TaxTMI 
TaxTMI 
2017 (1) TMI 318
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....r/w.Rule 8 D of the Income Tax Rules can be made in a year in which no exempt income has been earned or received by the Assessee? 2. Whether the Tribunal was right in law in confirming the disallowance under Section 14 A, without appreciating that Section 14 A of the Act envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income? 3. Whether the Tribunal erred in not appreciating that provisions of Rule 8D have to be interpreted within the frame work of Section 14 A and any expenditure which cannot be established to have been incurred in relation to earning ex....
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....e the Income tax Appellate tribunal, (in short 'Tribunal') the directions of the DRP were confirmed relying on a decision of the Special Bench of the Tribunal in the case of Cheminvest Limited vs Commissioner of Income Tax. The order of the Tribunal dated 26.6.2015 is assailed in appeal before us. 3. We have heard the submissions of Sri.Vijayaraghavan, learned counsel appearing for the assessee and Sri.T.Ravikumar, learned Senior Standing Counsel appearing for the Income Tax Department. 4. The admitted position is that no exempt income has been earned by the assessee in the financial year relevant to the assessment year in issue. The order of assessment records a finding of fact to that effect. The issue to be decided thus lie....
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....elied on by the assessing officer in this case) 7. Per contra, Sri.T.Ravikumar appearing on behalf of the revenue drew our attention to the marginal notes of s.14 A pointing out that the provision would apply not only where exempted income is included in the total income, but also where exempt income is 'includable' in total income. 8. He relied upon a Circular issued by the Central Board of Direct taxes in Circular No. 5 of 2014 dated 11.2.2014 to the effect that s. 14A was intended to cover even those situations whether there is a possibility of exempt income being earned in future. The Circular, at paragraph 4, states that it is not necessary for exempt income to have been included in the income of a particular year for the....
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....y apportionment of expenses incurred in relation to exempt income.' 10. The provision thus is clearly relatable to the earning of actual income and not notional or anticipated income. The submission of the Department to the effect that s.14A would be attracted even to exempt income includable in total income would entail the assessment of notional income, assumed to be exempt in the future, in the present assessment year. The computation of total income in terms of s.5 of the Act is on real income and there is no sanction in law for the assessment of admittedly notional income, particularly in the context of effecting a disallowance in connection therewith. 11. The computation of disallowance in terms of Rule 8D is by way of a det....
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...., and borrowed funds, for which the payment of interest had been incurred, had not been invested. The assessee sought to draw a nexus between the borrowed funds and the interest payments, highlighting the position that the quantum of available free funds was far in excess of the investments made. The Bench, in the light of the above submissions, remanded the issue to the file of the assessing officer to be considered de novo and after conducting a proper enquiry. Inter alia a direction was issued to the assessee to tender a proper explanation for the interest payments. The open remand was made in the facts and circumstances of that case and no conclusion was drawn by the Bench on the position of law involved. In fact, the substantial questi....