TaxTMI 
TaxTMI 
2019 (10) TMI 1637
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.... "1. The Commissioner of Income Tax (Appeals) has erred in law and on facts of the case in deleting the addition of Rs.9,97,27,12,640/- under section 40(a)(ia) of the I.T. Act, 1961 ignoring the fact that the assessee failed to deduct tax at source u/s 194J of the I.T. Act 1061 on these payments 2. The Commissioner of Income tax (Appeals) has erred in law and on facts of the case in deleting the addition of Rs.1,30,56,74,469/- without appreciating the fact that section 14A of the I.T. Act, 1961 does not use the word 'Income of the year' but 'Income under the Act' and CBDT's circular no 05 of 2014 states that the expenses which are relatable to earning of exempt income have to be considered for disallowance, ....
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....d is the addition of Rs.997,27,12,640/- under section 40(a)(ia) of the Act. I find that the issue has already been decided by Hon'ble ITAT, Lucknow in the case of the appellant for assessment year 2010-2011 and assessment year 2011-2012 in ITA No. 273 & 274/LKW/2015 dated 19.09.2016 at paragraph 5 of its order holding as under:- Respectfully following the earlier order of the Tribunal, we allow grounds No. 1.1 to 1.4 of the appeal taken by the assessee and therefore, we direct deletion of the addition made by applying the provisions of section 40a(ia) of the Act and also take note of the order of the Hon'ble Delhi High court in CIT vs. Delhi Tansco Ltd., [2015] 380 ITR 398 (Delhi) wherein the Hon'ble High Court held tha....
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....Bombay High Court and also the order of the Tribunal, dated 19/9/2016 in the assessee's own case for assessment years 2010-11 and 2011-12. The observations of the ld. CIT(A), in this regard, are reproduced hereunder:- 5(4) I have examined the facts and circumstances of the case. I have considered the findings of the AO in the assessment order and the submissions of the appellant. I find that the issue involved is the addition of Rs.130,56,74,469/- under section 14A of the Act. The AO made the impugned addition by adopting the method prescribed in Rule 8D whereas the appellant claims that no amount was disallowable as no exempt income was earned by the appellant during the relevant period. 5(5) In this connection a referenc....
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....there was no tax-free income, s. 14A could not apply. The department filed an appeal in the High Court in which it argued that as the profits derived by the assessee from the firm was exempt u/s 10(2A), the interest on the borrowed funds used to invest in the firm was disallowable u/s 14A. HELD by the High Court dismissing the appeal: In so far as Question (A) is concerned, on facts we find that there is no (tax-free) profit for the relevant assessment year. Hence the question as framed would not arise 5(5)(iii) I find that the issue has already been decided by Hon'ble ITAT, Lucknow in the case of the appellant for assessment year 2010-2011 and assessment year 2011-2012 in ITA No. 273 & 274/LKW/2015 dated 19.09.2016 at....
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....ome. In other words, Section 14A of the Act will not apply if no exempt income is received or receivable during the relevant previous year. Following the discussion above and relying of the case authorities discussed supra the disallowance of Rs.130,56,74,469/- made by the AO under section 14A of the Act is deleted giving relief to the appellant." 7. From the above findings of learned CIT(A), we find that CIT(A) has deleted the addition of Rs.1,30,56,74,469/- made under section 14A of the Act, following the order of the Tribunal dated 19/09/2016 in assessee's own case for assessment year 2010-11 and 2011-12. However, we find that the order of the Tribunal dated 19/09/2016 was challenged by the Department before Hon'ble Allahabad High....
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.... 4.2 In the present case before us, though Learned A. R. has tried to demonstrate that the assessee did not earn any exempt income therefore, the assessee was not liable for disallowance u/s 14A but in our opinion the Assessing Officer should make a finding of fact as to whether the assessee was having any exempt income or not. The Assessing Officer should also examine the applicability of section 14A and the manner of disallowance, if any, in accordance with the judgment of Hon'ble Supreme Court in the case of Maxopp Investment Ltd. (supra). In view of the above, the appeal of the Revenue as well as of the assessee are allowed for statistical purposes. 5. For the assessment year 2009-10, the issue and facts are similar. Howe....