TaxTMI 
TaxTMI 
2015 (8) TMI 871
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.... 8D of the Income Tax Rules. 2. At the outset, counsel for the assessee submits that in this case assessee has not received any dividend income which was claimed as deduction in the assessment year 2010-11. Counsel submits that in such circumstances when no dividend income was earned by the assessee and made any claim, the co-ordinate Bench of this Tribunal held that provisions of section 14A have no application in the case of ACIT Vs. M.Baskaran in ITA No.1717/Mds/2013 dated 31.07.2014, a copy of the said order is placed on record. Counsel further submits that out of the total investments of Rs. 6,08,78,812/-, Rs. 4,94,78,812/- represents share application money with Jones Foundation Pvt. Ltd. which is not an investment or asset yielding ....
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..... Heard both sides. Perused orders of lower authorities and submissions made by the assessee and the decisions in relied on. No doubt in the decision of the Special Bench of Delhi Tribunal in the case of Cheminvest Ltd. Vs. ITO (supra), the Special Bench held that disallowance under section 14A can be made even in the year in which no exempt income has been earned or received by the assessee. This decision of Special Bench of the Tribunal has been impliedly overruled by the decisions of High Courts in the following cases: 6. In the case of M/s. Shivam Motors P.Ltd. (supra), before the Hon'ble Allahabad High Court, the Revenue raised the following question of law:- "Whether on the facts and in the circumstances of the case and in law, th....
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....facts and the decision relied upon by the Id AR. The Hon'ble Punjab & Haryana High Court in the case of CIT vs. Winsome Textile Industries Ltd. reported at (2009) 3191TR 204(P&H) has held that in the present case, admittedly, the assessee did not make any claim for exemption. In such a situation, section 14A could have no application. In this case also, the assessee has not claimed any exempt income in this year. Therefore, respectfully following the judgement of Hon'ble High Court of Punjab & Haryana in the case of CIT vs. Winsome Textile Industries Ltd. (supra), we hereby allow this ground and direct the AO to delete the addition. Therefore, ground Nos 1 to 1.2 raised by the assessee in its cross objection are allowed." 4. Couns....
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....me to sister concern without having nexus with the business. The observations made therein have to be read in that context. In the present case, admittedly the assesse did not make any claim for exemption. In such a situation section 14A could have no application." 5. We do not find any question of law arising, Tax appeal is therefore dismissed." 9. The Hon'ble Bombay High Court in the case of CIT Vs. Delite Enterprises(supra) held as under:- "The Revenue is in appeal on the following questions:- "Whether on the facts and in the circumstance of the case and in law the Hon 'ble Tribunal was right in deleting the disallowance made by the Assessing Officer of interest paid by the Assessee Company on borrowed funds amounting to Rs. 2....
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....he same under section 14A of the Act was justified. 9. The CIT(A) vide order dated 24.6.2004 annexure A.II recorded as under:- "7.2 Keeping in view the above facts and circumstances of the case it is held that the AO was not correct in applying section 14A of the IT Act in disallowing the expenditure on account of interest amounting to Rs.46,91,684/-. It was incumbent on the AO to establish a nexus between the expenditure incurred and the income which was exempt under the Act. Facts clearly do not support the action of the AO. Disallowance is accordingly deleted. The AO is directed to recomputed the income accordingly." 10.Vide order dated 16.5.2008, Annexure A.III, the Tribunal on appeal by the revenue while upholding the finding rec....
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....f the learned Department Representative has to be rejected on the face of it inasmuch as the entire income of the assessee is taxable under the Act. Section 14A is applicable only when any part of the income is not to be included in the total income of the assessee and the expenditure relating to that part of income is claimed by the assessee as deduction. In such cases only, the expenditure relating to the exempted income can be disallowed and not otherwise. Since in the present casethe entire income is found to be taxable, no disallowance can be made under section 14A of the Act.' 10. Moreover, the AO has not established the nexus between invested funds and the interest bearing funds, since the investments in shares are in the years....