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TMI Blog2020 (3) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... ction between the project and Mysore Logistics Pvt.Ltd., are not explained. Therefore the business purpose, in our view was rightly not accepted by the CIT(A). As far as Primus Engineering Solutions Pvt. Ltd., is concerned, it is claimed that interest was charged on this loan and the CIT(A) has directed the AO to verify this aspect and allow relief. Hence, we need not examine the business purpose of this loan, as the loan is not interest free loan. What is now left for consideration is interest free loan to G.Susheela who is a director of the Assessee - The stand taken by the Assessee has not been established with credible evidence. There is no agreement between G.Susheela and the Assessee to substantiate the claim of the Assessee. There is no material brought on record to show any obligation on the part of G.Susheela to part with her rights over any property that she might acquire either as owner as agreement holder in favour of the Assessee. In such circumstances, the plea of the Assessee deserves to be rejected and was rightly rejected by the CIT(A). - ITA Nos. 2286 And 2287/Bang/2018 - - - Dated:- 6-3-2020 - Shri N.V. Vasudevan, Vice President And Shri Pradip Kumar Ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore it can safely be concluded that there was no exempt income earned by the Assessee in AY 2015-16. 4. In the given circumstances, the first question for our consideration is as to whether disallowance can be made u/s. 14A of the Act in the absence of exempt income. The law in this regard is now fairly well settled. The Bangalore Bench of ITAT in the case of M/s UB Infrastructure Projects Ltd., Vs. DCIT, ITA No. 2098/Bang/2016 (AY.2012-13) order dated 22-12-2017, this Tribunal took the view that there can be no disallowance of expenses u/s 14A of the Act, if there is no exempt income earned during the relevant previous year. The Tribunal followed the decision of the Hon ble Delhi High Court in the case of Cheminvest Ltd. (supra) . The following are the relevant observations of the Tribunal in this regard:- 3. Having carefully examined the orders of authorities below, we find that undisputedly the assessee has not earned any exempted income. Now it is settled position of law that whenever assessee did not earn any exempt income, no disallowance could be made u/s. 14A of the Act. The Hon ble Delhi High Court in the case of Cheminvest Ltd. v. CIT, 378 ITR 33 (Del) has catego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 14 of the Act cannot be applied. 5. In the light of the aforesaid judgment, the provisions of section 14A cannot be invoked as there is no exempt income in the hands of the assessee. Accordingly, we find no infirmity in the order of the CIT(Appeals) who has rightly deleted the addition. 5. In view of the aforesaid decision of the Tribunal, we are of the view that the disallowance of expenditure u/s 14A of the Act cannot be sustained and the same is directed to be deleted. 6. The appeal of the Assessee being ITA No. 2286/Bang/2018 is allowed. 7. As far as ITA No.2287/Bang/2018 for AY 2014-15 is concerned, the first issue that arises for consideration in this appeal is disallowance of expenses u/s.14-A of the Act. In this year, there is no dispute that the Assessee earned exempt income in the form of dividend of ₹ 1,51,694/-. The disallowance u/s.14A of the Act computed by the revenue authorities was a sum of ₹ 2,83,23,833/-. The Hon ble Delhi High Court in the case of Joint Investments (P) Ltd. v. CIT, 372 ITR 694 has taken the view that disallowance u/s. 14A of the Act cannot exceed the exempt income. Similar view was expressed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was that it charged interest on these loans to the related parties. To the extent of interest received the AO has given credit while working out the interest expenses to be disallowed. The plea of the Assessee before the CIT(A) in so far as the aforesaid three parties are concerned was that interest income received as considered by the AO was less than what was accounted for by the Assessee and that in the case of Swiss Smile Dental Clinics India Pvt.Ltd., the plea of the Assessee was that interest income receivable was not considered at all by the AO. The CIT(A) on the above plea has given the following directions in his order:- 5.6 As regards the claim of the appellant that it had charged interest in relation to advances/loans given to three companies and the disallowance of interest made in respect of these companies has wrongly been computed by the AO, it is noted that the AO has considered the interest received from these parties on the basis of related party transactions reported in the financials of the company. The appellant has claimed that the interest received was more than that and the same has duly been reflected by it as other income in its P L acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained. Therefore the business purpose, in our view was rightly not accepted by the CIT(A). 15. As far as Primus Engineering Solutions Pvt. Ltd., is concerned, it is claimed that interest was charged on this loan and the CIT(A) has directed the AO to verify this aspect and allow relief. Hence, we need not examine the business purpose of this loan, as the loan is not interest free loan. 16. What is now left for consideration is interest free loan to G.Susheela who is a director of the Assessee. It was the plea of the Assessee that it was in real estate and property development business. To acquire land for property development, agricultural lands were proposed to be acquired in Bhakthipura. The process involved is to acquire agricultural lands and then convert the usage from Agricultural to non-Agricultural purposes. A company cannot acquire Agricultural lands as per the Karnataka Revenue Rules and hence the modus operandi adopted is to acquire lands in the name of individuals and after conversion for non-agricultural use, the company acquires the land and carries out development. The advances given to G.Susheela was for acquiring land. It was submitted that there exists agre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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