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TMI Blog2017 (11) TMI 1689X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. 2. The only issue involved in this appeal is with regard to disallowance under section 14A of the Income Tax Act, 1961 (hereinafter referred to as 'Act'). 3. 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 relatabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Ltd. Vs. Addl. CIT, Company Range-V, Chennal in T.C.A.No.520 of 2016 in its order dated 23.12.2016, 392 ITR 633 (Madras) held that Sec.4 of the Act brings to tax, that income, which 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in CIT Vs. Maharashtra Sugar Mills Limited (1971) 82 ITR 452 and Rajasthan State Ware Housing Corporation Vs. CIT (2002) 242 ITR 450 in terms of which, expenditure incurred 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, Sec. 14A of the Act. Respectfully following above decisions and the fact that there is no exempt income earned in the previous year relevant to the assessment year, I hold that no disallowance u/s.14A r.w.Rule 8D is warranted. I, therefore, direct Assessing Officer to delete addition of ₹ 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 sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and bonds and did not make disallowance which was required to be made u/s14A of IT Act. The assessee explained that there were no expenses incurred in relation to the exempt income which 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial pronouncements no disallowance is called for when there is no exempt income. Therefore, we are of the considered opinion that there is no case for revision of order u/s 263 and accordingly we set aside the orders of the CIT and allow the appeal of the assessee." Ld. Departmental Representative has not brought any decision of the jurisdictional High Court or any other High Court which is contrary to the decision of the Hon'ble Madras High Court. 7. We, therefore, respectfully following the order of the Hon'ble Madras High Court in the case of M/s. Redington (India) Ltd. (supra) and also the decision of the coordinate bench of the tribunal in the case of D. Veerabhadra Reddy (HUF) (supra), this appeal filed by the revenue is dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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