2019 (11) TMI 1242

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....the law, facts and circumstances of the case. Under normal provisions of the Act 2. Disallowance under section 14A of the Income Tax Act ("the Act") 2.1 The CIT (A) has erred in confirming the disallowance made by the Assessing Officer ("AO") of INR 15,01,125 as expenditure incurred for earning the exempt dividend income under section 14A of the Act. 2.2 The CTT (A) ought to have appreciated that disallowance under section 14A of the Act is not warranted when the Appellant has not earned any exempt dividend income during the subject Assessment Year. 2.3 The CIT (A) ought to have appreciated that the Appellant has not incurred any expenditure an as such disallowance under section 14A of the Act is uncalled for. 2.4 The CIT (A) and the AO ought to have appreciated that provisions of section 14A of the A are not applicable in case of strategic investments made for the purpose of acquiring controlling interest. 2.5 The CIT (A) ought to have appreciated that the Appellant had taken a business decision to invest in a joint venture entity and it did not make the investments with a view to earn exempt income and as such notional attribution of expenses is unsustainable. 2.6 T....

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....vit that there was a change of officer who was looking after taxation matter and due to this change over of relevant officer incharge , it could not file its appeal in time with tribunal as there was not proper handover by outgoing officer looking after taxation matter to a new officer incharge of taxation matter. It was explained that on similar facts, learned CIT(A) allowed appeal of the assessee for ay: 2013-14 on merits , while for year under consideration viz. ay: 2015-16 , the appeal is decided by learned CIT(A) against assessee. It was explained in affidavit that when statutory auditors were reviewing contingent liabilities of the assessee for year ended 31st March 2019, then this fact of non filing of an appeal with tribunal came to notice and steps were taken to file this appeal with tribunal. It is also explained in the aforesaid affidavit that Managing Director of assessee company was not in India and after coming back to India , steps were taken to file this appeal with tribunal. The learned counsel for the assessee prayed that this delay of 133 days in filing this appeal late with tribunal be condoned and this appeal be adjudicated on merits in accordance with law. The....

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..... 5,17,44,000/- in equity share of group company namely M/s.Kanaech India Pvt. Ltd., as on 31.03.2014. Admittedly, assessee did not earn any dividend income during year under consideration and hence no exempt income was claimed by assessee in return of income filed with Revenue. The AO invoked provisions of Sec.14A of the 1961 Act r.w.r.8D of the Income-tax Rules, 1962, to make following disallowance , vide assessment order dated 25.11.2016 passed by AO u/s 143(3) of the 1961 Act:- Exempted income - 0 (i) The amount of expenditure directly relating to income which does not form part of total income 0 (ii) A. Amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year Rs. 10,17,46,593/- B. The average 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 Rs. 4,64,52,000/- Value of investment on the first day of the previous year Rs. 4,11,60,000/- Value of investment on the last day of the previous year Rs. 5,17,44,000/- C. The average of total assets ....

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....s since been dismissed by Hon'ble Supreme Court. Similarly, it was submitted that no addition can be made to book profit u/s.115JB as the assessee has not incurred any expenditure in relation to earning of an exempt income. It is claimed that no expenditure has been incurred and debited to P&L A/c which is incurred in relation to earning of an exempt income. On merits, Ld.DR submitted that disallowance of expenditure u/s.14A is to be made even if no exempt income is earned by the assessee. The learned DR would rely on orders of authorities below. 7. We have considered rival contentions and perused material on record including cited case laws. We have observed that assessee is engaged in business of manufacturing and supplying of automotive ancillary parts. The assessee has made investments to the tune of Rs. 5,17,44,000/- in equity shares of group company namely M/s.Kanaech India Pvt. Ltd., as on 31.03.2014. Admittedly, assessee did not earn any dividend income during the year under consideration and hence no exempt income was claimed by assessee in return of income filed with Revenue . The AO invoked provisions of Sec.14A of the 1961 Act r.w.r.8D of the Income-tax Rules, 1962, t....