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TMI Blog2016 (2) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance made u/s 14A has deserves to be deleted, as the assessee has not earned/received exempt income during the previous year relevant to the assessment year under appeal. - Decided in favour of assessee - I.T.A .No.308/DEL/2014 - - - Dated:- 18-1-2016 - SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER For The Appellant : Shri V.K. Sabharwal, Adv. For The Respondent : Shri Raman Kant Garg, Sr. DR ORDER PER BEENA A. PILLAI, JM The present appeal arises from the order of the ld. CIT(A)- XXXIII, New Delhi vide order dated 30.09.2013, for assessment year 2009-10, on the following grounds of appeal:- 1. That the Ld. Commissioner of Income Tax (Appeal) has passed the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income should not be disallowed as per provision of section 14A of the Act. 2.3. After going through the submissions of the assessee, the ld. Assessing Officer held that since the assessee has not disallowed the expenses incurred for earning of exempt income in view of the provisions of section 14A read with Rule 8D of the Income Tax Rules, and made an addition of ₹ 5,83,545/-. 3. Aggrieved by the order of the Ld.AO, assessee preferred an appeal before the Hon ble CIT(A). The Ld.CIT(A) held that though during the year, the assessee had net profits amounting to ₹ 4,29,51,263/-, use of borrowed funds for making investment during the year could not be ruled out. He accordingly confirmed the addition made by the ld.AO. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Board of Direct Taxes (CBDT) clarified that Rule 8-D read with section 14A provides for disallowance of expenditure even where tax payer in a particular year has not earned any exempt income. 5.1. The ld.DR, submitted that the Assessee s stand in not disallowing any expenditure in this regard is not acceptable though no dividend income is earned during the previous year. The ld.DR submitted that in order to disallow the expenditure it is not necessary that exempt income is earned. 6. We have heard both the counsel and perused the records. We have also gone through the orders of the lower authorities, Synopsis, Paper Book filed by the assessee and the case laws relied upon by the assessee. 6.1. On perusal of the balance sheet, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of; i) Commissioner of Income Tax, Faridabad v. M/s. Lakhani Marketing Incl. in ITA No. 970/2008 vide order dated 02.04. 2014 (P7 H) ii) CIT v. Hero Cycles Limited, reported [2010] in 323 ITR 518 iii) CIT v. Winsome Textile Industries Ltd., reported [2009] 319 ITR 204. iv) CIT -I v. Corrtech Energy (P) Ltd reported [2014] 223 Taxmann 130 (Guj.) v) CIT, Kanpur v. Shivam Motors (P) Ltd.(All) in ITA No. 88/2014 vide order dated 05.05.2014. 6.4. As per Maxopp Investment Ltd., (2012) 347 ITR 272 (Del), the correctness of the claim of the assessee in respect of expenditure incurred in relation to the income which did not form part of total income had to be first ascertained and in case, the assessee claimed that no expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar is in conflict with the law of the land laid down by the High Courts or the Supreme Court, the Revenue authorities while acting quasi-judicially, should ignore such circulars in discharge of their quasi-judicial functions. In view of the above, Circular No 5 of 2014, dated 11.2.2014 relied on by the Ld. DR, is in conflict with the law laid down by the High Courts and, therefore, it is justified to ignore the aforesaid circular while discharging quasi-judicial function. 6.6. All the above High Courts have categorically held that in the absence of any tax free income the corresponding expenditure could not be worked out for disallowance. In the instant case also, the admitted fact is that assessee has not earned any tax free inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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