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TMI Blog2018 (1) TMI 1323X X X X Extracts X X X X X X X X Extracts X X X X ..... nya Kumar Revenue by : Smt. Suman Malik ORDER PER P. MADHAVI DEVI, J.M.: This is assessee appeal for the A.Y 2012-13, against the order of the CIT(A)-5, Hyderabad dated 07-12-2016 in this assessment year the assessee is aggrieved by the order of the CIT(A) in confirming the disallowance made u/s 14A(2) of the IT Act r.w.r 8D of the IT Rules. 2. Brief facts of the case are that, the assessee firm engaged in the business of trading of cotton yarn and lint, filed its return of income for the A.Y 2012-13 on 27-09- 2012 declaring a total income of ₹ 37,80,390/-. During the assessment proceedings u/s 143(3) of the IT Act, the A.O observed that the assessee has borrowed secured loans from UCO Bank CC Limit with cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Karvy Stock Broking Limited, Hyderabad in ITA Nos. 1397 1398 of Hyd 2017 and also by the decision of the Hon ble Punjab and Haryana High Court in the case of CIT Vs Max India Limited dated 06-09-2016in ITA No. 186 of 2013 (O M). Copies of the said orders are filed before us. 5. The Ld. DR on the other hand, supported the orders of the authorities below and also placed reliance upon the CBDT circular No. 5 of 2014 dated 11-02-2014. 6. Having regard to the rival contentions and material on record, we find that the Tribunal in the case of M/s Karvy Stock Broking Limited (cited supra) has considered the issue at length and also the CBDT circular No. 5 of 2014 dated 11-02-2014, and the decision of the Hon ble High Court of Madras i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: The assessee had investments in companies to the tune of ₹ 177.56 crores that had not yielded any returns in the previous year relevant to the present assessment year. The Assessing Officer disallowed the expenditure under section 14A, read with rule 8D despite objections that the provisions of the above said section would not be attracted in a case where no actual exempt income had been earned. On further appeal, the Tribunal also confirmed the disallowance. On appeal to the High Court: Section 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. The Supreme Court in the judgment in the case of CIT v. Walf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;In computing the total income of a previous year, any income falling within any of the following clauses shall not be included........' [Para 14] The exemption extended to dividend income would relate 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. The language of section 14A(1)should be read in that context and such that it advances the scheme of the Act rather than distort it. [Para 15] In conclusion, the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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