TMI Blog2024 (4) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... tted the matter back to the file of the Assessing Officer for verification of factual issues of the case. Hon ble Madras High Court in assessee s own case [ 2012 (4) TMI 630 - MADRAS HIGH COURT] relied on by the assessee has dismissed the appeals of the Revenue for the preposition that the unrecovered amount of the subscriber was to be construed as a bad debt and allowable as deduction under section 36 of the Act. So far as the ground raised by the Department is that the Hyderabad Benches of the Tribunal, vide its order in ITA Nos. 471 1049/Hyd/2002 remitted the issue of bad debts to the file of the Assessing Officer is concerned, we find that the ground raised by the Department is not correct for the reason that the Hyderabad Benches of the Tribunal, in principle, allowed the claim of bad debts and only for factual verification, remitted the matter to the AO. Therefore, it cannot be said that the entire issue, on merits, has been remitted back to the file of the AO. Keeping in view of the decision of the Hyderabad Benches of the Tribunal, Hon ble High Court of Hyderabad, Telangana [ 2023 (6) TMI 1373 - TELANGANA HIGH COURT] as well as the judgement of the Hon ble Madras High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld, in setting aside the issue of claim of bad debts to the file of the Assessing Officer for verification. 2.1 The learned CIT(A) failed to appreciate and follow the decision of the Hon'ble ITAT Hyderabad in ITA No. 500/Hyd/99 (A.Y. 1995-96), ITA No.294/Hyd/ 2001 (A.Y. 1997-98), ITA No. 471/Hyd/2002 (A.Y. 1998-99) and ITA No. 1049/Hyd/ 2002 (A.Y. 1999-2000) dated 26.07.2004 in the assessee's own case, wherein it was held that bad debts in respect of subscriptions defaulted by the prized subscribers can be claimed only to the extent of the funds introduced by the Foreman and that the subscriptions that is becoming bad in future point of time cannot be held to have become bad in the current year and hence bad debts can be allowed only to the extent of the funds put in by the Foreman during the year. 3. The ld. CIT(A) has erred in directing the AO to recompute the disallowance under section 14A without following the law contained in Explanation to Section 14A and to compute the amount of expenditure to be disallowed under the second limb of Rule 8D(2) by taking into account only the amount of investments which yielded exempted income (dividend) income during the year by follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed chits. For and from the Asst. Year 1989-90 the conditions required for allowance of a bad debt under section 36(1) (vii) r.w.s. 36(2) of the Act are as under: (i) It must be a proper debt or a part there of (ii) It must be of revenue nature, Contra-distinguished from capital nature (iii) It must be written off as irrecoverable in the accounts of the assessee for the previous year. (v) (a) it must be taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year or (b) it must represent moneys lent in the ordinary course of business of banking or money lending which is carried on by the assessee. In order to claim a bad debt under section 36(1) (vii) of the Act, the assessee has to satisfy all the four conditions mentioned above, Otherwise, the assessee is not entitled to claim a bad debt under section 36(1) (vii) of the Act. The Assessing Officer was of the opinion that the chit fund transactions will not partake the character of debt and as such the relationship between the chit organization and subscriber (whether or not a prized subscriber) is not relationship of cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the said case the Supreme Court was considering whether the parliament had power to legislate in respect of chit contracts under the concurrent list. It held that the pith and substance thereof is to be examined to determine whether it falls within the legislative competence of any particular legislature. It is further well settled that even if such legislation incidentally affects or deals with other aspects, its constitutionality have to be upheld on the principle of pith and substance. In the said decision, the Hon ble Supreme Court has held that the relationship between the foreman as the organizer of the chit and the members of the chit fund were not that of the borrower and lender and that When a person joins the chit and agrees to make subscription in future, no debt is created against him in favour of the foreman or any other person. It held that even in the case of a prized subscriber who is required to make such subscription there is no debt involved. He argued that it would therefore be seen that the said decision dealt with nature of chit agreement as to its incidence with reference to compliance of terms of such Agreement and on the relationship of the parties in suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant. What is required to be seen is whether a bonafide assessment has been made by the assessee to the effect that realisation of the debt is not possible. Revenue cannot insist on any demonstrable and infallible proof that the debt has become bad debt. For the assessment years 1995-96 and 1997-98, the view taken by the first appellate authority was affirmed and Revenue's appeals on the issue of bad debts were dismissed. 