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TMI Blog2018 (7) TMI 2276X X X X Extracts X X X X X X X X Extracts X X X X ..... n the remand report after verification has not drawn any adverse inference against the claim of the Assessee. It is thus clear that the recipient of payment from the Assessee has filed return of income for the relevant previous year within time allowed u/s.139(1) and also included the sum received from the Assessee in their return of income. Since the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same, no disallowance u/s.40(a)(ia) of the Act should be made. In our view the CIT(A) was fully justified in allowing the relief to the Assessee. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- As admitted factual position in the present case is that there was no dividend income or other exempt income earned by the assessee during the relevant previous year - thus no disallowance of expenses u/s 14A of the Act, if there is no exempt income earned during the relevant previous year - Seef M/s UB Infrastructure Projects Ltd. [ 2017 (12) TMI 1749 - ITAT BANGALORE] - Thus we are of the view that the disallowance of expenditure u/s 14A of the Act was rightly deleted by the CIT(A). We find no grounds to interfere wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the recipient of payment from the assessee has included the amount received from assessee in the return of income filed for AY 2014-15. The Assessee also filed Form 26A which is the certificate of auditor certifying that the payee has included the amount received from the assessee in his return of income filed for the relevant assessment year and paid taxes thereon. The assessee pointed out that the 2nd proviso to section 40(a)(ia) of the Act which was introduced by the Finance Act, 2012 w.e.f. 1.4.2013 provided as follows:- Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso. 5. The 2nd proviso to Sec.40(a)(ia) lays down that for non-deduction of tax at source, if the Assessee is not treated as Assessee in default under the first prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly took the plea that such a certificate was not filed in the course of assessment proceedings. On a consideration of the remand report of the AO and the submissions of the assessee and the judicial pronouncements relied upon by the assessee, the CIT(Appeals) deleted the addition made u/s. 40(a)(ia) of the Act, observing as follows:- iv) The assessee during the course of appeal-proceedings has placed reliance on numerous judicial pronouncements on the subject under consideration. The Assessee has drawn reference to the findings of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd v/s CIT 163 taxman 55 in the context of section 201(1) and 201(1A), wherein it was held that, where deductee (recipient of income) has already declared income / paid taxes on amounts received from deductor, the department could not subject the same to double taxation. The appellant has also placed reliance on numerous other judicial decisions in this regard, including Gujarat Pipavan Port Ltd., vs DCIT TDS Circle Rajkot ( 614, 615, 641 642 Rjt 2012); Rajeev Kumar Agarwal v/s. ACIT (ITA No. 337/Agra/2013); G. Shankar vs ACIT ITA no. 1832/Bang/2013 dated 10/10/2014. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recipient of payment from the Assessee has filed return of income for the relevant previous year within time allowed u/s.139(1) and also included the sum received from the Assessee in their return of income. Since the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same, no disallowance u/s.40(a)(ia) of the Act should be made. In our view the CIT(A) was fully justified in allowing the relief to the Assessee. We find no grounds to interfere with the order of the CIT(A). Consequently, ground Nos.1 to 3 raised by the Revenue are dismissed. 12. Ground Nos.4 5 raised by the revenue reads as follows:- 4. On facts of the case, whether the decision of the Ld CIT(A) is right in allowing the appeal of assessee despite the fact that the provisions to section 14A makes it clear that the expenditure has to be worked out as per Rule 8D(2)(ii) 8D(2)(iii). 5. On facts of the case, whether the decision of the Ld CIT(A) is right in allowing the appeal of assessee as the same contravenes the provisions of section 14A and also the Ld CIT(A) has not followed the instructions laid down in the Board's Circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition made by the AO for the reason that there could be no disallowance of expenses u/s. 14A of the Act when there is no exempt income earned during the relevant previous year. 15. Aggrieved by the order of CIT(Appeals), the revenue is in appeal before the Tribunal. 16. The ld. DR relied on the order of the AO, whereas the ld. counsel for the assessee relied on the order of the CIT(Appeals). 17. We have considered the rival submissions. At the time of hearing of this appeal, it was brought to our notice by the ld. counsel for the assessee that the admitted factual position in the present case is that there was no dividend income or other exempt income earned by the assessee during the relevant previous year. The ld. counsel for the assessee drew our attention to the decision of the Bangalore Bench of ITAT in the case of M/s UB Infrastructure Projects Ltd., Vs. DCIT, ITA No. 2098/Bang/2016 (asst. year 2012-13) order dated 22/12/2017, wherein 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 following are the relevant observations of the Tribunal in this reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . These three decisions reiterated the position that when an assessee had not earned any taxable income in the relevant assessment year in question corresponding expenditure could not be worked out for disallowance. 4. This was also examined by the Tribunal in the assessee's own case for assessment year 2010-11 and held that when there is no exempt income, provision 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. 18. 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 was rightly deleted by the CIT(A). We find no grounds to interfere with the order of the CIT(A). Consequently, Gr.Nos. 4 5 raised by the Revenue are dismissed. 19. The other grounds of appeal are general and academic calling for no specific adjudication. 20. In the result, the appeal by the revenue is dismissed. Pronounced in the open court on this 06th day of July, 2018. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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