2017 (4) TMI 1533 - AT - Income Tax

Disallowance u/s 14A - Whether CIT(A) failed to appreciate that section 14A should be applied only when there is an exempted income earned out of investment and not otherwise. The Appellant had not earned exempted income during the AY 2013-14? - HELD THAT - Since the assessee did not appear we have no option but to hear the appeal ex parte qua the assessee. Accordingly the revenue was heard. We have carefully examined the order of the CIT(Appeals) on the impugned grounds and we find that he has rightly adjudicated the issues in detail and we find no infirmity therein. Accordingly we confirm the order of CIT(Appeals).

Summary

Issues:
1. Appeal against CIT(Appeals) order for Assessment Year 2013-14.
2. Applicability of section 14A in case of no exempted income.
3. Investment made from accumulated reserves and surplus.
4. Investment in subsidiaries for business strategy.
5. Request for filing additional grounds/arguments.

Analysis:

Issue 1: Appeal against CIT(Appeals) order
The appeal was filed by the assessee against the order of CIT(Appeals) for the Assessment Year 2013-14, challenging the decision on various grounds as mentioned in the appeal.

Issue 2: Applicability of section 14A
The appellant argued that section 14A should only be applied when there is exempted income earned from investments, which was not the case during the relevant assessment year. The appellant contended that since no exempted income was earned, the provision of section 14A should not be invoked.

Issue 3: Investment from accumulated reserves and surplus
The appellant highlighted that the investment in subsidiaries was made from accumulated reserves and surplus, which exceeded the short-term borrowings. It was argued that no borrowed funds were used for the investment, and reliance was placed on a specific decision to support this argument.

Issue 4: Investment in subsidiaries for business strategy
The appellant emphasized that the investment in subsidiaries was part of a business strategy and not solely to earn exempted income. It was contended that the investment should be viewed in the context of business operations and not compared with other exempted investments for the purpose of disallowance under section 14A.

Issue 5: Request for additional grounds/arguments
The appellant sought permission to file additional grounds or arguments during the hearing, indicating a willingness to present further points in support of the appeal.

In the absence of the assessee during the hearing, the Tribunal proceeded ex parte and heard the revenue. Upon careful examination of the CIT(Appeals) order and the arguments presented, the Tribunal found no reason to interfere with the decision. Consequently, the appeal of the assessee was dismissed, affirming the order of CIT(Appeals).

This detailed analysis reflects the key issues raised in the appeal, the arguments presented by the appellant, and the Tribunal's decision based on the facts and legal provisions discussed during the proceedings.