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TMI Blog2016 (1) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, there was no earning of exempted dividend income. He has also clarified that for the purpose of invocation of the provisions of section 14A of the IT Act, the AO has applied the formula only in respect of disallowance of proportionate interest expenditure. There was no allegation of the AO that the exempt income was earned by the assessee. Thus Section 14A will not apply if no exempt income is received or receivable during the relevant previous year as decided in Cheminvest Limited Versus Commissioner of Income Tax-VI [2015 (9) TMI 238 - DELHI HIGH COURT] - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... n holding that the reopening of the case is not in accordance with the provisions of sec. 147 of the Act without appreciating the fact that there was escapement of income and reopening was made on the basis of new fact with came to light while scrutiny of the case for subsequent years?" 2. Facts in brief, as emerged from the corresponding assessment orders passed u/s 143(3) read with section 147 of the IT Act dated 26-02-2013 were that the assessee company is in the business of manufacturing of paper, pulp etc. There was an allegation that the income has escaped assessment in the light of the provisions of section 14A of the IT Act. The AO has referred to a decision of the Special Bench of ITAT, New Delhi pronounced in the case of M/s. Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate authority. 3. In respect of invocation of the provisions of Section 14A of the IT Act, the finding of the learned CIT (A) was as under:- "5.1 I have carefully considered the facts of the case and the written submissions of the appellant. I find substantial force in the submissions made. The Hon'ble Bombay High Court in the case of CIT vs. Delite Enterprises (supra) has held that if there is no income earned by the appellant, which is claimed to be exempt, no disallowance u/s 14A can be made. The said judgment has been subsequently followed by the Hon'ble ITAT, Mumbai Bench in several cases and it has been held that section 14A would have no application where the assessee has not claimed any exempt income. In the case of Thermo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n exempt income has been earned or not. The AO has rightly invoked the provisions of section 14A of the IT Act. Hence, the order of the first appellate authority deserves to be reversed. 5. On the other hand, from the side of the respondent assessee, the learned AR, Shri K. P. Dewani appeared and at the outset placed reliance on the following decisions:- (i) Hon'ble Bombay High Court order in ITA No.110 of 2009 in the case of M/s. Delite Enterprises vide order dated 26/02/2009 (ii) Hon'ble Allahabad High Court order in ITA No.88 of 2014 in the case of M/s. Shivam Motors (P) Ltd. vide order dated 05/05/2014 (iii) Hon'ble Punjab & Haryana High Court order in ITA No.970 of 2008 (O&M) in the case of M/s. Lakhani Marketing Incl. Vide or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon'ble Delhi High Court, copy placed in the compilation. The Hon'ble Delhi High Court in ITA No.749/2014 vide order dated 02-09-2015 titled as "Cheminvest Ltd. Vs CIT" has decided the substantial question of law that whether disallowance u/s 14A of the Act can be made in a year in which no exempt income has been earned or received by the assessee. The Final verdict was as under:- "23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression 'does not form part of the total income' in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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