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TMI Blog2017 (5) TMI 1409X X X X Extracts X X X X X X X X Extracts X X X X ..... and none other and consequently the expenditure incurred in connection therewith should also be dealt with in the same previous year. Thus, by application of the matching concept, in a year where there is no exempt income, there cannot be a disallowance of expenditure in relation to such assumed income. See M/s. Redington (India) Ltd. Versus ACIT [2017 (1) TMI 318 - MADRAS HIGH COURT] Appeal filed by the Revenue is dismissed. - ITA No. 2827/Mds/2016 - - - Dated:- 29-3-2017 - Shri N.R.S. Ganesan, Judicial Member And Shri D.S. Sunder Singh, Accountant Member Appellant by : Shri Shiva Srinivas, JCIT Respondent by : Shri R. Sivaraman, Advocate ORDER Per N.R.S. Ganesan, Judicial Member This appeal of the Revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed under Rule 8D of Income-tax Rules, 1962. Since the assessee being a company, according to the Ld. D.R., the assessee has to necessarily incur expenditure at the managerial level for making decision to invest the funds, therefore, a portion of expenditure incurred by the assessee would be relatable to the income which is otherwise not taxable under the provisions of Income-tax Act. However, on appeal by the assessee, the CIT(Appeals) allowed the claim of the assessee on the ground that no dividend income was earned during the year under consideration. According to the Ld. D.R., earning of dividend income is immaterial when the expenditure was computed under Rule 8D(2). When the assessee borrowed funds and paid interest, definitely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the investment was made, were held by the assessee at the relevant point of time. Therefore, this Tribunal is unable to find out whether the investment is really made in the subsidiary companies. 8. Now coming to the contention of the Ld.counsel for the assessee that there was no income from such investment during the year under consideration, the contention of the Ld. D.R. is that irrespective of the income, the expenditure has to be computed as per the method prescribed under Rule 8D(2). 9. We have carefully gone through the Rule 8D(2) of the Income-tax Rules, 1962, which reads as follows:- METHOD FOR DETERMINING AMOUNT OF EXPENDITURE IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME (1) Where the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he previous year ; (iii) an amount equal to one-half per cent. of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance-sheet of the assessee, on the first day and the last day of the previous year. (3) For the purposes of this rule, the total assets shall mean, total assets as appearing in the balance-sheet excluding the increase on account of revaluation of assets but including the decrease on account of revaluation of assets. 10. We have also carefully gone through the judgment of Madras High Court in Redington (India) Ltd. (supra). The Madras High Court has observed at paragraphs 14 and 15 as follows:- 14. Nothing much turns on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only to the previous year when the income was earned and none other and consequently the expenditure incurred in connection therewith should also be dealt with in the same previous year. Thus, by application of the matching concept, in a year where there is no exempt income, there cannot be a disallowance of expenditure in relation to such assumed income. Madras Industrial Investment Corpn. Ltd. v. CIT (1997) 225 ITR 802/91 Taxman 340 (SC). The language of s.14A (1) should be read in that context and such that it advances the scheme of the Act rather than distort it. 11. In view of the judgment of Madras High Court, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is conf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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