TaxTMI 
TaxTMI 
2019 (2) TMI 1356
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....s engaged in the business of mall management and project management consultancy. For the assessment year under dispute, the assessee filed its return of income on 28th September 2013, declaring loss of Rs. 61,65,90,809. During the assessment proceedings, the Assessing Officer while examining the balance sheet of the company noticed that it has shown investment of Rs. 217,39,30,000 in unquoted shares. Whereas, the assessee has not disallowed any expenditure under section 14A of the Act in computation of total income. Therefore, he called upon the assessee to explain why disallowance under section 14A r/w rule 8D should not be made. In reply, it was submitted by the assessee, since in the relevant previous year the assessee has not earned any....
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.... 14A r/w rule 8D can be made. Without prejudice to the aforesaid submissions, she submitted, the assessee had sufficient surplus fund for making the investment, hence, no disallowance of interest expenditure can be made under section 8D(2)(ii). Further, she submitted, the investments which have not yielded income during the relevant previous year should be excluded while computing disallowance under section 14A r/w rule 8D. In support of her contention, the learned Authorised Representative relied upon the following decisions:- i) PCIT v/s Ballarpur Industries Ltd., ITA no.51/2016, dated 13.10.2016, (Bom.); ii) CIT v/s Delite Enterprises, ITA no.110 of 2009, order dated 26.02.2009 (Bom.) iii) CIT v/s Chettinad Logistics Pvt. Ltd., [20....
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..../s Ballarpur Industries Ltd., ITA no.15 of 2016, order dated 13th October 2016, has held that no disallowance under section 14A of the Act can be made if the assessee has not earned any exempt income in the relevant previous year. The Hon'ble Madras High Court in CIT v/s Chettinad Logistics Pvt. Ltd., [2017] 80 taxmann.com 221 (Mad.), held that where no exempt income was earned by the assessee in the relevant assessment year, provisions of section 14A of the Act could not be invoked. It is worth mentioning, SLP filed by the Department against the aforesaid decision in the Hon'ble Supreme Court was dismissed and the judgment of Hon'ble Madras High Court was upheld in CIT v/s Chettinad Logistics (P.) Ltd., 95 taxmann.com 250 (SC) and the ....
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....hether in absence of exempt income earned in the relevant assessment year provisions of section 14A of the Act can be invoked, was never an issue which fell for consideration of the Hon'ble Supreme Court. This fact becomes clear from Para-4 of the judgment wherein the Hon'ble Supreme Court has clearly set out the precise issue arising for consideration before them. For better appreciation, the said paragraph is reproduced hereunder:- "4. However, in these appeals, the question has arisen under varied circumstances where the shares/stocks were purchased of a company for the purpose of gaining control over the said company or as 'stock-in-trade'. However, incidentally income was also generated in the form of dividends as wel....
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....ether the disallowance under section 14A of the Act can be made in respect of shares / mutual fund held by the assessee as stock-in-trade or strategic investment in subsidiary company would not attract the provisions of section 14A of the Act. Therefore, it cannot be said that the Hon'ble Supreme Court in the aforesaid decision has laid down any ratio holding that even in the absence of any exempt income earned in the assessment year provision of section 14A of the Act would still be attracted. It is well settled proposition of law that what is binding is the ratio of a decision and not what can be inferred from the judgment by implication. Even, observations made by the Court as a obiter dicta do not constitute binding precedent. Consi....