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TMI Blog2013 (11) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... these two years u/s 14A. For AY 2007-08 the disallowance u/s 14A has been made at Rs. 8,61,50,315/- and for AY 2008-09 the disallowance u/s 14A has been made at Rs. 6,60,93,678/- by the CIT(A). 3. Brief facts of the case are that assessing officer found that business of the assessee has not been started, therefore, he held that business is not set up. Accordingly he disallowed various expenses claimed by the assessee in its P&L A/c. while disallowing expenses the assessing officer has observed in last para of the order for AY 2007-08 that mere incorporation and receipt of share application money cannot be said to be commencement of the business. Neither any interest income has been earned from these advances nor any goods or services been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowing the ground of the assessee, the CIT(A) found that the expenses claimed by the assessee are to be disallowed u/s 14A. Accordingly, a show cause notice was given to the assessee that as to why the expenditure claimed in its P&L A/c should not be disallowed u/s 14A. Detail reply was filed before the CIT(A). However, CIT(A) held that even if there is no actual exempt income, once an expenditure has been incurred for earning exempt income section 14A of the Act applies. Final finding has been given in para 5.15 by which it has been held that, "therefore, by applying the above judicial decision to the facts of the instant case, I find admittedly and undisputedly, entire expenditure incurred to the tune of Rs. 8,75,35,452/- has been incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for acquiring the controlling interest of those companies. It was further submitted that even for A.Y. 2007-08 Rule 8D is not applicable and therefore the disallowance, if any, is to be made, then it is to be seen as to how much disallowance can be made which related to earning of dividend income. No interest has been paid by the assessee as entire expenditure is made on account of salary, other administrative expenses etc. etc. which have no connection for earning of dividend as all these expenses are incurred for business purposes and as assessee has controlling interest in these companies. For this purpose reliance was placed on the decision of Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. 15 Taxmann.com 390 (Del.). Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble High Court has held that, "there is no doubt about the fact that while framing the assessment even u/s 143(3), the Assessing officer may omit to make certain additions of income or omit to disallow certain claims which are not admissible under the provisions of the Act thereby leading to escapement of income. The Act provides for remedial measures which can be taken under these circumstances". 13. Thereafter, the Hon'ble High Court has held that CIT(A) has no power to make the disallowance or addition where assessing officer has not applied his mind. It was further held by the Hon'ble High Court that if any disallowance escaped attention of the assessing officer, then remedial action can be taken either by issuing notice u/s 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this case also the disallowances were made u/s 14A by the assessing officer by observing that assessee has purchased shares of Rs. 3.01 crores of M/s Shri Sai Baba Sugar Mills Ltd. for earning exempt income. This action of the assessing officer was confirmed by CIT(A). On second appeal before the Tribunal, the Tribunal held that, "we find merit in the plea of the assessee that where a business strategy had been adopted by the assessee by way of investment in shares of sick company in order to make over the said company for widening its operation of business, cannot be held to be investment per se. The decision making of a business man by way of strategy planning in allied line of business is a decision made in the course of carrying on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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