9911796707
TMI Blog2014 (7) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... , "the Act") against the order dated 16.5.2008, Annexure A-III passed by the Income Tax Appellate Tribunal, Delhi Bench 'G' New Delhi (in short, "the Tribunal") in ITA No.3784/DEL/2004, for the assessment year 2001-02, proposing to raise following substantial questions of law for determination of this Court:- "i) Whether on the facts and circumstances of the case, the Hon'ble ITAT was right in law in upholding the order of the learned CIT(A) in deleting the disallowance of interest liability amounting to Rs. 46,91,684/- by invoking section 14A of the Income Tax Act, 1961 particularly when the investment in shares of M/s Lakhani India Limited which yield dividend income are not forming part of the total income by virtue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover of the respective companies.It filed its return declaring nil income on 30.10.2001 for the assessment year 2001-02. The assessment was completed under section 143(3) of the Act at Rs. 56,57,713/- making following additions to the total income shown by the assessee:- a) Rs. 47,100/- Charity and Donation. b) Rs. 3,50,000/- Disallowance of commission paid c) Rs. 3,58,574/- On account of sales tax payment d) Rs. 46,91,684/- Disallowance of interest under section 14A e) Rs. 55,782/- On account of car expenses Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 24.6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and in such a situation, provisions of Section 14A of the Act had no applicability. According to the learned counsel, the CIT(A) and the Tribunal had held the assessee to be entitled to claim deduction on account of interest liability. 7. After hearing learned counsel for the parties, we do not find any merit in the appeals. 8. The primary issue that arises for consideration in these appeals is whether the CIT(A) as well as the Tribunal were right in allowing deduction of interest liability out of other income and the claim of the revenue to disallow the same under section 14A of the Act was justified. 9. The CIT(A) vide order dated 24.6.2004, Annexure A.II recorded as under:- "7.2 Keeping in view the above facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the findings of the CIT(A), nor the statement of the assessee before AO that assessee is not in receipt of any dividend income and hence according to us, the Assessing Officer has erred in invoking Section 14A of the Act, to disallow various interest payments on capital account, security deposits and unsecured loans. This conclusion of ours finds support in the decision of Bombay Bench of the Tribunal in the case of Joint Commissioner of Income Tax v. Holland Equipment Co. B.V.reported in (2005) 3 SOT 810 (Mumbai) and the relevant portion of the order of the Bombay Bench of the Tribunal is reproduced below:- 'Regarding application of Section 14A of the Act, the contention of the learned Department Representative has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted's case (supra) recorded as under:- "5. In view of finding reproduced above, it is clear that the expenditure on interest was set off against the income from interest and the investments in the share and funds were out of the dividend proceeds. In view of this finding of fact, disallowance under section 14A was not sustainable. Whether, in a given situation, any expenditure was incurred which was to be disallowed, is a question of fact. The contention of the revenue that directly or indirectly some expenditure is always incurred which must be disallowed under section 14A and the impact of expenditure so incurred cannot be allowed to be set off against the business income which may nullify the mandate of section 14A, c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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