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TMI Blog2014 (7) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 (4) TMI 514 - ITAT MUMBAI] - Section 14A is applicable only when any part of the income is not to be included in the total income of the assessee and the expenditure relating to that part of income is claimed by the assessee as deduction - In such cases only, the expenditure relating to the exempted income can be disallowed and not otherwise - the entire income is found to be taxable, no disallowance can be made u/s 14A of the Act – Decided against Revenue. - ITA No.970 of 2008 (O&M) - - - Dated:- 2-4-2014 - Ajay Kumar Mittal And Jaspal Singh, JJ For the Appellant : Mr Tejinder K Joshi, Adv. For the Respondent : Ms Radhika Suri, Adv. JUDGEMENT:- PER : Ajay Kumar Mittal 1. This order shall dispose of ITA Nos.884 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y amounting to Rs. 46,91,684/- by invoking section 14A of the Income Tax Act, 1961 taking a view contrary to judgments pronounced by various courts (i) 105 ITD 669 (ITAT Mumbai- G Bench), (ii) 89 ITD 44 (ITAT Calcutta-C Bench), (iii) 97 ITJ 493 (ITAT Mumbai Bench), (iv) 91 ITD 311 (ITAT Hyderabad- B Bench)? iii) 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 in contravention of Hon ble Punjab and Haryana High Court judgment in the case reported in 286 ITR 1 (P H) as per which no nexus is required to be proved? 3. A fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the parties and perused the record. 5. Learned counsel for the appellant submitted that the CIT(A) as well as the Tribunal were in error in deciding the issue in favour of the assessee without properly appreciating the provisions of section 14A of the Act. According to the learned counsel, the assessee had invested in shares of M/s Lakhani Marketing Incl. which had yielded dividend income and was not forming part of total income by virtue of Section 10(33) of the Act and hence interest liability claimed for deduction from the income was impermissible. 6. On the other hand, learned counsel for the assessee besides supporting the order passed by the CIT(A) and the Tribunal relied upon judgments of this Court in CIT vs. Hero Cycles Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile upholding the finding recorded by the CIT(A) noticed as under:- We have heard rival submissions and have perused the material on record. From the reading of section 14A of the Act, it is clear that before making any disallowance the following conditions are to exist:- a) That there must be income taxable under the Act, and b) That this income must not form part of the total income under the Act, and c) That there must be an expenditure incurred by the assessee, and d) That the expenditure must have a relation to the income which does not form part of the total income under the Act. 9. Therefore, unless and until, there is receipt of exempted income for the concerned assessment years (dividend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bearing funds, since the investments in shares are in the years 1995-96, 1998-99 and 1999-2000 and the interest disallowance is for the assessment years 2000-01 and 2001-02. On the contrary perusal of the balance sheet for the year ending 31.3.1995, 31.3.1998 and 31.3.1999, it is clear that interest bearing funds have not been utilized for investment for purchase of shares. 11. For the aforesaid reasons, we see no reason to interfere with the order of CIT(A) concerning assessment year 2000-01 and 2001-02 and hence the decision of CIT (A) in deleting the disallowance of interest by invoking section 14A of the Act is correct and in accordance with law. 11. In view of the aforesaid findings, which could not be shown to be erroneous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee had taken loans on which interest was paid and all the money available with the assessee was in common kitty, as held by this Court in CIT vs. Abhishek Industries Limited, (2006) 205 CTR (P H) 304 : (2006) 286 ITR 1 (P H) and therefore, disallowance under section 14A was justified. 7. We do not find any merit in this submission. Judgment of this Court in Abhishek Industries (supra) was on the issue of allowability of interest paid on loans given to sister concerns, without interest. It was held that deduction for interest was permissible when loan was taken for business purpose and not for diverting the same to sister concern without having nexus with the business. Observations made therein have to be read in that cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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