18.1. Thus, the view taken by the Tribunal was that bad debts could be allowed to the extent of the instalments defaulted by the prized subscriber and written off as bad debt in the books by the assessee. But for the future instalments that are likely and yet to be defaulted no claim can be allowed. However, Tribunal was of the view that full facts and figures were not available and therefore, the matter was remanded back to the file of the assessing officer 1or considering the claim afresh, Accordingly, the orders of the assessing officer for the assessment years 1998-99 and 1999-2000 on the issue of allowability of bad debt as affirmed by the CIT(A) were set aside and the matter was remanded back to the file of the assessing officer for consideration afr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal held: 6.3. Tine of recognition of income from Commission on cancelled chits: This issue is involved in the assessee's appeals for assessment years 1998-99 and 1999-2000. The dispute is about time of accrual of the income by way of commission in respect of cases where defaulting non-prized subscribers who are removed from the chit and in whose place new subscribers are substituted. On a careful consideration of the issue, we find that from out of the amount that is payable to the defaulting subscriber consequent to his replacement by another person the company is entitled to deduct 9% as commission. This has nothing to do with the regular commission income of the assessee. Thus the stand of the assessee that the commission income accrues when the accounts have been finally settled to the defaulting non-subscriber to our mind appears to be the correct position. Otherwise in case of a non-prized subscriber the amount of 5% would be deducted from the amounts due to him much before the settlement of his account and recognized as income by way of transfer from current liabilities to profit and loss account. Reliance was placed by the Revenue on the Special Bench decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced by the Foreman and that the subscriptions that is becoming bad in future point of time cannot be held to have become bad in the current year and hence bad debts can be allowed only to the extent of the funds put in by the Foreman during the year and pleaded that the said order of the Hyderabad Benches may be followed. 8. On the other hand, the ld. Counsel for the assessee has submitted that by following the decision of the Hon ble High Court of Hyderabad, Telangana in assessee s own case, the ld. CIT(A) has decided the issue in favour of the assessee and prayed following the same. 9. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including paper book filed by the assessee. In this case, the assessee has debited an amount of ₹.63,84,79,939/- on account of bad debts written off during the previous year relevant for the assessment year 2015-16. Out of this, bad debts amounting to ₹.32,78,21,398/- pertain to the running chits and the balance bad debts of ₹.31,06,58,541/- pertain to the terminated chits. The Assessing Officer, on the grounds and reasons mentioned in the order of assessment, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Whatever may be the interpretation placed by Courts on this issue, the CBDT has placed its interpretation on the issue. 6.6 (iii) The instructions issued by the Central Board of Direct Taxes vide Instruction No.1175 under Order F.No.21/78-IT (80) dated 16th May, 1978 read as under: (a) If any person organizes Chit Funds and for this purpose brings the members together, administers the Chit Funds and thereby earns commission etc. profits made by such a person is income from business and if for any special reason there is loss then it is business loss. Normally, there should be no loss to the organiser unless he takes over the liability of some of the members. In such a case, the unrecovered amount due from such members will have to be treated as bad debts and the test to be adopted in usual business assessment for the allowance of bad debts would be applicable in such cases also. (b) In the hands of the subscribers, a few will be receiving more than what they have subscribed. This extra amount is in the nature of interest and as such taxable. Members who take the money earlier from the chit will necessarily have to contribute more which means that they incur loss, which is noth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same has to be necessarily applied by all the income tax authorities though the interpretations may have otherwise been made by the courts and this proposition is laid down by the Hon ble Supreme Court in the case of Collector of Central Excise v. Dhiren Chemical Industries (259 ITR 554 at 557) wherein it is held as follows: We need to make it clear that regardless of interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding on the Revenue. Similar was the view of the Hon ble Supreme Court in the case of K.P.Varghese (131 ITR 597 (SC)). The Apex Court held as follows, at page 612 of the Report: The two circulars of the CBDT to which we have just referred are legally binding on the revenue and this binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of sub-section (2) and they depart or deviate from such construction. It is now well settled as a result of two decisions of this Court, one in Navnit Lal C. Javeri v. K.K.Sen, (AAC (1965) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 issued by the CBDT which was later on clarified by the CBDT itself on 25.03.1992. As per the instructions of CBDT, if any person organised chit funds and brings the members together, administers the chit funds and thereby earns commission etc., profits made by such a person is income from business and if for any special reason, there is loss then it is business loss. Normally, there should be no loss to the organiser unless it takes over the liability of some of the members. In such a case, the unrecovered amounts due from such members would have to be treated as bad debt. The test to be adopted in usual business assessment for the allowance of bad debts would be applicable in such case also. In the clarification dated 25.03.1992, CBDT reiterated the view taken in instruction No.1175 dated 16.05.1978. After referring to various Supreme Court decisions, Tribunal held that instructions and circulars issued by CBDT are binding on revenue authorities. Therefore, there was no reason for the revenue authorities not to follow the instructions of CBDT. Further, Tribunal observed that there was no reason to deny the claim of the assessee of bad debt. It is not the case of the Revenue that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal proceedings against the debtor would not automatically justify the finding that he would not be entitled to write off the amount as a bad debt. Honesty of the assessee is relevant. What is required to be seen is whether a bonafide assessment has been made by the assessee to the effect that realisation of the debt is not possible. Revenue cannot insist on any demonstrable and infallible proof that the debt has become bad debt. For the assessment years 1995-96 and 1997-98, the view taken by the first appellate authority was affirmed and Revenue's appeals on the issue of bad debts were dismissed. 18. Coming to the assessment years 1998-99 and 1999-2000, Tribunal was of the view that the issue was the same. Only difference was that in the earlier assessment years, assessee was making the claim of bad debt in respect of the prized subscribers on the closure of the chit i.e., the year in which the chit was closed. From the assessment year 1998-99 onwards, assessee made its claim after the default was made by the prized subscriber in payment of four instalments. Tribunal held as follows: 6.6 (xvi) Now we consider the appeals of the assessee for the assessment years 1998-99 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and Auditing for Chit Fund Business published by the Research Committee of the Institute of Chartered Accountants of India, New Delhi which at page 19 under the head Accounting Standard (AS) 4, Contingencies and Events occurring after the Balance Sheet date at para 3.11 and 3.12 read as follows: 3.11. In a Chit Fund Business, it is possible that some prized subscribers may not pay their instalments after receiving the prized amount. The loss arising on account of non-payment of instalments by a prized subscriber is borne by the Foreman. Accordingly, in respect of the instalments which have become due on the balance sheet date but not by the prized subscribers as well as the instalments which have not become due on the balance sheet date but the prized subscriber has defaulted in respect of the instalments which have become due, a provision has to be created or a contingent liability has to be disclosed keeping in view the requirements of paragraphs 10 and 11 of AS 4 reproduced below: 10. The amount of a contingent loss should be provided for by a charge in the statement of profit and loss if: (a) it is probable that future events will confirm that, after taking into account any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine or policy. 6.6 (xxi) We have to mention that this issue has not come up during the course of arguments of the case. If the assessee has made the claim as indicated above, no prejudice would be caused to him by setting aside the matter. Similarly no prejudice would be caused to revenue on this count as it can examine the claim afresh. To allow the claim to the extent indicated above fresh collection of facts and figures are required and thus we set aside the issue to the file of the assessing officer for considering the claim afresh in the light of this order. Thus the appeal of the assessee for the assessment years 1998-99 and 1999-2000 on this ground of allowability of bad debt is allowed for statistical purposes. 