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TMI Blog2020 (1) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... umed that the investments were made from the interest free funds available with the assessee. We rely upon case of Reliance Utility and Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] and Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] and Munjal Sales Corporation [ 2008 (2) TMI 19 - SUPREME COURT] . Considering the totality of the facts and circumstances of the case, we do not find any justification to sustain the addition. Disallowance under section 14A read with Rule 8D - HELD THAT:- In I.P. Support Services India Ltd. [ 2015 (10) TMI 752 - DELHI HIGH COURT] held that no disallowance be made in the absence of satisfaction as to why voluntary disclosure made by assessee was unreasonable and unsatisfactory. - Thus in the absence of any satisfaction recorded by the A.O. for making disallowance under section 14A read with Rule 8D of the I.T. Act, no disallowance could be made in the case of the assessee. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. - Decided in favour of assessee. - ITA.No.3080/Del./2017, ITA.No.5408 & 5601/Del./2018 - - - Dated:- 15-1-2020 - Shri Bhavnesh Saini, Judicial Member An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opening balance as on 01.04.2011 was ₹ 5,70,72,153/- relevant to A.Y. 2011- 2012 which have been decided in favour of the assessee. Learned Counsel for the Assessee further submitted that advances were given for business purposes. The evidence for the same are filed at Pages 94, 95 and 98 of PB which is correspondence between the parties. He has, therefore, submitted that since the amount in question have been given for commercial expediency, therefore, no addition could be made. He has relied upon Judgment of Hon ble Supreme Court in the case of S.A. Builders 288 ITR 1 (SC). Learned Counsel for the Assessee further submitted that during the year under consideration, the assessee-company has sufficient own funds as well as interest free borrowing funds which have been used to make these advances and these advances have been shown in the balance-sheet, copy of which is filed at page-10 of the PB to show that assessee has total own surplus funds of ₹ 35,57,47,999/-. It was, therefore, submitted that no disallowance of interest should be made out of the same. He has relied upon Judgment of Hon ble Supreme Court in the case of Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .3 and 4, assessee challenged the disallowance of ₹ 1,52,47,867/- under section 14A of the I.T. Act read with Rule 8D of the I.T. Rules, 1962. 6.1. The A.O. noted that assessee has received dividend income of ₹ 64,59,304/- and has claimed the same to be exempted. Since the assessee has not made disallowance of expenditure against the exempted income, therefore, the A.O. disallowed ₹ 1,52,47,867/- under section 14A read with Rule 8D of the I.T. Rules. The Ld. CIT(A) confirmed the addition. 6.2. Learned Counsel for the Assessee submitted that the dividend earned by the assessee-company during the assessment year under appeal can be bifurcated that investment in M/s. ATS Town Ship Pvt. Ltd., yielded dividend of ₹ 56,25,000/- and from the Reliance Mutual Funds dividend was earned of ₹ 8,34,304/-. He has further submitted that value of investments from where dividend has been earned in the case of M/s. ATS Town Ship Pvt. Ltd., as on 31.03.2012 was ₹ 9,000/-, which is supported by PB-17 which is the details of Note-12 Non-current investments and PB-60 which is balance-sheet of M/s. ATS Town Ship Pvt. Ltd. In the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Max Opp Investment Ltd., vs., Commissioner of Income Tax 347 ITR 272 (Del.) (HC), which is confirmed by the Hon ble Supreme Court. He has also relied upon Judgments of Hon ble Delhi High Court on the same proposition in the case of Commissioner of Income Tax vs., Taikisha Engineering India Ltd., 370 ITR 338 (Del.) (HC). 7. On the other hand, Ld. D.R. relied upon the Orders of the authorities below. 8. We have considered the rival submissions and perused the material on record. The investments made by assessee as on 31.03.2012 as argued by the Learned Counsel for the Assessee is not in dispute that in case of M/s.ATS Township Pvt. Ltd., assessee made investment of ₹ 9000/- only and in the case of Reliance Mutual Fund it was NIL because sales and purchases were within the year. Thus while computing the disallowance under the above provision, the rate of 0.5% has to be applied to only those investments which actually have resulted in exempt dividend income rather than .05% of the average of the total investments. The A.O. shall have to take average value of such investment. Further A.O. did not record any sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal of assessee. 12. Learned Counsel for the Assessee submitted that in assessment year under appeal assessee has not earned any exempt income. He has referred to PB-29 which is balance-sheet of the assessee to show that as on 31.03.2013 assessee has not earned any dividend income. He has submitted that the Hon ble Supreme Court in the case of CIT vs., Chettinad Logistics (P.) Ltd., [2018] 95 taxmann.com 250 (SC) dismissed the SLP of the Revenue by confirming the Order of the Hon ble Madras High Court holding that Section 14A of the Act cannot be invoked where no exempt income is earned by the assessee . He has relied upon Judgment of Hon ble Delhi High Court in the case of Cheminvest Ltd., vs., CIT 378 ITR 33 (Del.) in which the Hon ble High Court similarly held that if assessee has not earned exempt income, no disallowance could be made. He has, therefore, submitted that no disallowance could be made by the authorities below. 13. The Ld. D.R. relied upon the Orders of the authorities below. 14. We have considered the rival submissions. It is well settled Law that in the absence of any exempt income no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 21. Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has submitted that the assessee has received this dividend out of investment made in Reliance Mutual Funds whose opening and closing balance during the year were NIL (PB- 26). Thus, the average value of investment will be calculated as NIL as is evident from audited financial year statement of the assessee. Complete copies are placed at pages 7 to 43 of the PB. He has submitted that provisions of Section 14A read with Rule 8D provide for disallowance of expenses which are incurred only in relation to exempt income earned. He has relied upon the Judgment of Hon ble Delhi High Court in the case of ACB India Ltd., (supra) and other decisions and submitted that the issue is same as has been considered in A.Y. 2012-2013. He has further submitted that no satisfaction have been recorded by A.O. in the assessment order before making any disallowance as required under section 14A of the I.T. act. In the alternate contention, he has submitted that since assessee earned only ₹ 1,97,449/- as dividend income, therefore, impugned addition is unjustified and disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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