TaxTMI 
TaxTMI 
2018 (9) TMI 1751
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....in law, the Commissioner of Income-tax (Appeals) erred in upholding the disallowance under section 14Aof the Act of Rs. 3,67,78,220. 2. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in ignoring the contention of the appellant that since the appellant has not earned any exempt income during the relevant previous year, no disallowance ought to be made under section 14A of the Act. The Appellant craves leave to add to, omit or alter all or any of the above Grounds of Appeal before or during the hearing of aforesaid matter." 3. The assessee has filed following additional grounds of appeals for admission before the tribunal as under: "3. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) - 18 ['CIT(A)'] erred in not considering the revised return of income filed by the Appellant u/s 139(5) of the Income-tax Act, 1961 ('Act'), wherein the Appellant sought to rectify the wrongful disallowance of expenditure made u/s. 14A of the Act in the original return of income. 4. Without prejudice to the Ground Nos. 2 and 3, the CIT(....
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....2)(iii) of the Income-tax Rules, 1962. Later on the assessee revised its return of income on 30.03.3016 u/s 139(5) of the 1961 Act, wherein the aforesaid disallowance u/s 14A r.w.r. 8D of the 1962 Rules was withdrawn by the assessee. During the course of assessment u/s 143(3) r.w.s. 143(2) of the 1961 Act, the AO show-caused assessee as to why disallowance u/s 14A of the 1961 Act as was originally made by the assessee in the return of income filed with the Revenue be not upheld in the assessment framed u/s 143(3) of the 1961 Act. The assessee filed a detailed submissions before the AO vide letter dated 22-12-2016 citing various judicial precedents to support its contentions. The AO rejected contentions of the assessee that no expenses were incurred w.r.t. these investments and upheld disallowance of Rs. 3,67,78,220/- u/s 14A vide assessment order dated 28-12-2016 passed u/s 143(3) of the 1961 Act , by holding that the investments decisions generally requires certain administrative and managerial expenses to be incurred. 6. The assessee carried the matter by filing first appeal before Ld. CIT(A) , which was dismissed by Ld. CIT(A) vide appellate order dated 31.03.2018 , by holdin....
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.... CIT vs. Radhe Shyam (ALL) (01 Taxman 29). The term "wrong statement" means statement which is factually incorrect or false statement. 4.3.7 In the instant case, the appellant has suo-moto made disallowance of Rs. 3,67,78,220/- u/s.14A r.w. Rule 8D. The basis of the said disallowance is audited accounts. In clause 21(h) of Form No.3CA (Audit Report), the Auditor has arrived at disallowance u/s.14A r.w. Rule 8D at Rs. 3,67,78,220/-. The working of the disallowance is annexed to the audit report as Enclosure F. The working as per Enclosure F is as under: Clause 21(h) : Amount of deduction inadmissible in terms of section 14A in respect of the expenditure incurred in relation to income which does not form part of the total income. A. Interest Expenses B. Average Value of Investments on which dividend income is exempt Value of Investments as on 31.03.2013 (a) 7,355,644,000 Value of Investments as on 31.03.2014 (b) 7,355,644,000 Average f(a) + (b)j/2 7,355,644,000 C. Average Value of Assets Value of Assets as on 31.03.2013 ....
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....s. CIT, 210 ITR 988, the Hon'ble High Court of Gauhati has held that the filing of the revised return after discovery of the omission or wrong statement is not by itself sufficient to bring the revised return within the ambit of sub-section (5) of section 139. The further requirement is that the omission or wrong statement in the original return must be due to a bona fide inadvertence or mistake on the part of the asscssee. 4.3.12 In the instant case, there is no bonafide inadvertence or mistake on the part of the assessee. Therefore, applying the ratio laid down by the Hon'ble High Court of Gauhati, it is held that the revised return filed by the appellant is not a valid revised return u/s. 139(5). 4.3.13 In the Note to the revised return it has been mentioned that the company has not earned any exempt income and the investments made by the company are strategic in nature. Therefore, revised return is filed by withdrawing disallowance u/s. .14A. It must be noted that these issues are debatable in nature. In the recent judgement, the Hon'ble High Court of Karnataka, in the case of Sharavathy Conductors (P) Ltd. vs. CCIT, 87 taxmann.com 244 (2O17), has ....
