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TMI Blog2021 (7) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance. - Decided in favour of assessee. - I.T.A. No. 6902/Del/2017 - - - Dated:- 7-7-2021 - Anil Chaturvedi, Member (A) And Sudhanshu Srivastava, Member (J) For the Appellant : Madhur Aggarwal and Anil Makhija, Advs. For the Respondents : Apoorva Bhardwaj, Sr. DR ORDER Per Sudhanshu Srivastava, JM This appeal is preferred by the assessee against order dated 04.08.2017 passed by the Learned Commissioner of Income Tax (Appeals)-35, New Delhi {CIT(A)} for Assessment Year 2014-15 and the sole issue being raised by the assessee is disallowance of ₹ 3,03,857/- u/s. 14A of the Income Tax Act, 1961 (herein after called 'the Act'). 2. The brief facts of the case are that the assessee company is engaged in the business of engineering supply of grinding machinery for cement plants. The return of income was filed declaring an income of ₹ 8,87,97,510/- and the assessment u/s. 143(3) of the Act was completed at an income of ₹ 8,91,01,367/- after making a disallowance of ₹ 3,03,857/- u/s. 14A of the Act. While making the disallowance u/s. 14A of the Act, the Assessing Officer (AO) noted that the assessee has made investments in mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income and no ad hoc disallowance of any expense without nexus is allowed or permissible as per scheme under the Indian Income Tax Act, 1961. 5. That the Learned Commissioner of Income Tax (Appeals) has grossly erred in not appreciating the fact that the investments in mutual funds are made by the appellate on the basis of services given by Deutsche Bank (Investment Advisors) [for which there is no charge to Appellant Company] and the bank receive a commission on sale of Mutual fund from the Mutual Fund Company and not from Appellant Company. 6. That the Learned Commissioner of Income Tax (Appeals) has grossly erred in reading and interpreting the provisions of section 14A of the Income Tax Act, 1961 to the extent that the recordings of satisfaction is an essence with respect to correctness of the claim of the assessee and such recording of satisfaction is missing in the case of the Appellant Company nor any steps were taken during the assessment proceedings by the Learned Assessing Officer the provisions of section 14A read with Rule 8D of the Income Tax Rules, 1962 could not have been invoked. 7. That the appellant seeks to alter, modify and add any of the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct expenses. Further, the assessee has incurred huge personnel and administrative expenses for maintenance of books and day to day look after work regarding huge investments in shares and mutual funds. Thus, the claim of the assessee that no expense has been incurred in connection to earn tax free income does not have any substance. 5.1. It was the assessee's submission before the Assessing Officer that the exempt income was only in the form of dividend from mutual funds and further that there was no buying and selling of such funds frequently or on regular basis and it was only on maturity of old funds that new investments were made. It was also the assessee's submission before the Assessing Officer that the assessee company had made investments in mutual funds on the basis of advisory services given by the Deutsche Bank investment advisors which was offered free of cost to all institutional buyers since they received a commission on the sale of mutual funds from the Mutual Fund Company. However, as reproduced herein above, the Assessing Officer rejected the submission of the assessee. 5.2. We note that an identical issue had arisen before the Co-ordinate Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO at the first instance should have examined the correctness of the statement made by the assessee that no expenses were incurred for earning the exempt income during the year and if and only if the learned AO is not satisfied on this account after making reference to the accounts, he is entitled to adopt the method under rule 8D of the rules. We, therefore, while allowing the plea of the assessee direct the learned Assessing Officer to delete the addition made on this score also. 5.3. Similarly, we also note that in assessee's own case for Assessment Year 2011-12 in ITA No. 4909/Del/2015 vide order dated 27.04.2018 disallowance u/s. 14A of the Act had been deleted. The relevant observation of the Co-ordinate Bench of the Tribunal is as under: 8. It is settled principle of law that when no actual expenses have been incurred by the assessee on account of administrative expenses to earn the interest free dividend income, no disallowance can be made u/s. 14A read with Rule 8D. Reliance in this regard may be placed on the decision of Hon'ble Supreme Court in case of Godrej Boyce Manufacturing Company Ltd. vs. DCIT - 394 ITR 449 (SC) and the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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