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TMI Blog2021 (2) TMI 933X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance under section 14A of the Act after excluding the dividend income from M/s OMIFCO-Oman. We do not find any infirmity in the order of the Learned CIT(A) on the issue in dispute, and accordingly, we uphold the same. The ground of the appeal of the Revenue is accordingly dismissed. - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER Appellant by Shri Gurmel Singh, Sr.DR Respondent by Shri Tarandeep Singh, CA ORDER PER O.P. KANT, AM: This appeal has been filed by the Revenue being aggrieved against the order dated 21/09/2017 passed by the Ld. CIT(Appeals)-31, New Delhi [in short the Ld. CIT(A) ] for assessment year 2007-08, raising following grounds: 1. On the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in deleting the disallowance of an amount of ₹ 835.9 lakhs (910.16 74.26) lakhs made by the Assessing Officer u/s 14A, as the assessee has claimed deduction of expenses in relating to income which is exempt from tax. 2. The appellant craves leave to add, alter or amend the grounds of appeal before or during the course of appellate proceedings before the Hon ble ITAT. 2. Briefly stated facts of the case are that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their Lordships clarified their earlier order dated 02.02.2012 in ITA No.l293/Del/2011vide their order dated 17.04.2012 by stating that the necessary working and computation of the deduction u/s 14A of the Income Tax Act, 1961 and the appeal effect has to be given/undertaken by the AO following Maxopp Investment Ltd. vs CIT in ITA No-687/2009. Accordingly the AO in view of the above direction shall pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. 2.1 Consequently, the Assessing Officer in assessment order passed on 31/03/2015 made disallowance on proportionate basis under section 14A of the Act, amounting to ₹ 9,10,16,000/-. The working of the disallowance made by the AO is summarized as under: A. Total Revenue ₹ 1132877.00 lakhs B. Expenses incurred by the assessee (relatable to earning dividend income) ₹ 83163.00 lakhs C. Exempt Dividend Income ₹ 12398.56 Disallowance B X C A Thus: 83163 X 12398.56 = 910.16 lakhs 1132877 The Disallowance made by the AO is 910.16 lakhs. 2.2 While working out the above disallowance, the Assessing Officer has included dividend income of ₹ 113,86,96,340/- fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om joint venture with OMIFCO, Oman, the assessee is effectively not paying any tax on this income either in the source country or in India. As per the Oman Tax Laws, any PE (Permanent Establishment) in Oman which is supported by foreign company or establishment becomes taxable entity under Oman tax laws. Flowever, the article 8(bis) exempts the taxation of dividend income of companies in Oman. In subsequent year also, the dividend income received from overseas joint venture OMIFCO Oman has been shown in the Income-tax return of PE in Oman, but no tax has actually been paid on the amount of such dividend in view of the exemption provided in accordance to the article 8 (bis) of the Income-tax Law in Oman. Effectively, dividend from OMIFCO, Oman is exempt in the hands of assessee in view of the DTAA agreement. It is admitted that the assessee is entitled to claim relief U/s 90 of the Income-tax Act, 1961 read with DTAA with Oman @ 30% on dividend income received by PE from OMIFCO-Oman. The net effect is that the income whatever whenever accrue, will be exempt or the assessee shall not be required to pay any tax on this income. The tax infact is not required to be paid in reality eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly on the issue in favour of the assessee. The Hon ble Punjab Haryana High Court in CIT, Faridabad Vs. M/s. Lakhani Marketing Inc., in ITA No. 970/2008 made reference to the two earlier decisions of the same Court in CIT Vs. Hero Cycles Limited, 323 ITR 518 and CIT Vs. Winsome Textile Industries Limited, 319 ITR 204 to hold that Section 14A cannot be invoked when no exempt income was earned. The Hon ble Gujarat High Court in CIT Vs. Corrtech Energy Pvt. Limited, 223 Taxman 130 and the Hon ble Allahabad High Court in CIT (II), Kanpur Vs. M/s. Shivam Motors Pvt. Limited in ITA No. 88 of 2014 also held the same view. The Hon ble Delhi High Court in CIT Vs. Holcim India Pvt. Limited in ITA Nos. 486 and 299/2014 have referred to the aforesaid judgments of the Hon ble Punjab Haryana High Court and Allahabad High court and have also held a similar view. Therefore, the contention of the assessee that the average investments to be taken into account for application for Rule 8D would only be those investments which have actually yielded exempt income ought to succeed. It is the assessee s submission that the following investment should be excluded while computing the disallowance under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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