2016 (10) TMI 1039 - HC - Income Tax

Disallowance u/s 14A - Held that - Both the Authorities have recorded a clear finding of fact that there was no exempt income earned by the assessee as relied on the judgment in Cheminvest Limited Versus Commissioner of Income Tax-VI 2015 (9) TMI 238 - DELHI HIGH COURT which holds that the expression does not form part of the total income in Section 14A envisages that there should be an actual receipt of the income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. The Income Tax Appellate Tribunal correctly held that the provisions of Section 14A of the Income Tax Act, 1961 would not apply to the facts of this case as no exempt income was received or receivable during the relevant previous year. It is not the case of the Assessing Officer that any actual income was received by the assessee and the same was includible in the total income. In the facts of the case, the Authorities held that since the investments made by the assessee in the sister concerns were not the actual income received by the assessee, they could not have been included in the total income. No substantial question of law.

Summary

Issues: Challenge to orders of Commissioner of Income Tax and Income Tax Appellate Tribunal regarding exempt income under Section 14A of Income Tax Act, 1961.

Analysis:
The High Court of Bombay addressed the challenge raised by the Department against the orders of the Commissioner of Income Tax and the Income Tax Appellate Tribunal. The Authorities had determined that there was no exempt income earned by the assessee. They relied on a judgment of the Delhi High Court, which clarified that for disallowing any expenditure under Section 14A of the Income Tax Act, 1961, there must be an actual receipt of income not included in the total income during the relevant year. The Tribunal found that Section 14A did not apply as no exempt income was received or receivable in the relevant year. The Assessing Officer did not claim that any actual income was received and included in the total income. The investments in sister concerns were not considered actual income received by the assessee, leading to the conclusion that they should not be included in the total income.

The High Court determined that the findings of fact by both Authorities did not raise any substantial question of law. As a result, the Court dismissed the income tax appeal, stating that no substantial question of law arose in the case. The appeal was dismissed with no order as to costs.