that the Revenue had accepted the genuineness of the expenditure incurred by the Assessee in that case and that ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only if any income is made or earned. There is in fact nothing in the language of s. 57(iii) to suggest that the purpose for which the expenditure is made should fructify into any benefit by way of return in the shape of income. The plain natural construction of the language of s. 57(iii) irresistibly leads to the conclusion that to bring a case within the section, it is not necessary that any income should in fact have been earned as a result of the expenditure. 21. There is merit in the contention of Mr. Vohra that the decision of the Supreme Court in Rajendra Prasad Moody's case (supra) was rendered in the context of allowability of deduction under Section 57(iii) of the 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's case (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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