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TMI Blog2020 (2) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... as erred in law and on facts in deleting the addition of Rs. 4,80,00,000/- made u/s. 35D of the I.T. Act, 1961. (2) That the ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,00,390/- made u/s. 14A r.w. Rule 8D. (3) That the ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,00,390/- made u/s. 14A r.w. Rule 8D while computing book profit u/s. 115JB of the I.T. Act. (4) The appellant craves, to leave, to amend and/or to alter any ground or add a new ground which may be necessary." First Ground:- Deletion of addition of Rs. 4,80,00,000/- made u/s. 35D of the Act:- 3. During the course of assessment proceedings the AO observed that the appellant has incurred an amount of Rs. 6,00,00,000/- on account of legal and professional fees paid to one M/s. Emerging India Investment Advisors Pvt. Ltd. It was further found by the Ld. AO that such expenditure has been incurred for preparation of feasibility study for improvement and set up of coal logistic business in terms of agreement by and between the appellant and the service provider. It was observed that such feasibility study would primarily involve a feasibility study for set up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p of any new facilities/services to increase customer stake. Thus, there is no expansion of any existing unit as Appellant is engaged in logistic business which includes coal logistics business and services are obtained for improvement in such business. It is not the case of Appellant that it is in the business of export of goods and it was in process of starting logistics business which can be held as setting up of new unit. The improvement in coal logistics business cannot be termed as extension of undertaking as envisaged in Section 35D of the Act. The Appellant has incurred entire expenditure for improving its coal logistics business and genuineness of such expenditure is not doubted by the Assessing Officer. Even he has not treated such expenditure as capital expenditure and there is no concept of differing the expenditure over a period of 5 years or ten years under the Income Tax Act. If the expenditure is allowable revenue expenditure in one year, entire expenditure is required to be allowed as revenue expenditure in view of decision of Hon'ble Supreme Court in the case of Taparia Tools Limited 55 taxman.com 361. The Hon'ble Mumbai ITAT in the case of Pan India Food Solution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal relates to deletion of addition of Rs. Rs.Rs. Rs. 2,00,390 made under section 14A read with rule 8D of the Act. 8. Upon verification of the balance sheet it is found that the assessee company has made investment in shares and having some exempt income. The assessee has claimed expenditure on account of interest payment on loans as also reflecting from the Profit and Loss account of the assessee as observed in the order passed by the Learned AO. The assessee since not identified any expense in relation to the exempt income not included in the total income of the assessee a notice dated 20.11.2017 was issued by the revenue asking the assessee to explain as to why the provision of Section 14A of the I.T. Act read with Rule 8D of the I.T Rules are not be applicable in the instant case. 9. The assessee replied that when there is no exempt income earned by the assessee, the question of application of Section 14A read with rule 8D of the I.T. Rule does not arise. However, the explanation of the assessee was not found acceptable by the Learned AO. He, therefore, made and addition of Rs. 2,00,390/- against the assessee which was deleted by the Learned CIT(A). Hence the instant appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is earned. The decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Corretech Energy P.Ltd., (supra) relied upon the ld.counsel for the assessee support the case of the assessee. The relevant portion of the judgment reads as under: "5.4 On careful consideration of observation of Assessing officer and contention of Appellant, it is observed that during the year under consideration Appellant has not earned any exempt income from investments made by it which is apparent from Audited Annual Accounts as well as computation of total income as submitted before as well as in Appellate Proceedings. The Hon'ble Gujarat High Court in the case of Corrtech Energy Pvt. Ltd. 45 taxmann.com 116, on identical disallowance under Section 14A when no dividend income is earned by Assessee, the Court has held as under: "4. Counsel for the Revenue submitted that the Assessing Officer as well as CIT(Appeals) had applied formula of rule 8D of the Income Tax Rules, since this case arose after the assessment year 2009-2010. Since in the present case, we are concerned with the assessment year 2009-2010, such formula was correctly applied by the Revenue. We however, notice that sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure made u/s 14A read with Rule 8D of Rs. 1,60,45,77 5/- in the Assessment Year 2007-08 and Rs. 2,04,30,860/- in the Assessment Year 2008-09. Thus, this ground of appeal of the assessee is allowed in both the years under appeal." Further, Hon'ble Delhi High Court in case of Holcim India Private Ltd. (ITA No. 486/2014 & ITa No. 299/2014), Hon'ble Allahabad High Court in the case of CIT Vs. Sivam Motors Private Ltd. in I.T. Appeal No. 88 of 2014 dated 5.5.2014 on identical facts decided the issue in favour of assessee. Considering, the facts of appellatn's case as discussed herein above along with decisions referred supra, it is held that disallowance u/s. 14A r.w. Rule 8D cannot be made as appellant has not earned any exempt income. In the nutshell, disallowance u/s. 14A made by Assessing Officer for Rs. 2,00,390/- is deleted. In the result, this ground of appeal is allowed." 13. Hon'ble Gujarat High Court has held that in the absence of any exempt income being claimed by the assessee provisions of section 14A r.w.r 8D could not be invoked and no expenses could be considered for disallowance. In the present case, the ld.CIT(A) has held that the assessee has no exempt income in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A r.w. rule 8D. Respectfully following the above decision of the Special Bench, we allow this ground of appeal and direct the AO not to make adjustments in book profit for the purpose of MAT liability on the basis of calculations made with Rule 8D of the Income Tax Rules.
19. We find no justification in reversing the order passed by the Learned CIT(A) in deleting the enhancement of book profit made by the Learned AO to the extent of exempt, hence the Revenue's appeal is found to be devoid of any merit, and therefore ground no.3 is dismissed.
20. In the result, Revenue's appeal is dismissed.
21. Now we take cross objection filed by the assessee.
22. At the time of hearing of the matter, the Learned Counsel for the assessee submitted before us that he is not pressing the CO. In view of this submission of the assessee, CO filed by the assessee stands dismissed for want of prosecution.
23. In the combined result, both Revenue's appeal and assessee's CO are dismissed.
This Order pronounced in Open Court on 31/01/2020 X X X X Extracts X X X X X X X X Extracts X X X X
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