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TMI Blog2017 (8) TMI 1624X X X X Extracts X X X X X X X X Extracts X X X X ..... nder assessment - CIT (A) observed that it cannot be ruled out that there is a proximate relationship between office establishment expenditure and interest expenditure to the investment resulting income not chargeable to tax - HELD THAT:- When the assessee has not earned any exempt income during the year under assessment, no disallowance is permissible u/s 14A of the Act. So, in these circumstances, this issue is also set aside to the AO to decide accordingly in view of the decision rendered by Hon ble Delhi High Court in case titled as Cheminvest Limited [ 2015 (9) TMI 238 - DELHI HIGH COURT ] in favour of the assessee. Disallowance of expenditure u/s 36(1)(xii) - As argued when the Assessee Board has placed on record documents under Rule 46A to prove the justification of the expenses made in normal course of business, the disallowance is not sustainable - HELD THAT:- When the assessee has brought on record documentation to prove the justification of debit of expenses disallowed by the AO as well as by CIT (A), the AO is required to examine and verify these documents before deciding the issue in controversy. So, we remand this issue also to AO to decide after entertaining t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rstood ignoring the main contents which inter alia is directive in nature by DGH for enabling recognition of expenses payable for half year ended 30-09-2009 ₹ 38.73 crore and another half year ended 31-3-2010 for ₹ 27.38 crore (3) That Ld. CIT (A) has completely overlooked the submissions of the appellant board so as to hold on to the view that amount of ₹ 66,11,00,000/- is a contingent liability hence request is placed through this appeal to submit further documents u/r 46A to support justification of debit of expenses being made in the normal course of business respecting applicable accounting standards. (4) That Ld. CIT (A) has completely overlooked that the inherent character of contingent liability is some demands 1 claims which 'mayor may not happen and not some acts dutifully provided thus to categorize the royalty payable to Arunachal Pradesh and Gujarat Government in the ambit of contingent liability as they are bound to happen because such discretion of providing royalty expenses is monitored and devised by the management at every step on regulators directives. (5) That Ld. CIT (A) has erred in upholding disallowance of ₹ 1,62,49,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bited on estimate basis. 6. The issue raised by the assessee in its appeal bearing ITA No.4221/Del/2014 for AY 2010-11 inter alia that AO disallowed a sum of ₹ 66,11,00,000/- an amount Assessee Board debited in income expenditure account on account of royalties payable to the State Government on the ground that the provision made regarding royalty payment on accrual basis in the Assessee Board s account is in the nature of contingent liability as the quantification was done after closure of financial year by DGH. Ld. CIT (A) confirmed the decision of AO by recording similar reasons by holding that no contingent expenditure are allowable even u/s 36(1)(xii) of the Act. 6.1 Second issue raised by the Assessee Board by filing aforesaid appeal is disallowance of ₹ 1,62,49,000/- u/s 14A by the AO on the ground that in case of the assessee, section 14A is not attracted as the assessee had no exempt income in the year under assessment. CIT (A) affirmed the decision of disallowance made by the AO on similar grounds. Next issue raised by the assessee is disallowance of amount of ₹ 5,94,00,000/- on the ground that the assessee has failed to demonstrate that it fulfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dication. Grounds No.5 6 of ITA No.4221/Del/2014 for AY 2010-11 filed by the assessee 12. The AO disallowed an amount of ₹ 1,62,49,000/- u/s 14A by rejecting the contentions raised by the assessee that no expenses have been incurred by the assessee to earn the exempt income during the year under assessment. CIT (A) observed that it cannot be ruled out that there is a proximate relationship between office establishment expenditure and interest expenditure to the investment resulting income not chargeable to tax. Ld. CIT (A) relied upon order passed by the Tribunal in case of Cheminvest Limited vs. ITO 124 TTJ 577 (Del.)(SB) by holding that, if an expenditure is incurred in relation to income which does not form part of total income, it has to suffer disallowance irrespective of the fact whether any income is earned or not. However, this decision has been overruled by the Hon ble Delhi High Court in Cheminvest Ltd. vs. CIT - (2015) 378 ITR 33 (Delhi). So, in these circumstances, we are of the considered view that when the assessee has not earned any exempt income during the year under assessment, no disallowance is permissible u/s 14A of the Act. So, in these ..... X X X X Extracts X X X X X X X X Extracts X X X X
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