2015 (12) TMI 1870

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....two days in filing of appeals and prays for condonation of delay. We have perused the reasons and are satisfied that there is a reasonable cause for the short delay in filing of the appeals. In the interest of justice, we condone the delay of two days in filing of the appeals. The petitions for condonation of delay are allowed and appeals are admitted for hearing. 3. Counsel for the assessee at the outset submits that the issue in appeal is decided in favour of the assessee by the co-ordinate Bench of this Tribunal in the case of DCIT Vs. BS & B Safety Systems (I) Ltd. in ITA No.359/Mds/2015 dated 31.07.2015, wherein the Tribunal held that provision for gratuity should be considered for allowance under section 40A(7)(b) of the Act. 4. Departmental Representative referring to the grounds of appeal submits that this issue has come up before the coordinate Bench of this Tribunal in assessee's own case for the assessment year 2008-09 and the co-ordinate Bench by order in ITA No.1411/Mds/2012 dated 07.03.2013 remitted back the issue to the file of the Assessing Officer for fresh consideration in accordance with law to look into certain aspects of the matter and therefore he submits th....

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....provisions of section 14A read with rule 8D have no application to the facts of the assessee's case as no dividend has been received by the assessee during the assessment year 2011-12. Placing reliance on the decision of the coordinate Bench of this Tribunal in the case of ACIT Vs. M.Baskaran in ITA No.1717/Mds/2013 dated 31.07.2014, counsel submits that when no dividend is earned, disallowance under section 14A is not warranted. 12. Heard both sides. Perused orders of lower authorities and the decision relied on. On going through the decision of the co-ordinate Bench of this Tribunal in the case of M.Baskaran in ITA No.1717/Mds/2013 dated 31.07.2014, we find that the issue in appeal is squarely covered by the said decision wherein the Tribunal held that when the assessee has not earned dividend income, disallowance under section 14A is not warranted. While holding so, the Tribunal observed as under:- "5. Heard both sides. Perused orders of lower authorities and submissions made by the assessee and the decisions in relied on. No doubt in the decision of the Special Bench of Delhi Tribunal in the case ofCheminvest Ltd. Vs. ITO (supra), the Special Bench held that disallowance und....

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.... respectfully following the judgement of Hon'ble High Court of Punjab & Haryana in the case of CIT vs. Winsome Textile Industries Ltd. (supra), we hereby allow this ground and direct the AO to delete the addition. Therefore, ground Nos 1 to 1.2 raised by the assessee in its cross objection are allowed." 4. Counsel for the Revenue submitted that the Assessing Officer as well as CIT(Appeals) had applied formula of rule 80 of the Income Tax Rules, since this case arose after the assessment year 2009-2010. Since in the present case, we are concerned with the assessment year 2009-2010, such formula was correctly applied by the Revenue. We however, notice that subsection (1) of section 14A provides that for the purpose of computing total income under chapter IV of the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could....

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....igh Court while affirming the decisions of CIT(A) as well as the Tribunal in deleting the disallowance made under section 14A observed as under:- "7. After hearing learned counsel for the parties, we do not find any merit in the appeals. 8. The primary issue that arises for consideration in these appeals is whether the CIT(A) as well as the Tribunal were right in allowing deduction of interest liability out of other income and the claim of the revenue to disallow the same under section 14A of the Act was justified. 9. The CIT(A) vide order dated 24.6.2004 annexure A.II recorded as under:- "7.2 Keeping in view the above facts and circumstances of the case it is held that the AO was not correct in applying section 14A of the IT Act in disallowing the expenditure on account of interest amounting to Rs. 46,91,684/-. It was incumbent on the AO to establish a nexus between the expenditure incurred and the income which was exempt under the Act. Facts clearly do not support the action of the AO. Disallowance is accordingly deleted. The AO is directed to recomputethe income accordingly." 10.Vide order dated 16.5.2008, Annexure A.III, the Tribunal on appeal by the revenue while u....