TaxTMI 
TaxTMI 
2016 (11) TMI 957
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....l of the balance-sheet noted that the assessee has shown huge investments amounting to Rs. 30,07,67,119 as on March 31, 2012. Therefore, the assessee was asked to furnish details of disallowable expenditure with regard to earning of exempt income. The assessee vide its submission dated January 28, 2015, submitted that it has not incurred any expenditure in earning the income which is claimed as exempt income and clarified that regarding the source of investment that it has sufficient balance in reserve and surplus account and the investment has been made from its own resources. However, the Assessing Officer was not convinced by the said explanation of the assessee and relying on the co-ordinate Bench decision of the Tribunal in I. T. A. No. 9/Lkw /2008 in the case of Asst. CIT v. Ratan Housing Development Ltd. wherein it was observed that for disallowance under section 14A it is immaterial that any dividend is in fact earned or not. So while making disallowance under section 14A of the Act the Assessing Officer observed in paragraph 7.4 of his order as below : "In Champion Commercial Co. Ltd. the Kolkata Income-tax Appellate Tribunal Bench has held that when the taxpayer ....
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.... the parties and perused the record. We take note that from a bare reading of section 14A, we note that unless the Assessing Officer records a clear finding that the expenditure shown or even not shown in the assessee's account has been incurred, he cannot proceed to compute the disallowance as prescribed by the rule 8D. The condition precedent for the Assessing Officer to embark upon the formula stipulated in rule 8D in order to compute the amount of expenditure incurred in relation to exempt income, is that the Assessing Officer must record a clear finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure to earn income not includible in total income of the assessee. 7. The assessee's case is that it has not incurred any expenditure to earn income not includible in the total income and so no disallowance under section 14A of the Act is warranted. As per the provision of section 14A of the Act, even if the assessee's claim is that no expenditure has been incurred by him relating to income which does not form part of total income, then as per sub-section (3) of section 14A recourse can be taken by the Assessing ....
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....contention of Revenue based on the said order of the Tribunal is repelled. 8. Coming to the next reasoning given by the Assessing Officer relying on a case of Champion Commercial Co. Ltd. Kolkata Income-tax Appellate Tribunal Bench, we must respectfully say that the Assessing Officer has not cited the Income-tax Appeal number or any citation of the order without which we are unable to take any reliance on the same. However, we have to disagree with the proportion or law as noted by the Assessing Officer and wherein it is stated that when the taxpayer does not offer any disallowance on his own, the provision of section 14A(2) read with rule 8D can be invoked without there being any need of any express satisfaction about incorrectness of such claim. We must say that the bare reading of section 14A does not support such an interpretation and we are not in agreement with such proposition of law and the order of the Assessing Officer is vitiated on this count. 9. From a bare reading of section 14A of the Act, it is clear that before making the disallowance the following conditions need to exist. (i) There must be income taxable under the Act ; (ii) The said incom....
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....e's for deposit for the PF/ESIC account has not been deposited in the respective account on or before the due date as per the provision of section 36(1)(va) of the Act, therefore, he disallowed a sum of Rs. 41,94,658. Aggrieved the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals) who was placed to delete the same by the holding as under : "The authorised representative has submitted that once the expenditure has been allowed, the income will not have any effect on the returned income of the assessee. I have also considered the submissions and arguments placed by the authorised representative of the assessee along with contents of the assessment order. The Assessing Officer has treated these amounts (ESI and PF) paid after due dates as income under section 36(1)(va). The authorised representative of the assessee has submitted the details along with copy of challans for payments of such dues before filing the return of income. Once dues are paid before filing of return of income, such expenditure are to be allowed in the hands of the assessee. Thereby, the resultant effect will be nil to the returned income of the assessee. The authori....