2019 (6) TMI 1174

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.... of expenditure in respect of not only those investments, income from which does not form part of total income but also those investments, income from which shall not form part of total income and hence, wrongly deleted addition of Rs. 4,50,37,200/-. 2.That on the facts and in the circumstances of the case, the CIT(A)-20 has erred in law in deciding that disallowance u/s 14A read with Rule 8D cannot be made in a year in which no exempt income has been earned or received by the assessee without considering the CBDT's Circular no.5/2014 dated 11.02.2014. 3.On the fact and circumstances of the case and under the law, the Ld. CIT(A)-20 erred in deleting the addition made on account of Income from other sources u/s. 56(2)(viib) of the I.T. Act of Rs. 1,01,82,550/- without going to the facts of the case and without examining the case record and assessment order properly and without making correct interpretation of Rule 11UA. 4.On the fact and circumstances of the case and under the law, the Ld. CIT(A)-20 erred in deleting the valuation of fair market value of unquoted shares stating non inclusion of intangible assets where actually the difference in valuati....

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....td. [2013] 358 ITR 228 held that the interest expenditure which has no nexus with the business activity of the assessee is liable to be disallowed in terms of section 14A read with Rule 8D. Admittedly, in this case, the assessee has used funds raised on short term basis for long term investments. Hence the disallowance of the interest expenditure is justified. In the case of REI Agro Ltd. [2013] 144 ITD 141, the issue before the tribunal was whether any expenditure can be disallowed under Rule 8D(2)(iii) of the Income Tax Rules, 1962 in absence of exempt income and the tribunal held that for computing disallowance under Rule 8D(2)(iii) in respect of the income which is exempted & does not form part of the total income, the only investment which has given rise to the exempted income should be taken into consideration. Thus, the ld. CIT(A) wrongly held that the decision in the case of REI Agro Ltd. (supra) was applicable even where the disallowance of interest to be computed under Rule 8D(2)(ii). In view of the above, it is prayed that the disallowance u/s 14A to the extent of interest expenditure of Rs. 4,20,67,548/- computed by the Assessing Officer applying Rule ....

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....vidend income during the year in respect of investments made as per the audited accounts. Since no exempt income earned by the assessee, therefore, there should not be any disallowance on account of section 14A of the Act. The said issue of the assessee is squarely covered by the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Holcim India Pvt. Ltd. in ITA No.486/2014 wherein it was held that in the absence of any tax free income, the corresponding expenditure could not be worked out for making disallowance u/s. 14A of the Income Tax Act, 1961.The Hon'ble Delhi High Court in the case of Chemnivest vs. Commissioner of Income Tax-Vl, ITA 749/2014 order dated,02.09.2015 held that section 14A will not apply if no exempt income is received during the relevant previous year. 8. We note that Hon'ble High Court of Madras in the case of Redington India Pvt. Ltd. vs. ACIT 392 ITR 692 (Mad) wherein it was held that if there is no exempt income, there cannot be any disallowance of expenditure u/s 14A , the Hon'ble Madras High Court held as under: "The exemption extended to dividend income would relate only to the previous year when the income was earned and none oth....

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....preciation should be provided on the basis of revalue figures. ii) Further, the depreciation on revalue figures is being debited to revaluation reserve account. In other words, the revaluation reserve on depreciable assets is set apart for providing depreciation. Thus, it necessarily implies that revaluation reserve on depreciable assets is set apart for providing depreciation on revalue figures. Assessing Officer further held that as per clause (iii) of Rule 11UA(2), liability shall not include any reserve other than those set apart towards depreciation. Thus, such reserves which are set apart towards depreciation are not to be deducted from the book value of liability shown in the balance sheet to arrive at the fair market value. Therefore, the premium exceeding fair market value amounting to Rs. 1,01,82,550/- received in the FY 2014-15 was treated as income from other sources in accordance with the provisions of section 56(2)(viib) of the I.T. Act, 1961. 11. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has deleted the addition observing the following: "I have considered findings of the AO in the ....