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TMI Blog2017 (9) TMI 1583X X X X Extracts X X X X X X X X Extracts X X X X ..... essee bank that no expenditure was incurred to earn exempt income was incorrect. Furthermore, it is undisputed fact that exempt income is earned from securities, which were invested in the earlier years. No any fresh investments have been made. - Decided in favour of assessee. - ITA No. 5508/Del./2015 - - - Dated:- 18-9-2017 - Shri I. C. Sudhir, Judicial Member And Shri L.P. Sahu, Accountant Member Appellant by : Shri S.L. Gupta, C.A. Respondent by : Shri Padam Singh, Sr. DR ORDER Per L. P. Sahu, A. M. This is an appeal filed by the assessee against the order of ld. CIT(A)-20, New Delhi dated 13.08.2015 for the assessment year 2011-12 on the following grounds : 1. On the facts and circumstances of the case, the order dated 13.08.2015 passed by the Learned Commissioner of Income Tax (Appeals) - XX New Delhi [CIT- (A)] is bad both in the eyes of law and on facts. 2.(i) On the facts and circumstances of the case, Learned CIT (A) has erred both on facts and in law in confirming the order of the Assessing Officer rejecting the contention of the assessee that the appellant has invested in tax free securities out of their own interest free capital/fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of exempted income. He also noted that the assessee has suo moto has not disallowed any expenditure to earn the tax free income. The basis of disallowance made by the Assessing Officer is as under : The assessee has not made any disallowance on its own in spite of the fact that it has incurred some portion of its overall expenditure for the investment resulting in tax free income. In view of the fact that the assessee is a banking concern having huge investments and major expenditure on account of interest and as the total exempt income is only ₹ 25,68,356/- hence the disallowance u/s. 14A is restricted to the said amount. Aggrieved by the order of the AO, the assessee appealed before the first appellate authority, who after considering the submissions of the assessee, confirmed the action of the Assessing Officer. Aggrieved by the order of ld. CIT(A), the assessee has filed this appeal before the Tribunal. 3. The ld. AR submitted a small synopsis, relying on some case laws, which read as under : The appellant has invested a sum of Rs. Two Crore each, in 6.85% tax free bonds of IIFCL on 22.01.2009 and 6.00% IRFC tax free Bonds on 16.02.2010. During the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.66 3708.62 Total own funds 4340.04 4919.86 5552.44 The Assessing Officer has failed to verify the correctness of the appellant's claim having regard to the accounts of the appellant. The Assessing Officer has not given any cogent reason in the assessment order for disbelieving the contention of the appellant that it has incurred no expenditure to earn the exempt income. The Assessing Officer has not examined the accounts of the appellant and there is no satisfaction recorded by the Assessing Officer about the correctness of the claim of the appellant and without application of independent mind disallowance u/s 14A has been made. The Assessing Officer has just made the arbitrary disallowance and added to the income u/s 14A and failed to mention how the disallowance under Rule 8D has been calculated. The AO has not brought on record anything which proves that there is any expenditure incurred towards earning of tax free income. The AO has not examined the accounts of the appellant and there is no satisfaction recorded by the AO about the correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1,93,730/- made by the Assessing Officer u/s 14Ar.w. Rule 8D. c) In the case of M/s Minda Capital Ltd. vs DCIT, (ITA No. 568/Del/2013 dated 25.03.2015 the ITAT Delhi has held as under: In the case, the A.O. vide questionnaire dated 22.10.2010 had asked the assessee to explain as to why disallowance in accordance with the provisions of Section 14A should not be made and thereafter holding that reply of the assessee was not satisfactory he proceeded to disallow the amount as calculated as per provisions of Rule 8D. The A.O. did not record as to how the explanation submitted by assessee was not satisfactory. The A.O. should have examined the claim of assessee and then he should have recorded his satisfaction as to why the reply of assessee was unsatisfactory. Therefore, respectfully following the order of Hon'ble High Court in the case of Taikisha Engineering India Ltd. we delete the disallowance confirmed by Ld. CIT(A). d) In case of Modern Info Technology P. Ltd. Vs. ITO (ITA NO. 4294/Del/2012) a/y 2009-10 the Hon'ble ITAT, BENCH 'E1 DELHI has categorically stated that: Disallowance u/s 14A cannot be made if appellant has not incurred clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled. We are of the opinion that no point of law has been raised. Therefore, this appeal is dismissed. i) In case of CIT v. Glenmark Pharmaceutical Ltd. (2013) 351 ITR 359/ 85 DTR 169 the Hon'ble Bombay High Court has stated that Where no expenditure was incurred for earning exempt income, disallowance u/s 14A cannot be made j) In the case of Fereshte Sethna (Ms) v. ACIT (2017) 162 ITD 412 A/Y 2010-11, the ITAT Mumbai has held: Allowing the appeal of the assesssee, the Tribunal held that AO cannot directly invoke rule 8D for making disallowance without examining the claim of the assessee. The disallowance u/s 14A could not be made unless a satisfaction was reached by the AO that the appellant's claim could not be accepted having regard to the accounts. No such satisfaction having been recorded by the AO. The Assessing Officer has not recorded any cogent reasons for rejecting the claim of the appellant that no expenses were incurred to claim exempt income. The additions, for whole of the interest received during the year under appeal, amounting to ₹ 25,68,356/- on the investments made in prior periods, u/s 14A is liable to be deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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