18.1. Thus, the view taken by the Tribunal was that bad debts could be allowed to the extent of the instalments defaulted by the prized subscriber and written off as bad debt in the books by the assessee. But for the future instalments that are likely and yet to be defaulted no claim can be allowed. However, Tribunal was of the view that full facts and figures were not available and therefore, the matter was remanded back to the file of the assessing officer for cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advert to sub-section (2) of Section 36 and Section 37 of the Act. 20.1. As per sub-section (2) of Section 36, in making any deduction for a bad debt or a part thereof, the provisions contained therein shall be applied, such as, no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year or represents money lent in the ordinary course of the business of banking or money lending which is carried on by the assessee; if the amount ultimately recovered on any such debt or part of debt is less than the difference between the debt or part and the amount so deducted, the deficiency shall be deductible in the previous year in which the ultimate recovery is made; any such debt or part of debt may be deducted if it has already been written off as irrecoverable in the accounts of an earlier previous order, but the assessing officer had not allowed it to be deducted on the ground that it had not been established to have become a bad debt in that year; etc. 20.2. Thus, what sub-section (2) of Section 36 sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of all future subscriptions forthwith in the case of a default. Chapter V of the Chit Funds Act, 1982 prescribes the rights and duties of prized subscribers. Sections 31 to 33 in Chapter V read as follows: 31. Prized subscriber to furnish security. Every prized subscriber shall, if he has not offered to deduct the amount of all future subscriptions from the prize amount due to him, furnish, and a foreman shall take, sufficient security for the due payment of all future subscriptions and, if the foreman is a prized subscriber, he shall give security for the due payment of all the future subscriptions to the satisfaction of the Registrar. 32. Prized subscriber to pay subscriptions regularly. Every prized subscriber shall pay his subscriptions regularly on the dates and times and at the place mentioned in the chit agreement and, on his failure to do so, he shall be liable to make a consolidated payment of all the future subscriptions forthwith. 33. Foreman to demand future subscriptions by written notice. (1) A foreman shall not be entitled to claim a consolidated payment from a defaulting prized subscriber under Section 32 unless he makes a demand to that effect in writing. (2) W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s subscriptions, the foreman will be obliged to obtain the equivalent amount from other sources, to meet the obligations for payment of the chit amount to the other members, who prize the chit on subsequent draws. For raising such an amount, the foreman may be required to pay high rates of interest. 14. The stipulation of empowering the foreman to recover the entire balance amount in a lump sum, in the event of default being committed by a prized subscriber, is to ensure punctual payment by each of the individual subscribers of the chit fund. Without punctual payments, the system would become unworkable, and the foreman would not be in a position to discharge his obligations to the other members of the chit fund. 15. In view of the aforesaid discussion, the relationship between a chit subscriber and the chit foreman is a contractual obligation, which creates a debt on the day of subscription. On default taking place, the foreman is entitled to recover the consolidated amount of future subscriptions from the defaulting subscriber in a lump sum. 23. In Khyati Realtors Private Limited (supra), on which much reliance has been placed by Mr. Prasad, learned Standing Counsel, a three-Judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal has given good reasons as to why the claim of bad debt is an allowable deduction under Section 36(1)(vii) of the Act. That apart, Tribunal took the view that bad debts can be allowed to the extent of the instalments defaulted by the prized subscriber and written off as bad debt in the books by the assessee, but at the same time clarifying that for future instalments that are likely and yet to be defaulted no claim for bad debt can be allowed. However, to allow such a claim to the extent indicated, Tribunal observed that more facts and figures were required and therefore, relegated the matter back to the file of the assessing officer. We see no error or infirmity in the view taken by the Tribunal on the issue of bad debts covering both the facets. 25. That brings us to the next issue as to royalty payment. While deleting the disallowance made on this count by the assessing officer and allowing the claim of the assessee, Tribunal took note of the fact that the only ground for the disallowance was that in the prior assessment years no such payment was made. However, the undisputed fact is that the logo and the words Shriram Chits is owned by M/s. Shriram Chits and Investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure is incurred to acquire a tangible asset, determination as to whether the said acquisition of tangible asset is of capital nature or the expenditure is of revenue nature, may not pose a problem. However, in case of technical information and know-how, having regard to their unique characteristic, the questions that need to be posed for determining the nature of such an expenditure are also of different nature. In case where there is a transfer of ownership in the intellectual property rights or in the licences, it would clearly be a capital expenditure. However, when no such rights are