AI Drafter 
TaxTMI 
TaxTMI 
2023 (5) TMI 112
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....e set aside and that of the Assessing Officer be restored." ASSESSMENT YEAR 2016-17 "1) "The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs 25,02,096/- U/S.14A of the Act r.w.r. 8D of the IT Rules, 1962 made while computing income under normal provisions of the Act?. 2) "The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs 20,77,01,000/- made on account of R & D expenditure, without properly appreciating the facts of the case and the material brought on record?". 3) The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary 4) It is, therefore, prayed that the order of ld. CIT(A) may be set aside and that of the Assessing Officer be restored." ASSESSMENT YEAR 2017-18 "(1) The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.13,39,050/-under section 14A of the Income-tax Act r.w.r. 8D of the Income-tax Rules, 1962 made while computing income under normal provisions of the Act. (2) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.20,17,60,000/-made on account of R&D Expenditure witho....
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....given in the order are reproduced hereunder:- "I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has made the disallowance u/s. 14A of the I. T. Act, 1961 r.w. Rule 8D of I. T, Rules at Rs.89,19,604/- stating that the interest bearing borrowed funds have been utilized for the purpose of investment in the shares. The appellant has claimed the interest expenses at Rs.9,45,19,687/-. The AO observed that the appellant has not proved that the borrowed funds have not been used by the appellant towards investment in shares which was the onus upon the appellant. 2.4. The appellant submitted that the provisions of section 14A of I. T. Act are not applicable in the case in view of recent judgment of Hon'ble Gujarat High Court in the case of CIT Vs. Corrtech Energy Pvt. Ltd. [(2014) 223 Taxmann. 130], since the appellant has not derived any exempted income on the investments so made in the form of share and not claimed any income exempt. It was held by the Hon'ble Court that section 14(1) provides that for the purpose of computing total income under Chapter IV, no deduction shall be allowed in ....
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....se for various reasons. Firstly, there was no dividend income and hence no income was derived by the appellant in the year under consideration, therefore, as per the judgment j of jurisdictional High Court, as discussed above, no disallowance could be made. Further, the circular No. 5 of 2014 issued by the CBDT is also not applicable as the same cannot overcome the judgment of jurisdictional High Court and other authorities as has been discussed in detail in the other paras of this order. 2.9. It has been noticed that the Hon'ble ITAT, Bangalore 'C' Bench in the case of M/s. Anriya Project Management Vs. assessee in ITA No,1799/Bang/2013 dated 20/02/2015 has held that even the Circular No. 5 of 2014 dated 11/02/2014 issued by the.-GBDT is not relevant for the reasons that it was contrary to the Hon'ble High Court's judgment .and the circular cannot prevail over the judgments of Hon'ble High Courts. The relevant para of the judgment is reproduced as under:- 19. We have given a careful consideration of the rival submissions. On the basis of the documents to which our attention was drawn it is clear that the assessee did not earn any exempt in....
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....the judicial authorities have explained that if the event has already occurred and an out flow will be required in future to settle the obligation, the provision made to meet such an out flow is allowable. The same cannot be rejected considering it as notional. -Hindustan Aeronautics Ltd. Vs. CIT: Even if there is a circular, once the law is declared by the H.C./S.C., the same is to be followed.-110 Taxmann 311 SC -All Gujarat Federation of Tax Con Vs. CBDT 76 TAXMANN 307 Guj. Interpretation by CBDT not binding on the assessing authority. -C.I.T.V/S. SIRPUR .PAPE/R MILLS LTD Circulars cannot direct the A.O. -He make particular assessment in particular way: SB EXIT OPTEES' Association Vs. CBDT (26 taxmann.com 08) (Bom) The Circular was not quashed as it did not preclude the A.O. from deciding the matter in accordance with the law. If the existing circular is in conflict with the judicial decisions, the revenue authorities have to ignore the circular and decide the matter applying their discretion. -Bharatia Ind. Ltd. V/S. C.I.T. 12 TAXMANN.COM 409 Cal. 2. 10.4. The quasi-judicial functions cannot be controlled by CBDT. O....
