2017 (9) TMI 830

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....ted 20/03/2015. 2. In this appeal, Revenue has raised the following Grounds of appeal:- 1. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance of Rs. 3,39,44,749/- made u/s 14A of the IT. Act, by holding that no disallowance u/s 14A of the I.T. Act, is called for, once there is no exempt income received or receivable by the assessee during the relevant previous year". 2. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance u/s 14A for A.Y.2012-13 without appreciating the fact that the circular No.5 of 2014 dated 11th February, 2014, issued by the Central Board of Direct Taxes clearly provides for disall....

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....ules, 1962 and computed the disallowance under section 14A of the Act at Rs. 3,39,44,790/-. As a consequence the Assessing Officer determined the total income at Rs. 3,39,44,790/- as against the 'Nil' income declared by the assessee. The CIT(A), however, accepted the plea of the assessee that in the absence of any exempt income in the instant year, there cannot be any disallowance of expenditure under section 14A of the Act. In coming to such a decision, the CIT(A) relied upon the decision of the Mumbai Bench of the Tribunal in the case of Delite Enterprises (P) Ltd vs. ITO in ITA Nos.433,2983-4887 &5708/Mum/2005. Accordingly, the CIT(A) deleted the disallowance made by the Assessing Officer. 5. In this background, the rival parties have....

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....ssessment records a finding of fact to that effect. The issue to be decided thus lies within the short compass of whether a disallowance in terms of s.14A of the Act read with Rule 8D of the Rules can be contemplated even in a situation where no exempt income has admittedly been earned by the assessee in the relevant financial year. 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 ....

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....e and Stock Brokers (P) Ltd. [2010] 326 ITR 1 '.... The mandate of s.14A is clear. It desires to curb the practice to claim deduction of expenses incurred in relation to exempt income against taxable income and at the same time avail of the tax incentive by way of an exemption of exempt income without making any apportionment of expenses incurred in relation to exempt income.' 10. The provision this 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 p....