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TMI Blog2015 (3) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... s not received any exempt income and hence disallowance is unwarranted. 2. The Assessing Officer while completing the assessment disallowed ` 19,28,666/- under section 14A read with Rule 8D of the Act as expenditure incurred for earning exempt income as the assessee was holding investments worth `14.05 crores and incurred interest expenses of ` 34.80 lakhs. On appeal the Commissioner of Income Tax (Appeals) deleted the disallowance holding that assessee has not derived income out of investments and investments are made from his own source which did not suffer any interest. The Commissioner of Income Tax (Appeals) also observed that Assessing Officer should have excluded share application money from the working of the qualifying amount. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal No.110 of 2009 dated 26.2.2009. Counsel for the assessee submits that even otherwise the Assessing Officer should have excluded share application money in various companies which will not produce any exempt income. He submits that if such share application money is excluded the disallowance under section 14A of the Act will works out to `5,61,125/- as against disallowance of `19,28,666/- made by the Assessing Officer. For the proposition that share application money is not investment for the purpose of section 14A, he places reliance on the decision of the Tribunal in the case of Rainy Investments Pvt. Ltd. Vs. ACIT in I.T. Appeal No.5491/Mum/2011 dated 16.1.2013. 5. Heard both sides. Perused orders of lower authorities and submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is incurred for earning the income is not an allowable deduction. For the year in question, the finding of fact is that the assessee had not earned any tax free income. Hence, in the absence of any tax free income, the corresponding expenditure could not be worked out for disallowance. The view of the CIT(A), which has been affirmed by the Tribunal, hence does not give rise to any substantial question of law. Hence, the deletion of the disallowance of Rs. 2,03,752/- made by the Assessing Officer was in order." 8. The Gujarat High Court in the case of CIT Vs. Corrtech Energy Pvt.Ltd.(supra) held as under:- "We have given our thoughtful consideration to the facts and the decision relied upon by the Id AR. The Hon'ble Punjab & Har ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat disallowance under section 14A of the Act could not be made. In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of Commissioner of Income Tax v Winsome Textile Industries Ltd reported in (2009) 319 ITR 204 (Punj & Har) in which also the Court had observed as under: "7. We do not find any merit in this submission. The judgement of this court in Abhishek 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 observatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not arise." 10. Similar view has been taken by the Hon'be Punjab & Haryana High Court in the case of CIT Vs. M/s. Lakhani Marketing Incl. in ITA No.970 of 2008 dated 2.4.2014. The Hon'ble High Court while affirming the decisions of CIT(A) as well as the Tribunal in deleting the disallowance made under section 14A observed as under:- "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 apepals 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be rejected on the face of it inasmuch as the e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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