TaxTMI 
TaxTMI 
2021 (5) TMI 240
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....s computed as per Rule 8D of I.T. Rules 1962 on the basis of CBDT Circular No.5/2014 dated 11.02.2014 which clearly states that it is not necessary to earn exempt income in a particular year in which the disallowance is made? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in restricting the disallowance u/s 14A holding that no disallowance is to be made when the assessee not earned any exempt income which is contrary to CBDT Circular No.5/2014 which clarifies that the Rule 8D r.w.s. 14A of the Act provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income? 3. Whether on the facts and circumstances of the case and in Jan', the Ld. ....
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....ter the reply of the assessee, the AO disallowed a sum of Rs. 3,00,49,824/-. The total income of the assessee was assessed to the tune of Rs. 10,62,380/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who allowed the claim of the assessee, therefore, the revenue has filed the present appeal before us. ISSUE NOS. 1 to 4 4. We have heard the argument advanced by the Ld. Representative of the revenue and have gone through the case file carefully. The Ld. Representative of the revenue has argued that the CIT(A) has wrongly deleted the addition in sum of Rs. 3,00,49,824/- u/s 14A r.w. Rule 8D of the Rules, therefore, the finding of the CIT(A) is not justifiable, hence, is liable to be set aside. Before going further, we dee....
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....the appellant are as follows. "The AO, based on incorrect surmises and wrong apprehension of facts, erred in making the disallowance of Rs. 30,049,824/- u/s 14A A. Disallowance u/s 14A cannot be made in the absence of exempt income i.e. disallowance cannot exceed the exempt income earned by the assessee B. Correctness of the claim of the Appellant - Not refuted by the AO/Dissatisfaction not recorded by the AO: C. Incorrect observations / assumptions of the AO which form the basis of disallowance u/s 14A r.w.r. Rule 8D D). Principle of Res Judicata - Assessee's own case We here-in-below discuss the above arguments in detail: A. Disallowance u/s 14A cannot be made in the absence of exempt income i.e. disallowance cannot exceed....
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....ncorrect observations / assumptions of the AO which form the basis of disallowance u/s 14A r. w. Rule 8D At this juncture, the attention of your Honor is invited to para no. 4.1 at page 2 of the assessment order, wherein the AO formed the belief that the motive of the assessee for doing investment was to earn dividend income. The relevant gist of AO observation is dotted hereunder- D. Principle of Res Judicata - Assessee's own case -It is submitted that your good office in the assessee's own case for Assessment year 2011-12, your good office had accepted assessee's contention that no disallowance is called for in absence of any dividend income. 4.4 - The fact that, the assessee was not having any exempt income during the year ....
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....vides that if there is air which does not form a part of the total income under the said Act, the expenditure which is incurred for earning the income is not all deduction. Therefore, during the relevant year, if the assessee has not earned any tax free income, the corresponding expenditure incurred cannot be taken into consideration for disallowance. 4. We respectfully concur with the view taken by the Delhi High Court as the said view can always be taken on fair reading of Section 14A of the said Act. A Division Bench of Allahabad High Court has also taken a similar view in the case of Commissioner of Income Tax v. Shivam Motors (P) Ltd. (supra). Hence, in our view, no fault can be found with the impugned judgment of the Appellate Tribu....
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....ear, Assessee has not earned any tax free income, the corresponding expenditure incurred cannot be taken into consideration for dis-allowance. 5. In view of the fact that, the Revenue is not challenging the above finding of the Tribunal on the above issue the questions as framed for our consideration by the Revenue become academic. Therefore, none of the question give rise to any substantial questions of law in the context of the present facts." 3. Same view was taken by the Hon'ble Bombay High Court in the case of POT Vs Ballarpur Industries Ltd (ITA No. 51/2016) (Bombay HC, Nagpur bench). 4.5 Besides, there are many other decisions wherein it was held that disallowance u/s. 14A cannot be made when there is no exempt income. Th....