2015 (2) TMI 1234

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....re and need no adjudication. 3. Ground Nos.2 to 6 relate to the assessee's claim of deduction u/s 80-IB(10) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] while ground Nos.7 to 9 are against the disallowance made by the Assessing Officer (AO) u/s 14A of the Act. 3.1 Brief facts of the case are that the assessee which is carrying on the business of developing and building of residential flats and colonies, filed its return of income declaring total income of Rs. 1,95,84,996/- after claiming deduction u/s 80-IB(10) of the Act. The return of income was filed on 9/3/2010 u/s 139(4) of the Act. During the assessment proceedings, the AO observed that the assessee is not eligible for deduction u/s 80-IB(10) ....

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....ot made any claim of exempt income in its return of income and therefore no disallowance u/s 14A can be made. The learned counsel for the assessee submitted that the AO had made the disallowance u/s 14A read with rule 8D even though there was no exempt income during the relevant financial year. The CIT(A) had confirmed the order of the AO by holding that there is increase in the investment of the assessee during the relevant assessment year resulting in increase of interest on total loans and thus interest bearing funds were utilized in investments earning exempt income. Therefore, he held that proportionate interest on investments earning exempt income is disallowable. He relied upon the various decisions of ITAT to confirm the disallowanc....

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....or the sake of convenience. "17. The learned counsel for the assessee relied on the following judicial pronouncements of the Hon'ble High Courts to the proposition that if there is no exempt income during the previous year, then the provisions of section 14A of the Act cannot be invoked: CIT v. Winsom Textile Industries Ltd.(2009) 319 ITR 204 (P&H); CIT v Corrtech Energy P. Ltd. (Tax Appeal No.239 of 2014, dt.24.03.2014)(Guj); JCIT v. Shivam Motors (P) Ltd. (ITA.17/Lkw/2012, dated 12.11.2013)(ITATLucknow); and CIT v. M/s Shivam Motors (P)Ltd. (ITA.88 of 2014, dated 5.5.14) Alalhabad High Court 18. The learned DR relied on the order of the Assessing Officer and drew our attention to the circular No.5 of 2014, dt.11.02.2014, where....