TaxTMI 
TaxTMI 
2016 (10) TMI 1216
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....s 14A r.w.r 8D when the assessee had not earned any exempt income during the year. For this and such other grounds as may be urged at the time of hearing, the order of the CIT(Appeals) and Assessing Officer may be vacated and the appellant's claim may be allowed or any suitable directions issued. 3. The only issue arising in the present appeal is against disallowance made under section 14A of the Act read with Rule 8D of Income Tax Rules, 1962 (in short 'the Rules') at Rs. 5,12,750/-. 4. Briefly, in the facts of the case, the assessee had furnished the return of income declaring total income at Rs. 11,13,960/-, which was processed under section 143(1) of the Act. During the course of assessment proceedings, the Assessing Officer noted t....
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....invoking of provisions of section 14A of the Act read with Rule 8D of the Rules but had only requested for modification of quantum of disallowance. Hence, the order of Assessing Officer in this regard was confirmed, against which the assessee is in appeal. 6. The learned Authorized Representative for the assessee pointed out that no dividend income was earned during the year and in the absence of any dividend income, there is no merit in the disallowance made under section 14A of the Act. In this regard, reliance was placed on the ratio laid down by the Hon'ble Delhi High Court in Cheminvest Ltd. Vs. CIT in ITA No.749/2014, judgment dated 02.09.2015. Attention was drawn to the page 19 of the Paper Book, which is Schedule to the Profit & Lo....
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....ome. The Assessing Officer on the other hand, considered the fact that the assessee has debited interest expenditure and since the assessee was not maintaining separate fund flow for the regular business activity and the tax free income, hence, the said expenses had to be disallowed. Further, there were various other expenses debited by the assessee in its Profit & Loss Account and the same had to be taken note of. The second plank of reasoning of Assessing Officer was the reliance on Special Bench of Delhi Tribunal in Cheminvest Ltd. Vs. ITO, wherein it was held that even if the assessee had not received any tax free income in respect of investments in shares, it could not be said that no disallowance was to be made under section 14A of th....
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.... was on account of Rule 8D(iii) of the Rules i.e. 0.5% of average investment for expenses other than the interest. The Assessing Officer had made the disallowance relying on the decision of Special Bench of Delhi Tribunal in Cheminvest Ltd. Vs. ITO (supra). The learned Authorized Representative for the assessee has pointed out that the decision of Special Bench has been reversed by the Hon'ble Delhi High Court in Cheminvest Ltd. Vs. CIT (supra). The issue before the Hon'ble High Court was whether disallowance under section 14A of the Act could be made in a year in which no exempt income was earned or received by the assessee. The Hon'ble High Court vide para 23 held as under:- "23. In the context of the facts enumerated hereinbefore the C....