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....(2)(iii) was withdrawn by the assessee by filing revised return of income on 30.03.2016 u/s 139(5) of the 1961 Act because the assessee did not earn any exempt income during relevant previous year and hence in the absence of exempt income , no disallowance u/s 14A is warranted. It was submitted that Courts have consistently held that no disallowance u/s 14A of the 1961 Act is warranted in cases no exempt income is earned by the assessee during the impugned assessment year. The assessee did not earned any exempt income during the previous year under consideration was the contention of learned counsel for the assessee. It was submitted that when return of income was filed , these decisions of the Court were not available but when the revised return of income was filed u/s 139(5) on 30-03-2016, the decision of Cheminvest Limited(supra) which was pronounced by Hon'ble Delhi High Court on 02-09-2015 was available. Similar is the position of Hon'ble Delhi High Court judgment dated 25-02-2015 in the case of Joint Investments Private Limited v. CIT reported in (2015) 372 ITR 694(Del HC) . Thus, it was submitted that revised return of income was filed on 30-03-2016 based on decision of Hon'....
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....essee had a belief that in view of several decisions of Hon'ble Courts/tribunal no disallowance u/s 14A is warranted in the case of the assessee as no exempt income was received or receivable by the assessee on these investments during relevant previous year. Another belief which led assessee in filing revised return of income u/s 139(5) was that these investments were strategic investments in subsidiary company and hence Section 14A is not applicable which in any case proposition is now decided against the tax-payer by Hon'ble Supreme Court in the case of Maxopp Investment Limited v. CIT reported in (2018) 402 ITR 640(SC) . The said belief's which made assessee revise its return of income was found mentioned in note to the revised return of income filed by the assessee with its revised return of income(pb/page 129).During the course of assessment proceedings u/s 143(3) r.w.s. 143(2) conducted by the AO, the assessee justified its stand of withdrawing disallowance u/s 14A on the grounds that no exempt income was received or receivable by the assessee on the investments held by it during relevant previous year and submitted that as held by several Hon'ble Courts/tribunal decisions ,....
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....as non-bonafide or frivolous ground and could not be a reason for rejecting/discarding such revised return of income. It is also pertinent to mention that the framing of law is function of Parliament while interpretation of such laws are done by Courts . When the Courts interpret provision of statute through pronouncement of its judgement , it interprets the law made by Parliament which was always existing after its enactment and hence the said interpretation of law by Courts shall relate back to date of enactment of such law by Parliament unless otherwise specified by Courts in their judgment . The learned CIT(A) has discarded/rejected the revised return of income holding that there was nothing wrong statement or omission in the original return of income filed by the assessee which could be corrected by filing revised return of income. The learned CIT(A) has relied upon the decision of Hon'ble Gauhati High Court in the case of Sunanda Ram Deka v. CIT reported in (1994) 210 ITR 988(Gau.) and decision of Hon'ble Karnataka High Court in the case of Sharavathy Conductors Private Limited v. CCIT reported in (2017) 87 taxmann.com 244(Kar.) to declare the revised return of income filed b....
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....parties, perused the material available on record and gone through the orders of authorities below. The AO disallowed expenditure incurred towards setting up of STPI unit at Chennai u/s 14A of the Act. According to the AO, the tax auditor has quantified the expenditure to be disallowed u/s 14A towards expenditure incurred for setting up STPI unit at Chennai. It is the contention of the assessee that no disallowance can be made u/s 14A, when there is no exempt income. The assessee further contended that STPI unit at Chennai did not commence its activities during the year under consideration and the assessee has not claimed any deduction u/s 10A, therefore, the AO was erred in disallowing expenditure u/s 14A of the Act. We find force in the arguments of the assessee for the reason that the Hon'ble Delhi High Court in the case of Cheminvest Ltd vs CIT (supra) has observed that when there is no exempt income, disallowance of expenditure u/s 14A cannot be made. Therefore, we direct the AO to delete addition made towards expenditure incurred for setting up of STPI unit u/s 14A of the Act. We further direct the AO to delete adjustment made towards book profit computed u/s 115JB of the Inc....