TaxTMI 
TaxTMI 
2017 (11) TMI 799
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.... of expenses u/s 14A of the Act @ 1% of personnel cost and other expenses on assumption basis. The reasons given by him for doing so are wrong, contrary to the facts of the case and against the provisions of law. (ii) The Ld. CIT(A) erred in law and facts in confirming mechanical disallowance of Rs. 48,80,605/- without proving the nexus of expenditure with the investments made or incurred for the purpose other than business hence the disallowance u/s 14 A is unwarranted. 2. The appellant craves the leave to add, amend or alter all or any grounds of the appeal." 3. The assessee is providing direct to home(DTH) satellite television services and teleport services including placement and active service . In the first round of litigation while passing the order u/s. 143(3) of the Act, the A.O made an inter-alia additions to the tune of Rs. 1,97,58,364/- u/s. 14A. The learned CIT-A in the first round of litigation confirmed the disallowance to the tune of Rs. 5 lacs and deleted the balance additions to the tune of Rs. 1.92 crores . The department came in appeal in first round of litigation before the tribunal and tribunal was pleased to pass orders in ITA no. 1646/Mum2012 dated 1....
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....he Balance Sheet that total investment as on 31.03.2007 is of Rs. 94,45,10,450/~ whereas on 31.03.2006 total investment of Rs. 1,06,,87,15,480/- whereas the total interest-free fund of the Appellant as on 31.03.2006 was of Rs. 4,44,39,32,900/-, Similarly, as on 31.03.2007 owned fund was of Rs. 21,2,40,79,601/-. Thus, investment of Rs. 94,45,10,040/- as appearing in Schedule-7 cannot be presumed to be from unsecured loan of Rs. 30,63,14,726/-. Therefore, there is Financial Cost to the Appellant for making investment in sister concern. Since there is a huge Investment and it is well known fact that for making such investment managerial involvement and Administrative expenses are bound to be there. Hence, it cannot be pleaded that no expenditure was incurred for earning dividend or capital gains, therefore, definitely there is some expenditure. 3.4 However calculation of expenditure @3% the finding of the Assessing Officer or reasoning of the Assessing Officer is not convincing one because most of the investment are internal transfer of fund which requires less managerial involvement. Further, the business of the Assessee is altogether different than simple investment hence, consid....
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....14A except as accepted by the assessee to be reasonable disallowance to the tune of Rs. 5 lacs. The learned counsel for the assessee produced before us decision of the tribunal in the assessee's own case in ITA no. 2066 and 2067/Mum/2015 vide orders dated 20.12.2016 wherein for AY 2008-09 and 2009-10, wherein the tribunal has followed the decision of Hon'ble Delhi High Court to hold that since the assessee has not earned any dividend income and the investments were made only as a strategic investment in wholly owned subsidiary companies, no disallowance u/s 14A is attracted. The Ld. DR on the other hand relied upon the order of the learned CIT-A 5. We have considered rival contentions and perused the material on record including case laws cited before us. We have observed that the assessee is engaged in business of direct to home (DTH) satellite television services and teleport services. We further observed that assessee has not received any dividend income or other exempt income during the impugned assessment year. The assessee has conceded and accepted to have incurred Rs. 5 lacs towards an expenditure u/s. 14A towards earning of an exempt income which is claimed to be reasonabl....
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.... the court answers the question framed by holding that the expression "does not form part of the total income" in section 14A 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. In other words, section 14A will not apply if no exempt income is received or receivable during the relevant previous year." 3.4.2 In the case on hand, admittedly the factual position is that the assessee has not earned any exempt income in the year under consideration. In these circumstances, in our considered view, the ratio of the decision of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. (supra) would squarely apply. The Hon'ble High Court in the aforesaid judgement held that no disallowance under section 14A of the Act can be made in the year in which no exempt income is earned. It was held that the expression 'does not form part of the total income' in section 14A of the Act envisages that there should be an actual earning of income which is not includible in the total income during the relevant....