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2018 (8) TMI 2118 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - Whether no exempt income has accrued to the assessee from the investment made in the sister concerns? - HELD THAT - In the present case there is no change in facts as facts are similar to the facts of the earlier decision rendered by the Tribunal in the case of the assessee for AY 2009-10 2015 (8) TMI 605 - ITAT BANGALORE where the Tribunal has deleted the disallowance on the premise that no exempt income has accrued to the assessee from the investment made in the sister concerns. Therefore following the decision of the coordinate bench in the case of the assessee for earlier year and also following the judgment of matter of Chem Chem Investment 2011 (11) TMI 267 - DELHI HIGH COURT - Section 14A will not apply if no exempt income is received or receivable during the relevant previous year - we dismiss the appeals of the Revenue.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Applicability of Section 80-IA(5) and Section 80-I(6) of the Income Tax Act. 3. Set-off of losses under Section 70(1) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act: The primary issue revolves around the disallowance made by the Assessing Officer (AO) under Section 14A of the Income Tax Act, amounting to Rs. 3,81,32,243/-. The CIT (A) directed the AO to delete this addition, citing that the assessee should not have made disallowances if no tax-exempt income was earned during the year. This decision was based on the Tribunal's earlier judgment in the assessee's case for the assessment year 2009-10, where it was held that in the absence of exempt income, no disallowance under Section 14A can be made. The Tribunal upheld this view, referencing the Hon'ble Delhi High Court's ruling in Chem Investment, which stated that no disallowance should be made if no exempt income is received or receivable during the relevant year. Consequently, the Tribunal dismissed the Revenue’s appeal. 2. Applicability of Section 80-IA(5) and Section 80-I(6) of the Income Tax Act: The Tribunal examined the provisions of Section 80-IA(5) and Section 80-I(6) of the Income Tax Act, which pertain to the computation of profits for eligible businesses and the quantum of deduction. The Tribunal referred to the Supreme Court's decision in Synco Industries Ltd., which clarified that the profits from an industrial undertaking should be computed as if it were the only source of income. However, this restriction applies only to the quantum of deduction and not to the gross total income, which must be computed after adjusting losses from other divisions. The Tribunal concluded that the provisions of Section 80-IA(5) do not restrict the set-off of losses under Section 70(1) and upheld the CIT (A)'s application of the Supreme Court's decision. 3. Set-off of losses under Section 70(1) of the Income Tax Act: The Tribunal addressed the set-off of losses under Section 70(1), which allows the adjustment of losses from one source against income from another source under the same head. The Tribunal reiterated that the provisions of Section 80-IA(5) are limited to computing the quantum of deduction for eligible businesses and do not impact the set-off of losses under Section 70(1). The Tribunal supported the CIT (A)'s view that the set-off of losses should be allowed before determining the gross total income, aligning with the Supreme Court's interpretation in Synco Industries Ltd. Conclusion: The Tribunal dismissed the Revenue's appeals, upholding the CIT (A)'s decisions. The Tribunal confirmed that no disallowance under Section 14A should be made if no exempt income is earned, supported the application of Section 80-IA(5) and Section 80-I(6) for computing deductions, and allowed the set-off of losses under Section 70(1) before determining the gross total income. The judgments were pronounced in the open court on August 31, 2018.
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