9911796707
TMI Blog2018 (11) TMI 1050X X X X Extracts X X X X X X X X Extracts X X X X ..... Asst Year 2013-14 on 27.9.2013 declaring total loss of Rs. 5,44,78,899/-. The assessee filed a revised computation declaring loss of Rs. 3,74,14,050/- during the course of assessment proceedings. The ld AO observed that in support of assessee's claim of expenditure and on various queries raised in course of hearing, the authorized representative of the assessee submitted the details as per requisition and Xerox copies of documents. The ld AO examined the balance sheet, profit and loss account along with schedules, tax audit report and other details and documents submitted during the course of hearing. The ld AO asked the assessee as to why disallowance of expenses u/s 14A of the Act should not be made in the instant case as the assessee was having exempted income . The assessee offered a sum of Rs. 8,25,160/- for disallowance u/s 14A of the Act read with Rule 8D(2)(iii) of the Income Tax Rules , 1962. The ld AO however observed that the assessee had paid interest on its borrowed funds and accordingly recomputed the disallowance to be made u/s 14A of the Act read with Rule 8D of the Rules as under:- Disallowance under Rule 8D(2)(ii) - Rs. 65,92,509/- Disallowance under Rule 8D(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n various relevant amounts were shown under separate accounts of (i) Corporate office . (ii) Sugar division , (iii) Agriculture division and (iv) Marketing division. Copies of annual accounts together with segmental accounts for the year ended 31.3.2013 were again produced before the ld CITA. The assessee explained from the annual statement of accounts of each division that the entire borrowed fund, i.e. Loan, had been utilized only for the purposes of the businesses run under the Sugar Division and Marketing Division and no part of the Loan has been utilized towards making any Investments. It was also submitted by the assessee that all the existing Share in Financial Year 2012-13 in various companies had been acquired in the earlier years only by way of utilizing its own fund available for the Share Capital and the Reserves. Accordingly, the assessee submitted that there could not be any disallowance of any part of the Interest paid on Loan since the Loan had been utilized for specific purposes, viz., carrying on the business of the assessee. The assessing officer did not accept the assessee's submissions and after making reference to certain decisions of the ITAT and the High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Interest paid on Loan should have been disallowed by the Assessing Officer u/s 14A read with Rule 8D(2)(ii) and accordingly the appellant submits that the disallowance of Interest of Rs. 65,92,509 should be held as unjustified. The assessee submits that it was required of the Assessing Officer to establish that there had been alleged nexus between the Loan and the Investments made to hold that part of loan could allegedly have been utilized for making investments. In this regard several decisions have been taken by the Courts and ITATs holding that no disallowance would be called for where an assessee had made investments out of his own funds or the own funds available with him had been quite sufficient to make investments from which the income could be exempt and further that for making any disallowance it would be necessary to prove nexus between the loan and the making of investments. Some of the decisions are being referred to hereunder: (a) CIT v. Winsome Textile lndustries Ltd. [2009] 319 ITR 204 (Punj & Har); (b) Yatish Trading Co. (P.) Ltd. v. Asst CIT [2011] 129 ITD 237(Mum ITAT); (c) Maruti Udyog Ltd. v. Dy, CIT [2005] 921TD 119(Delhi ITAT); (d) ITO v, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income had been earned during the year under consideration, there was no need for resorting to the provisions of section 14A r.w.Rule 8D. Having perused the accounts of the assessee and finding that no exempt dividend income had been earned by it during the year under consideration. I do not find any merit in the action of the AO in making the impugned disallowance . The matter is well settled by various judicial forums that when there is no exempt income earned by an assessee, the provisions of section 14A r.w. Rule 8D would not be applicable. The Delhi High Court in the case of Chem Invest Ltd. vs. CIT reported in 378 ITR 33 (Del) has held that where there is no exempt income no disallowance is called for u/s 14A of the Act. Respectfully following the foregoing decision, I direct the AO to delete the impugned addition. This ground is allowed accordingly." 8. With regard to disallowance made u/s 14A of the Act in respect of agriculture division in the sum of Rs. 21,13,761/- , the assessee submitted that the assessee had duly maintained separate Accounts for its 3(three) separate businesses, viz., (i) Agricultural Division (Cultivation of Sugar Cane), (Ii) Sugar Division (Manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Years 2008-09 and 2009-10 also similar disallowances had been made by the Assessing Officer and in Appeals the CIT(Appeals)-4, Kolkata .vide his two separate Appellate Orders both dated 10/07/2015 deleted the said disallowances. Copies of the above-referred two Appellate Orders both dated 10/07/2015 are enclosed for ready reference. The assessee submits that for the Assessment Year 2013-14 also, following the above- referred Appellate Orders, the disallowance of Rs. 21, 13,761 may kindly be deleted. Without prejudice to the above, the assessee further submits that while computing the alleged further disallowable amount under Rule 8D(2)(iii) in relation to the Agricultural Division, the Assessing Officer assumed the Average Total Value of the Assets of the Agricultural Division at Rs. 42,27,52,232 as the appellant's alleged average of value of investments from which the earned income did not form part of Total Income as appearing in the Accounts of the appellant. The appellant submits that this assumption of the Assessing Officer was not in accordance with the provisions contained in Rule 8D of the income-tax Rules, 1962. The Assessing Officer should have appreciated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the appellant's Agricultural Division. These grounds are allowed." 10. Aggrieved, the revenue is in appeal before us. 11. None appeard on behalf of the assessee. We have heard the ld DR. At the outset, with regard to disallowance made in the sum of Rs. 74,18,344/- u/s 14A of the Act is concerned in respect of expenditure debited in the taxable divisions of the assessee, we find that the assessee had not derived any exempt income in the form of dividend and hence there is no question of applicability of provisions of section 14A of the Act thereon. This issue is now settled by the following decisions of various high courts :- a) Hon'ble Madras High Court in the case of CIT vs Chettinad Logistics (P) Ltd reported in 80 taxmann.com 221 (Mad HC) b) Hon'ble Delhi High Court in the case of CIT vs Holcim India Pvt Ltd in ITA No. 486 /2014 (Delhi HC) c) Hon'ble Delhi High Court in the case of Cheminvest Ltd vs CIT reported in 378 ITR 33 (Del) d) Hon'ble Punjab & Haryana High Court in the case of CIT vs Lakhani Marketing in ITA No. 970/2008 dated 2.4.2014 (P&H HC) e) Hon'ble Gujarat High Court in the case of CIT vs Corrtech Energy Pvt ltd reported in 223 taxman 130 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
