TaxTMI 
TaxTMI 
2017 (7) TMI 356
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.... decisions of Hon'ble Jurisdictional High Court in the case of CIT Vs. Lakhani Marketing in ITA No. 970 of 2008, and in case of CIT Vs. Mascot Foot Care in ITA No. 67 of 2009 and in the case decided by the Hon'ble Bench in the case of Arti Steels Ltd Vs. DCIT in ITA No. 268/Chd/2015 Directions may be given to delete the disallowance made us/ 14A w.r.t rule l8D. 3. Brief facts relating to the case are that assessment in the impugned case was completed u/s 143(3) of the Act at an income of Rs. 95,54,210/- as against returned income of Rs. 93,98,880/- on account of disallowance of expenses by invoking the provisions of section 14A of the Act read with Rule 8-D of the Income Tax Rule, 1962 on the ground that the assessee company had made non current investment of Rs. 5.65 crores, the income from which whether received or not would be exempt from tax. Before the Assessing officer, the assessee contended that no exempt income was earned by it during the year and, therefore, no disallowance u/s 14A of the Act could be made. The assessee relied upon the decision of the Jurisdictional High Court in the case of CIT Vs. Lakhani Marketing in ITA No. 970 of 2008, dated 2.4.2014 and CI....
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....ome. The Ld. CIT(A) also upheld the other findings of the Assessing officer and relevant findings of the CIT(A) are reproduced at para 5.2 of the said order:- "5.2 have considered the observations of the Assessing Officer as made by her in the assessment order while making impugned addition/disallowance. I have also considered submissions made by the assessee company through its Ld. AR during the course of assessment proceedings. I have further considered various judicial pronouncements relied upon by the assessee company as well as other material placed by it on record. On careful consideration of the rival contentions, I am of the opinion that the provisions of section 14A of the Act are clearly attracted in the case of the assessee company as it cannot be said that the assessee company has not incurred any expenses for earning dividend income irrespective of the fact that as to whether the dividend income has been received by the assessee company or not as the same as and when received will be exempt from tax more particularly when the provisions of section 14A of the Act are read with Rule 8D of the Income Tax Rules, 1962. 1 am further of the opinion that the Assessing Office....
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.... sought of disallowance has to be made even in those cases where assessee company claims that no expenditure has been incurred in earning exempt income. Under such circumstances, the action of the Assessing Officer in making an addition of Rs. 1,27,788/- in this case on account of disallowance of expenses by invoking provisions of section 14A of the Act cannot be said to be unjustified. 5. Aggrieved by the same, the assessee has now come up on appeal before us. During the course of hearing before us, Ld. Counsel for the assessee reiterated the submissions made before the authorities below and stated that in view of the decisions of the Jurisdictional High Court in the case of CIT Vs. Lakhani Marketing (supra) and CIT Vs. Mascot Foot Care (supra,) no disallowance u/s 14A was warranted in the absence of any dividend income earned during the year. 6. The Ld. DR On the other hand, relied on the order of the CIT(A) in this regard. 7. We have heard both the parties. The undisputed fact in this case is that the assessee had shown investment of Rs. 5,65,00,000/- in non-current investment. It is also not disputed that no dividend income was earned on the same during the year. The Jurisd....
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....ay Bench of the Tribunal in the case of Joint Commissioner of Income Tax v. Holland Equipment Co. B.V.reported in (2005) 3 SOT 810 (Mumbai) and the relevant portion of the order of the Bombay Bench of the Tribunal is reproduced below:- 'Regarding application of Section 14A of the Act, the contention of the learned Department Representative has to be rejected on the face of it inasmuch as the entire income of the assessee is taxable under the Act. Section 14A is applicable only when any part of the income is not to be included in the total income of the assessee and the expenditure relating to that part of income is claimed by the assessee as deduction. In such cases only, the expenditure relating to the exempted income can be disallowed and not otherwise. Since in the present case,the entire income is found to be taxable, no disallowance can be made under section 14A of the Act.' 10. Moreover, the AO has not established the nexus between invested funds and the interest bearing funds, since the investments in shares are in the years 1995-96, 1998-99 and 1999-2000 and the interest disallowance is for the assessment years 2000-01 and 2001-02. On the contrary perusal of the balan....
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....e income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction. For the year in question, the finding of fact is that the assessee had not earned any tax free income. Hence, in the absence of any tax free income, the corresponding expenditure could not be worked out for disallowance. The view of the CIT(A), which has been affirmed by the Tribunal, hence does not give rise to any substantial question of law. Hence, the deletion of the disallowance of Rs. 2,03,752/- made by the Assessing Officer was in order". . . . . 17. In these circumstances, we do not find any merit in the present appeals. The same are dismissed in limine." 9. Further, the decision of the Special Bench of the ITAT, referred to by the Assessing officer while making the disallowance in the present case, in the case of Cheminvist India Vs. CIT (supra) has since been reversed by the Delhi High Court in its decision reported at 378 ITR 33 as follows:- "19. In light of the clear exposition of the law in Holcim India (P) Ltd. (supra) and in view of the admitted factual position in this case that the Assessee has made strategic investment in shares of Max....