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....s worth here to mention that the appellant's objection that the A.O. has not drawn satisfaction before invoking the provision of Rule 8D is found not correct for the reason that the assessment order, the issue has been elaborately discussed by the A.O. drawing the inference from the facts and submissions of the appellant available on record. So, in substance, he was statisfied and after recording the reasons, it has invoked the provisions of section 14A r.w. Rule 8D. Thus, this ground is dismissed. The grounds of appeal are partly allowed." From the submissions made by the appellant, it is seen that the appellant had not derived any exempt income during the year under consideration. Therefore, the provisions of the section 14A of the Act are not applicable. Also, since the facts of the case are similar to those of AY 2013-14 and 014-15, following the decision taken by the CIT(A)-2, Ahmedabad, the disallowance made by the A.O. u/s. 14A r.w.r. 8D of Rs. 25,02,096/- is hereby deleted." 6. The Department is in appeal before us against the order passed by ld. CIT(A). In appeal before us, the ld. counsel for the assessee invited our attention to the recent ruling pas....
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.... earned by assessee in relevant assessment year. The Gujarat High Court in the case of Dipesh Lalchand Shah [2022] 143 taxmann.com 419 (Gujarat) held that where in relevant assessment year, assessee-individual earned profits from partnership firm and made investments in shares of a company, since its income from partnership was negative and no exempt income was earned, in such case disallowance under section 14A could not be made. In the case of Corrtech Energy (P.) Ltd. [2014] 45 taxmann.com 116 (Gujarat), the Gujarat High Court held that where assessee did not make any claim for exemption of any income from payment of tax, disallowance under section 14A could not be made. The Delhi High Court in the case of Delhi International Airport (P.) Ltd. [2022] 144 taxmann.com 80 (Delhi) held that section 14A would not be applicable if no exempt income was received or receivable during relevant previous year. The Delhi High Court in the case of Amadeus India (P.) Ltd.[2022] 145 taxmann.com 311 (Delhi), held that section 14A envisages that there should be an actual receipt of income which is not includible in total income; hence, section 14A will not apply where no exempt income is received....
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....ld. CIT(A) allowed the appeal of the assessee following the judgment of ITAT Ahmedabad in assessee's own case for assessment year 2013-14. While allowing the assessee's appeal, the ld. CIT(A) made the following observations:- "The assessing officer has made disallowance of R & D expenditure of Rs. 20, 77, 01,000/- on ground that the expenditure is of capital nature. The appellant in his statement of income had shown expenditure on R & D of Rs. 20,77, 01,000/-, out of which Rs.20,77,01,000/- was claimed as revenue expenditure. The assessing officer held that entire R & D expenditure is of capital nature and disallowed the sum of Rs.20,77, 01 ,000/-. The appellant contended that it is engaged in manufacturing of customized bearing cages and R&D expenditure towards the product developed in accordance with the specification of the customers and its benefits are endured till the time the appellant delivers the cages to the customer and therefore, cannot be termed as capital expenditure. In this connection, the appellant also submitted that identical issue was decided in the appellant's case for A.Y. 2013-14 by Hon'ble ITAT, Ahmedabad vide order No. 173....
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....the assessee's appeal by placing reliance on the order of ITAT Ahmedabad in assessee's own appeal for assessment year 2013-14 vide order dated 05-10-2020 and the relevant extracts of the order have been reproduced in the order of ld. CIT(A) at the time of affording relief to the assessee. Accordingly, in the light of the above facts, we find no infirmity in the order of ld. CIT(A) in allowing the assessee's appeal with respect to this ground of appeal, so as to call for any interference. In the result, ground no. 2 of the Department's appeal is dismissed. 13. Ground Nos. 3 and 4 of the Department's appeal are general in nature and do not require any specific adjudication. Now we shall discuss the Department's Appeal for assessment year 2014-15 and assessment year 2017-18 The Department's Appeal for assessment year 2014-15 Ground No. 1: CIT(A) erred in deleting the addition of Rs. 11,61,96,094/- made on account of R&D expenditure 14. We observe that the facts of this ground no. 1 of Department's appeal is identical to ground no. 2 of Department's appeal for assessment year 2016-17. In view of our observations made with respect to ground no. 2 of Department's appeal....