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TMI Blog2014 (11) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant : Shri H. N. Khincha, CA For the Respondents : Shri B. K. Panda, Addl CIT Shri C. H. Sundar Rao, CIT-I ORDER Per Bench In these appeals filed by the assessee and the revenue issue is an addition made u/s14A of the IT Act, 1961 ( The Act'), which has been pegged down by the CIT(A), on assessee's appeal. Revenue is aggrieved that the CIT(A) deleted the disallowance made by the AO under rule-8(2)(iii) of the IT Rules,1962, whereas the assessee is aggrieved that the CIT(A) sustained the disallowance made under rule-8(2)(ii). The grounds are similar for both the years. 2. Assessee engaged in the business of real estate and construction had filed its return for AY; 2009-10 declaring an income of ₹ 55,45,092/-and for AY: 2010-11 and an income of ₹ 8,07,253/-. During the course of assessment proceedings, it was noted by the AO that the assessee had investments worth ₹ 77,57,63,341/-in the form of shares in various companies and investment of ₹ 12,07,42,035/- in a partnership firm. These investments which were made during the previous year relevant to AY: 2009-10 continued without change for AY : 2010-11 also. AO sought exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts made by it. Again as per the assessee there were no additional investments during the FY: 2009-10. Assessee also pointed out to the learned CIT(A), that total investment which could give rise to tax free income was ₹ 53,41,37,341/- only. Therefore, as per the assessee its own funds were more than sufficient to meet such investments. Further, as per the assessee AO had not expressed his dissatisfaction on the claim of it having not incurred any expenditure for the investments. 4. The learned CIT(A) was agreeable to the contentions of the assessee though, not in full. According to him, argument of the assessee that no disallowance u/s 14A could be made when there was no tax exempt income, could not be accepted in view of the decision of the Hon' Delhi High Court in the case of M/s Technopak Advisors Pvt.Ltd., 18 Taxman.com.146. However, according to him, assessee had interest free funds in excess of the investments made by it and when there was mixed pool of funds available, the presumption was that investments were made out of interest free funds. Relying on the decision of the Hon'ble Bombay High Court in the case of CIT Vs Reliance Utilities Power Ltd., 313 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciating the specific plea taken by the assessee in this regard and sustaining the disallowance made under rule 8D(2)(ii) of the Act. 7. We have perused the orders and heard the rival contentions. There is no dispute that the assessee had no exempt income during both the years involved. No doubt as mentioned by the Learned DR, the Special Bench of this Tribunal in the case of Cheminvest Ltd. Vs. ITO 121 ITD 318, had held that disallowance under section 14A could be made even in an year in which no exempt income was earned or received by the assessee. This decision of Special Bench of the Tribunal has been, in our opinion, impliedly overruled by various decisions of different High Courts as elaborated by us in the succeeding paragraphs. 8. In the case of CIT Vs M/s. Shivam Motors P.Ltd. (ITA number 88 of 2014 judgment dated 6-5-2014 for AY 2008-09) the question of law raised by the Revenue before the Hon Allahabad High Court was as under: Whether on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal was justified in upholding the decision of CIT(A) in deleting the disallowance of ₹ 2,03,752/- u/s.14A ignoring the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hishek Industries Ltd (2006) 286 ITR 1 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. The observations made therein have to be read in that context. In the present case, admittedly the assesse did not make any claim for exemption. In such a situation section 14Acould have no application. 12. The Hon'ble Bombay High Court in the case of CIT Vs. Delite Enterprises (Tax Appeal 110 of 2009 dated 26-2-2009) held as under:- The Revenue is in appeal on the following questions ; A-Whether on the facts and in the circumstance of the case and in law the Hon'ble Tribunal was right in deleting the disallowance made by the Assessing Officer of interest paid by the Assessee Company on borrowed funds amounting to ₹ 241.10 lakhs overlooking the fact that the borrowed funds were used by the Assessee Company to invest in the Capital of another Partnership Firm and since profits derived by the Assessee Company from a Partnership firm wer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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