TaxTMI 
TaxTMI 
2017 (11) TMI 1965
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....209/-, being depreciation claimed by the assessee on civil work of factory building, without appreciating the fact that assessee could not prove the genuineness of the transaction. 2. On the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition made by the A.O of Rs. 13,58,162/-, being expenditure incurred on earning the exempt income by invoking provision of section 14A of the I.T.Act read with rule 8D 2.1 Briefly stated the assessee being resident corporate assessee engaged in the business of manufacturing of MDF and particle boards from sugarcane Bagasse, was assessed u/s 143(3) for impugned AY on 30/12/2011 at loss of Rs. 115.89 crores as against returned loss of Rs. 121.80 crores as per revised return of income filed by the assessee on 02/11/2009. The issues involved in the present appeal are disallowance of depreciation for Rs. 3,04,36,209/- and disallowance u/s 14A for Rs. 13,58,162/-. 2.2 During assessment proceedings, with the view to examine the expense & depreciation claimed by the assessee, notice u/s 133(6) was sent to a concern namely Teracon Construction India Private Limited who stated to have carried out certain civil wor....
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....have carefully heard the rival contentions and perused relevant material on record. Since, prima facie, the additional evidences submitted by assessee before Ld. first appellate authority were never confronted to Ld. AO and no remand report was called against the same, we remit the matter back to the file of Ld. AO to re-appreciate the contentions of the assessee and decide as per law after affording adequate opportunity of being heard to the assessee. The assessee, in turn, is directed to substantiate his claim in this regard. This ground of revenue's appeal stands allowed for statistical purposes. 6. So far disallowance u/s 14A is concerned, we confirm the stand of Ld.CIT(A) firstly because it was noted that own interest free funds of the assessee far exceeded the impugned investments and secondly, no exempt income has been earned by the assessee during the year and hence disallowance u/s 14A was not attracted. These facts are nowhere disputed or controverted by the revenue. Our view is fortified by a recent judgment of Hon'ble Delhi High Court rendered in PCIT Vs. IL&FS Energy Development Co. Ltd. [84 Taxmann.com 186 dated 16/08/2017] where the Hon'ble court has discussed the....
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....otal income" which is neither notional nor speculative. It has to be 'real income'. The subsequent amendment to Section 14A does not particularly clarify whether the disallowance of the expenditure would apply even where no exempt income is earned in the AY in question from investments made, not in that AY, but earlier AYs. 16. Rule 8D (1) of the Rules is helpful, to some extent, in understanding the above issue. It reads as under: "8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with- (a) the correctness of the claim of expenditure made by the assessee; or (b) the claim made by the assessee that no expenditure has been incurred, in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2)." 17. The words "in relation to income which does not form part of the total income under the Act for such previous year" in the above Rule 8 D (1) indicates a correlation between the exempt income ear....
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....ct as well as indirect attribution. Thus, accepting the submission of the Revenue would result in the imposition of an artificial method of computation on notional and assumed income. We believe thus would be carrying the artifice too far." 21. The decisions in CIT v. M/s Lakhani Marketing Inc. 2014 SCC Online P&H 20357, CIT v. Winsome Textile Industries Limited [2009] 319 ITR 204 (P&H), CIT v. Shivam Motors (P) Ltd. [2014]272 CTR (All) 277 have all taken a similar view. The decision in Taikisha Engineering India Pvt. Ltd. (supra) does not specifically deal with this issue. 22. It was suggested by Mr. Hossain that, in the context of Section 57(iii), the Supreme Court in Commissioner Of Income Tax, West v. Rajendra Prasad Moody [1978] 115 ITR 519 (SC) explained that deduction is allowable even where income was not actually earned in the AY in question. This aspect of the matter was dealt with by this Court in M/s Cheminvest Ltd. (supra) where it reversed the decision of the Special Bench of the ITAT by observing as under: "20. Since the Special Bench has relied upon the decision of the Supreme Court in Rajendra Prasad Moody (supra), it is considered necess....