2016 (1) TMI 574

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.... under:- "1. Whether on the facts and circumstances of the case and in law the CIT (A) was right in holding that presence of exempt income is necessary for disallowance of expenditure u/s 14A? 2. Whether on the facts and circumstances of the case and in law the CIT (A) was right in holding that investments were made out of the non-interest bearing funds and as no expenditure has been incurred for earning the exempt income without appreciating the fact that the assessee has not proved nexus between the owned interest fee funds and investment? 3. Whether on the facts and circumstances of the case and in law the CIT (A) was right in holding that the reopening of case is not in accordance with the provisions of sec. 147 of the Act witho....

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....bsence of exempt income. After invoking the provisions of section 14A of the IT Act, the AO has worked out the disallowance as per the rule prescribed as under:- "4.7 In view of the above discussions, the proportionate interest expenditure attributable to income which does not form part of total income is disallowed u/s.14A. Hence, the proportionate interest expenses attributable to investment in exempt income u/s. 14A of the I. T. Act is computed as under: A) Total interest Rs. 1,12,14,87,815/- B) Total investment on First day of the year Rs. 39,41,87,000/- C) Average of total assets Rs. 31,60,61,38,802/- The amount to be disallowed u/s 14A A X B/C = 1,39,87,026/- 4.8 In view of the above discussion, the total disallowa....

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....t Tradecom P. Ltd., Mumbai VS ACIT in ITA Nos. 5779/Mum/2006 & ITA No.208/Mum/2009, it was held on identical facts as under:- .............. 5.3. Also in the case of Corrtech Energy Pvt. Ltd. vs. DCIT in ITA No.208/Ahd/2012 it has been held as under: -.... 5.4 Thus respectfully following the decision of jurisdictional High Court in the case of Delight Enterprises and the Hon'ble Punjab & Haryana High Court in the case of CIT Vs Winsome Textile Industries Ltd. (supra) it has been held that section 14A could have no application as the assessee has not claimed any exempt income in the year under consideration." For the sake of brevity, the reproduction of the case laws has been avoided while reproducing the relevant portions from the o....

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.... years under consideration were concerned, it was an admitted factual position that the AO has not mentioned any such amount. Meaning thereby, there was no exempt income earned by the assessee for the years under consideration. In reply to one of our questions, the learned AR, Mr. K. P. Dewani has also made a statement at Bar that no dividend was declared, hence, there was no earning of exempted dividend income. He has also clarified that for the purpose of invocation of the provisions of section 14A of the IT Act, the AO has applied the formula only in respect of disallowance of proportionate interest expenditure. There was no allegation of the AO that the exempt income was earned by the assessee. In the light of the undisputed finding on ....