TaxTMI 
TaxTMI 
2016 (1) TMI 415
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..... The Assessee has raised two elaborate grounds in its appeal, however the crux of the issue is concised herein below for adjudication:- "The Ld. Assessing Officer has erred in invoking the provisions of section 14A of the Act because the Company has not earned any exempt income during the year under consideration and therefore disallowance of Rs. 11,79,079 as expenses attributable towards earning exempt income is not warranted." 3.1 The assessee is engaged in the business of providing logistics services and supply chain management, filed its return of income on 15.10.2010 admitting loss of Rs. 1,16,55,581/-. Subsequently the case was selected for scrutiny and reference was made U/s.92CA(1) of the Act on 11.02.2013 for determina....
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.... form part of the total income under this Act. 144(3): The provisions of sub-section (2) shall a/so apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act." 2.4 Also reliance is placed on Memorandum explaining the provisions, Notes on clause relating to Finance Bill, 2001 by which the said provision was inserted into the Act. "..... the expenses incurred can be allowed only to the extent they are relatable to the earning of taxable income...." 2.5 The assessee has not admitted any expenditure against the earning of exempt income. However, given the volume and portfolio of investment....
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....he last day of the previous year 48,28,91,889 A X B/C 2,01,985 ii) One half per cent of average value of investment, income from which does not or shall not form part of the total income, as appearing in the Balance Sheet of the assessee, on the first day and the last day of the previous year 9,77,094 Disallowance U/s.14A r.w.Rule 8D Aggregate *i), (ii) and (iii) 11,79,079 3.2 On further reference to the Dispute Resolution Panel (DRP), the assessee made the following submissions before the DRP:- "i) The AO has erred in law and facts in applying the provisions of the section 14A of the Act where the Company has not earned any income during the year which would be exempt under the provisions of the Act . ....
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....in India and section 14A of the Act would not apply to such income. x. The AO has erred in law, by including the amount of' investment made into the foreign company in the total investments while computing the value of average investments during the year. xi. AU has erred in facts and law while calculating the total value of assets of the Assessee as on the first day and last day of the relevant previous." 3.3 However the Ld. DRP upheld the order of the Ld. Assessing Officer by observing as under:- "This panel has taken into consideration all the arguments of the assessee. This Panel has also taken into consideration what Assessing Officer has observed in draft order while invoking Rule-8D in this case. The Ass....
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.... assessee and all those companies subsequent to acquisition of the shares has become the sister concerns of the assessee. Moreover, the investments made were out of non-interest bearing funds of the assessee company. We find that these facts were not taken into consideration by the Revenue before invoking the provisions of Section.14A of the Act in the case of the assessee. In similar circumstance this Bench of the Tribunal in the case of M/s Agile Electric Sub Assembly Pvt. Ltd., in I.T.A.No.1272/Mds./2015 vide order dated 27.11.2015, following the earlier order, has held as follows:- "7.2 In regard to applicability of Section 14A of the Act read with Rule 8D also; the above view will be applicable. Moreover in the case EIH Associ....