transferred but the arrangement facilitates grant of licence to use those rights for a limited purpose or limited period, the Courts have held that in such a situation, the royalty paid for use of such technical information or know-how would be in the nature of revenue expenditure as no enduring benefits is acquired thereby. This was so held in a classic case, entitled CIT v. Ciba of India Ltd. (AIR 1968 SC 1131 : (1968) 69 ITR 692) 26.1. This decision of the Supreme Court has been followed by the Madras High Court in Shriram Transport Finance Company Limited (supra). Madras High Court has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deleting the disallowances made by the assessing officer, have rightly treated the royalty payment as revenue expenditure. Once the payment of royalty is treated as revenue expenditure, automatically, it goes without saying that the assessees would be entitled to 100% deduction. Therefore, we need not interfere with the orders passed by appellate authorities. Accordingly, the substantial questions of law relating to royalty, are answered in favour of the assessees. 27. We are in respectful agreement with the view expressed by the Madras High Court as extracted supra. Therefore, we have no hesitation in answering this issue in favour of the assessee. 28. The last issue is that of the claim relating to commission on removed chits. Tribunal decided this issue in favour of the assessee. This was what the Tribunal held: 6.3. Time of recognition of income from Commission on cancelled chits: This issue is involved in the assessee s appeals for assessment years 1998- 99 and 1999-2000. The dispute is about time of accrual of the income by way of commission in respect of cases where defaulting non-prized subscribers who are removed from the chit and in whose place new subscribers are subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the matter, we answer the questions proposed by the Revenue as substantial questions of law against the Revenue and in favour of the assessee. 11. While dismissing the appeals of the Revenue and deciding the issue in favour of the assessee by the Hon ble High Court of Hyderabad, Telangana vide its order dated 09.06.2023, we have also perused the decision of the Hyderabad Benches of the Tribunal, wherein, for the assessment years 1998-99 and 1999-2000 in ITA Nos. 471 1049/Hyd/2002, the Tribunal, in principle, allowed the appeal of the assessee in respect of bad debts claim and remitted the matter back to the file of the Assessing Officer for verification of factual issues of the case. Similarly, the Judgement of the Hon ble Madras High Court in assessee s own case in T.C.A. Nos. 996 to 998 of 2005 dated 03.04.2012 relied on by the assessee at its paper book page 124, wherein, the Hon ble High Court has observed and held as under: 9. In order to decide on the rival contentions made, it is necessary to get into the decision of the Apex Court reported in AIR 1993 SC 2063 (Shriram Chits Investments (P) Ltd. Vs. Union of India others), a decision which dealt with the vires of the Chit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Act are regulatory in nature, the Apex Court further pointed out that the Act intends to avoid fraud played on the subscribers by delaying the payment. Dealing with the nature of chit agreement, the Apex Court referred to the decision of the Kerala High Court reported in AIR 1983 Ker 178 (FB) (Janardhana Mallan Vs. Gangadaran), holding that the chit transaction is not a money lending transaction within the meaning of Money Lenders Act and there is no creditor and debtor relationship, for the purpose of it being treated as a money landing transaction. 11. Keeping this declaration of law, when we look into the provisions of the Chit Funds Act, one may note the obligation of the foreman, particularly as given under Section 21. While enumerating the rights of the foreman, the Act also takes care to impose an obligation on the foreman to do all acts which may be necessary for the due and proper conduct of the chit under sub clause (f) which empowers the foreman to substitute subscriber in the place of defaulting subscriber. As far as the duties of the foreman as enumerated under Section 22(2) of the Act is concerned, the Act stipulates that in the event of default by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e earlier years, the terms of the claim of the assessee in earlier years assume significance. 14. It is not denied by the Revenue that in respect of the earlier years 1990-91 and 1991-92, the claim of the assessee for deduction as a bad debt was allowed and in the appeal preferred by the Revenue before the Tribunal, the Tribunal referred to the clarification issued by the Board in F.No.169/21/78/21/78-IT(80) dated 16th May 1997, which reads as follows:- (a) If any person organises Chit Funds and for this purposes brings the members together, administers the Chit Funds and thereby earns commission, etc., profits made by such a person is income from business and if for any special reason there is loss then it is business loss. Normally there should be no loss to the organiser unless he takes over the liability of some of the members. In such a case the unrecovered amount due from such members will have to be treated as bad