9911796707
TMI Blog2017 (11) TMI 1689X X X X Extracts X X X X X X X X Extracts X X X X ..... Facts of the case are in brief are that, in the assessment order, the Assessing Officer has observed that the main purpose of introduction of section 14A is that the expenditure which is relatable to earning of exempt income has to be considered for disallowance, irrespective of the fact whether any such income has been earned during the financial year or not. In the present case, the investments made by the assessee in shares are unlisted companies are to be treated as qualifying investments for invoking the provisions of section 14A. Accordingly, the expenditure relatable to exempt income is to be computed as per Rule 8D (2) of the Income Tax Rules, 1962 (for short, "Rules"). Accordingly, an amount of Rs. 7,37,080/- is disallowed under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is relatable to the assessment year in issue. The Division Bench, thus, held that where no exempt income is earned in the previous year, relevant to the assessment year in issue, provisions of Sec. 14A of the Act r.w.rule 8D could not be invoked. The reasoning of the Division Bench is contained in the following part of the judgment: "4. The admitted position is that no exempt income has been earned by the assessee in the financial year relevant to the assessment year in issue. The order of assessment records a finding of fact to that effect. The issue to be decided thus lies within the short compass of whether a disallowance in terms of section 14A of the Act read with Rule 8D of the Rules can be contemplated even in a situation wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred by an assessee 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 Sec. 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 CIT Vs. Walfort Share and Stock Brokers (P)Ltd. (2010) 326 ITR 1. '.... The mandate of Sec. 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 incentive by way of an exemption of exempt income without making any ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no disallowance u/s.14A r.w.Rule 8D is warranted. I, therefore, direct Assessing Officer to delete addition of Rs. 7,37,080/-. Revised ground of appeal no.2 (original ground of appeal no. 1) is allowed." 5. None appeared on behalf of the assessee. Ld. Departmental Representative has supported the order of the Assessing Officer. 6. In this case, admittedly, no exempt income is earned by the assessee for the relevant assessment year under consideration. However, the Assessing Officer is of the opinion that whether there is an exempt income or not as per section 14A, the expenditure which is relatable to earning of exempt income has to be considered for disallowance, irrespective of the fact whether any such income has been earned during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was claimed as deduction for the assessment year 2009-10. Hence, the assessee argued before the Ld.CIT that Section 14A is not applicable in assessee's case. As per the observation of the Ld.CIT, the assessee made the investments to the tune of Rs. 19,90,625/- in shares and bonds from the borrowed funds and the interest expenditure relating to the earning of dividend income is required to be disallowed u/s 14A. Though CIT opined that the expenditure relating to the earning of dividend income required to be disallowed, there was no finding given by the CIT in his order with regard to earning of dividend income. The CIT also did not rebut the explanation offered by the assessee stating that no expenditure was incurred for making the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
