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TMI Blog2014 (9) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... bearing fund utilized by the assessee for making the investment – the order of the CIT(A) is upheld – Decided against revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... o the accounts of the assessee, is not satisfied with- (a) the correctness of the claim of disallowance of expenditure made by the assessee; or (b) the claim made by the assessee that no expenditure has been incurred, in relation to income which does not form part of the total income under the Act for such previous year. If the AO is not satisfied with the correctness of claim of disallowance of expenditure made by the assessee or the claim made by the assessee that no expenditure has been incurred in relation to income which does not fall part of the total income under the Act for such a previous year, he shall determine the amount of expenditure in relation to such Income In accordance with the provisions of sub-rule (2). The objective behind the section 14A was that expenditure which has a bearing on exempt income should not be considered in the computation of total income as otherwise this would result in double advantage to the assessee. So in a nutshell, the conditions for the invocation of rule 80 read with section 14A are as follows: i. The AO should be satisfied that the claim of expenditure in relation to tax free income has not been correctly made by the assessee havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble ITAT in the case of M/s. Cheminvest Ltd. has held that disallowance u/s 14A can be made even if no exempt income has been earned or received by the assessee. . 02. The appellant craves leave for reserving the right to forego any ground(s) of appeal at any time before appeal." 4. While pleading on behalf of the revenue, ld. DR submitted that the assessee has incurred interest expenses and no bifurcation was provided during the assessment proceedings. In view of this fact, the Assessing Officer rightly applied the Rule 8D by making the disallowance as the Assessing Officer was not satisfied with the correctness of the claim of expenditure made by the assessee. He further submitted that CIT (A) was not justified in observing that disallowance u/s 14A of the Act cannot be made when there is no exempted income. He submitted that when there is expenditure which has incurred to earn the exempted income there may be an income or may not be an income for the year under consideration then also disallowance has to be made as it will effect the correct taxable income for the year under consideration. The expenditure can be allowed only when it has been incurred wholly and exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 14A does not have any application where the assessee does not make any claim for exemption and where investments are out of own funds; (iii) ITAT, Ahmedabad decision dated 10.05.2013 in the case of DCIT vs. Gujarat Narmada Valley Fertilizer Co. Ltd. - 2013-TIOL-405-ITATMUM and ITAT, Mumbai decision in the case of Shopper's Stop Ltd. vs. ACIT - 2011-TIOL-581-ITAT-MUM - for the proposition that section 14A cannot be invoked where the assessee's own funds far exceeds the investment made; (iv) ITAT, Ahmedabad decision dated 05.12.2012 in the case of DCIT vs. Jay Chemical Industries Ltd. in ITA No.97/Ahd/2012; (v) ITAT, Mumbai Bench in the case of ITO vs. Strides Arcolab Ltd. - 138 ITD 323 (Mum); (vi) Hon'ble Bombay High Court decision in the case of CIT vs. Reliance Utilities and Power Ltd. - 313 ITR 340; (vii) Hon'ble Punjab & Haryana High Court in the case of CIT vs. Hero Cycles Ltd. - 323 ITR 518 (P&H) - for the proposition that the disallowance u/s 14A is not permissible where there is no nexus between expenditure incurred and income generated. (viii) ITAT, Chennai dated 07.11.2013 in the case of DCIT vs. M/s. Allied Investments Housing P. Ltd. in ITA No.305/Mds/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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