debts and the test to be adopted in usual business assessment for the allowance of bad debts would be applicable in such cases also. (b) In the hands of the subscribers, a few will be receiving more than what they have subscribed. This extra amount is in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pump in its own money for the purpose of ensuring that the chit cycle goes on as promised. It is an admitted fact that in respect of shortfall due to non-payment, the company brought in its own money which was utilised for running the chit business and this did not stand in the way of the statutory obligation of the foreman on getting the chit cycles move on as before. Thus with statutory obligation imposed and well in compliance of the said obligation, that the company had to pay its own money to have the successful chit circulated as before, as pointed out by the Apex Court, if there is an obligation under a special contract between the defaulted chit holder and the company, even if the amount due is not treated as a debt within the meaning of the Money Lenders Act, yet, the contract gives rise to a relationship of a creditor and debtor. Thus, the Commissioner of Income Tax (Appeals) having gone into the requirement of the provisions under the Chit Funds Act, held that the advancement of the money is part and parcel of the business, thus giving rise to a situation that when the defaulter did not make the payment to the company, the company had to claim it as a bad debt for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Extending the same logic to the present case herein, going by the obligation of the foreman arising under Sections 21 and 22 of the Chit Fund Act to make good the default to the successful bidder on the subsequent day transaction, the claim was rightly considered by the Tribunal as one allowable under Section 36 of the Act. 21. As far as the reliance placed on the decision reported in [2010] 328 ITR 342 (Commissioner of Income Tax vs. Sahib Chits (Delhi) (P) Ltd.) is concerned, we do not find that the Revenue could draw any assistance from the said decision, since the said decision relates to a totally different situation. A perusal of the above judgment of the Delhi High Court shows that it is more on the question of discount allotted to the members of the chit in the prized chit disbursed by the various members and the successful bidder being given the contribution made. Thus the distribution was not made out of any money borrowed by the assessee to result in a debt for considering the same as deduction at source. 22. As far as the decision reported in [1998] 229 ITR 727 (Suman Saving and Investments Pvt. Ltd. vs. CIT) is concerned, the same also is not of any relevance to the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13,77,195 Exempt income claimed by the assessee 53,00,021 10,60,004 17,49,023 10,00,000 7.5.2 The AO, after applying the provisions of Rule 8D(2)(i), calculated 1% of annual average of the monthly average of investments, thus arriving at the above disallowance. The contention of the assessee is that, for the purpose of calculating the amount of disallowance under provisions of Rule 8D, only those investments that would fetch exempt income should be included. Further, the assessee has also submitted that such investments were made out of own funds and it had surplus money which would enable to make such investments. Hence, no expenditure was incurred towards such exempt income. 7.5.3 I have considered the submissions of the appellant. The Rule 8D reads as under: As per the present income tax laws (post amendment in June 2016), expenditure incurred in relation to earning exempt income is the aggregate of following: Any amount of expenditure which is directly relating to exempt income; and An amount that is equal to 1 per cent of the annual average of the average of opening and closing balances of the investment, income from which does not form part of the total income. However, any d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be included. The above contention of the assessee is acceptable in view of the decision of the Coordinate Benches of the Tribunal in the case of Parry Agro Industries Ltd. v. DCIT in ITA No. 2372 2373/Chny/2017 dated 21.03.2018. Just because, the Department has not accepted the decision of the Tribunal, we cannot take any different view in the absence of any higher Courts decision having modified and reversed the findings of the Tribunal. Moreover, the ld. CIT(A) has rightly directed the Assessing Officer to rework the computation of disallowance under section 14A r.w. Rule 8D to restrict the same to the extent of dividend income earned by the assessee by following the above decision in the case of Parry Agro Industries Ltd. v. DCIT (supra). 18. Further, where there is no exempt income earned in relevant assessment year, section 14A of the Act cannot be invoked in view of the decision in the case of CIT v. Chettinad Logistics (P) Ltd. as rightly followed by the ld. CIT(A). Thus, we find no infirmity in the order passed by the ld. CIT(A) with regard to the application of section 14A r.w. Rule 8D. 19. The appeal filed by the Revenue in ITA No. 953/Chny/2023 for the assessment y ..... 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