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TMI Blog2017 (1) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... xt and such that it advances the scheme of the Act rather than distort it. In conclusion, we are of the view that the provisions of s. 14A read with Rule 8D of the Rules cannot be made applicable in a vacuum i.e. in the absence of exempt income. The questions of law are answered in favour of the assessee and against the department - T.C.A. No. 520 of 2016 - - - Dated:- 23-12-2016 - Nooty Ramamohana Rao And Anita Sumanth, JJ. For the Appellant : Mr.Vijayaraghavan For the Respondent : Mr.T.Ravikumar JUDGMENT ( Judgment of the Court was delivered by Anita Sumanth, J. ) 1. This appeal comes to us at the instance of the assessee raising various substantial questions of law extracted below: 1. Whether the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The assessment year involved is 2007-2008. The assessee had investments in Indian Companies to the tune of ₹ 177.56 crores that had not yielded any returns in the previous year relevant to the present assessment year. An order of draft assessment in terms of s.143(3) r.w.s.144C of the Income Tax Act 1960 (hereinafter referred to as 'Act') was issued by the assessing officer, interalia proposing a disallowance in terms of s. 14A of the Act read with Rule 8D of the Income Tax Rules of an amount of ₹ 1,88,245/-. The proposal was confirmed despite objections that the provisions of s.14A and Rule 8D would not be attracted in a case where no exempt income had, in fact, been earned. The matter was carried before the Disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling under Chapter III of the Act, viz. incomes not forming part of total income, would stand excluded from the application of s. 14 A of the Act. 6. Reliance was placed on the following decisions: Commissioner of Income Tax Vs. Corrtech Energy Private Limited (372 ITR 97) (Gujarath High Court) CIT (iv) Holcim India Ltd., Vs. Commissioner of Tax (Delhi High Court) ( 90 CCH 81), Commissioner of Income Tax Vs. Shivam Motors Private Limited (Allahabad High Court) (230 Taxmann 63), Principal Commissioner of Income Tax Vs. Gujarath State Petronet Limited (Gujarath High Court) and Commissioner of Income Tax, Vs. Lakhani Marketinng Incl (272 CTR 265); Chem Investments Limited vs Commissioner of Income Tax (94CCH (2)) Delhi High Court (reversing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) 242 ITR 450) in terms of which, expenditure incurred by an assesee carrying on a composite business giving rise to both taxable as well as non-taxable income, was allowable in entirety without apportionment. It was thus that s. 14A was inserted providing that no deduction shall be allowable in respect of expenditure incurred in relation to the earning of income exempt from taxation. As observed by the Supreme Court in the judgment in the case of Commissioner of Income Tax vs. Walfort Share and Stock Brokers (P) Ltd (2010) 326 ITR 1 '....The mandate of s.14A is clear. It desires to curb the practice to claim deduction of expenses incurred in relation to exempt income against taxable income and at the same time avail of the tax inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11) (12 Taxmann.com 227) in all of which the assessee did, as a matter of fact, earn dividend income. The aforesaid decisions are thus factually distinguishable and do not advance this proposition of the revenue. 13. Reliance is also placed on a decision of the jurisdictional High Court in the case of Beach Minerals Company Pvt. Ltd. Vs. Assistant Commissioner of Income Tax in TCA No.681 of 2013, dated 2.12.2013. In that case, payments of interest by the assessee were sought to be disallowed invoking the provisions of s.14A on the premise that the same related to borrowings that had been invested and would yield exempt returns. The assessee contested the disallowance u/s 14A on multiple grounds. It was contended that there were sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, which imposes the charge to tax reads thus: Charge of income-tax 4. (1) Where any Central Act enacts that income tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions (including provisions for the levy of additional income-tax) of, this Act in respect of the total income of the previous year of every person: Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income tax shall be charged accordingly. Thus, where the statute indented that income shall be recognized for taxation in r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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