2018 (6) TMI 1461

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....in appeal No. CIT(A)-12/DCIT-6(3)(1)/134/15-16, dated 02/11/2016, which in turn arises out of the assessment order passed by the Assessing Officer under sec. 143(3) of the Income Tax Act, 1961 (for short, "Act"), dated 25/03/2015. 2. The grievances raised by the Revenue are as follows:- "1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance made under sec. 14A r.w.rule 8D of Rs. 1,85,38,029/- ignoring the CBDT circular No. 05/2014 dated 11/02/2014 that clarifies that disallowance under sec. 14A has to be made irrespective of the fact whether any exempt income has been earned during the year by the assessee or not? 2. The appellant prays that the order of the l....

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....es not fetch any income. In this regard, the assessee was asked to furnish a working of disallowance u/s 14A r.w.r. 8D and also show cause why disallowance u/s 14A r.w.r 8D should not be made. In response, the assessee has not submitted any explanation, details and reply. The Assessing Officer has considered that firstly the disallowance u/s. 14A not only includes disallowance on account of interest expenses, but also on account of administrative expenses. Since the assessee has completely failed to justify the rationale of not making any disallowance u/s. 14A, the disallowance has to be made under rule 8D of the I.T. Rules, 1962. The Assessing Officer noted that the Hon'ble Jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. L....

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....t day and the last day of the previous year - Rule 8D(2)(ii)   3 i) Average value of investments opening balance of investments + C losing balance of investments/2 = (Rs. 2,00,00,000 + Rs. 65,50,79,700 /2 = Rs. 33,75,39,850/-) ii) Disallowance An amount equal to one half percent of the average of the value of investment income from which does not or shall not form part of the total income as appearing in the balance sheet of the assessee on the first day and the last day of the previous year. iii) 0.5% of Rs. 16,87,699 4 Total disallowance Rs. 1,85,38,029 Accordingly, the Assessing Officer disallowed Rs. 1,85,38,029/- u/s. 14A r.w.r. 8D and added back to the total income of the assessee. 6. Aggrieved....

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....e & surplus of Rs. 42,95,91,531/-. Now, it is a settled position that if there is no exempt income, the disallowance under sec. 14A should not be made and the Assessing Officer has admitted the fact that the assessee has not received any exempt income during the year under consideration. Therefore, we are of the view that the addition should not be made unless and until there is a receipt of exempt income for the assessment year under consideration, and for that, we rely on the judgment of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Delhi-HC), wherein it was held that no disallowance under section 14A can be made in a year in which no exempt income had been earned or received by the assessee. T....