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TMI Blog2023 (5) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessee s own case for assessment year 2013-14 [ 2020 (10) TMI 404 - ITAT AHMEDABAD ] which was rendered on identical set of facts. Further, the counsel for the assessee submitted that ld. CIT(A) allowed the appeal of the assessee with respect to this ground of appeal by placing reliance on the aforesaid decision of ITAT Ahmedabad for assessment year 2013-14. No infirmity in the order of ld. CIT(A) in allowing the assessee s appeal with respect to this ground of appeal, so as to call for any interference. Decided against revenue. - ITA Nos. 303, 304 And 306/Ahd/2022 - - - Dated:- 26-4-2023 - Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri Mohit Balani, A.R. For the Revenue : Shri Sudhendu Das, CIT-D.R. ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- These are three appeals filed by the Department against the order of ld. National Faceless Appeal Centre (NFAC), Delhi for assessment years 2014-15, 2015-16 2016-17 passed u/s. 250 of the Act. 2. The Department has taken the following grounds of appeal:- ASSESSMENT YEAR 2015-16 (1) The Ld.CIT(A) has erred in law and on facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer disallowed a sum of Rs. 25,02,096/- on account of investment in shares in different companies. The assessee filed appeal against the aforesaid addition made u/s. 14A of the Act r.w.r. 8D before the ld. CIT(A). In appeal, the ld. CIT(A) allowed the appeal of the assessee on the ground that the assessee has not derived any exempt income during the year under consideration. Therefore, the provisions of section 14A of the Act are not applicable to the case of the assessee. Further, the ld. CIT(A) also allowed the appeal of the assessee on the ground that on similar facts, his predecessor ld. CIT(A)-2, Ahmedabad has already given relief to the assessee for assessment year 2013-14 and assessment year 2014-15. Accordingly, following the order of his predecessor CIT(A)-2 Ahmedabad, the ld. CIT(A) deleted the disallowance made by the Assessing Officer u/s. 14A r.w.r. 8D of Rs. 25,02,096/-. While allowing the appeal of the assessee, the ld. CIT(A) made the following observations:- 6.2 Ground 1 to 4: Disallowance of Rs.25,02,096/- u/s 14A r.w.r. 8D. During the course of assessment proceedings, the AO disallowed Rs. 25,02,096/- on account of investment in shares of different c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled principle of law in matters concerning disallowance to be made under section 14A that the onus of establishing nexus between interest bearing borrowed funds and their deployment yielding exempt income also rests upon the assessing officer. 2.6. Similarly the Hon'ble ITAT, Kolkatta Bench in the case of REI Agro Ltd. Vs. ACIT in ITA No.1331/Kol/2011 has also held that if there is no dividend income, in that case the case was not fit to attract the provisions of Section 14A of I. T. Act, following the ratio as in appellant's case there was no dividend income and hence provisions of section 14A do not attract. 2.7. It is also found that the onus was upon the AO to establish the nexus of the interest bearing funds utilized for the purpose of investments as has been held by the Hon'ble ITAT, Ahmedabad in the case of Aakash Agro Industries Ltd. Vs. ACIT, Circle-1, Ahmedabad in ITA No.3247/Ahd/2011 for A.Y. 2008-09. However, in the instant case no such nexus have been established by the A.O. 2.8. In view of the aforesaid discussion, it is found that the appellant has no income towards dividend or otherwise on such investments, and therefore, the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not interpret the provision in such a way so as to tone down the decision laid down by the Supreme Court, I. T.A. T. or High Court. 2.10.1. The circular cannot detract from the provisions of law. The law as Interpreted by judicial authority is considered as law settled. 2.10.2. The decision of five members bench of S.C..CCE V/s. Ratnam Melting Wire Ind_ (SC) Civil Appeal No. 1469/2002 is cited. The observation is as Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarification / circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the Court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive looked at from another angle, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make order without keeping in mind circular which he had referred to in assessment order - Held, yes - Whether, in the present case, appeal would not be proper remedy and as such writ petition was maintainable - Held, yes Section 119 of the Income-tax Act, 1961 - Central Board of Direct Taxes - Instructions to subordinate authorities - Whether quasi-judicial functions of an income-tax authority cannot be controlled by CBDT in a particular case, but they can be ^o controlled to extent that general directions are issued by CBDT - Held, yes -Whether CBDT can direct any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner - Held, no (Circulars and clarifications - Circular No. 549, dated 31-10-1989) 2.11. In view of the aforesaid discussion, the disallowance made by the AO invoking the provisions of section 14A of the Act is not correct and hence, same is deleted. Since the disallowance of 14A made by the AO is deleted as per discussions made in the preceding paras of this order, thus the other contentions/ground of appeal taken by the appellant are not separately decided as same become infructuous. The grounds of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that ld. CIT(A) has not erred in facts and in law in deleting the disallowance made u/s. 14A of the Act r.w.r. 8D. In response, the ld. Departmental Representative placed reliance on the order passed by the ld. Assessing Officer. 7. We have heard the rival contention and perused the material on record. We are of the considered view that there is no infirmity in the order of ld. CIT(A) as during the year under consideration, as held by the Delhi High Court in the case of Era Infrastructure supra and also various high courts and tribunals decisions on similar facts, wherein it has been held that no disallowance could be made u/s. 14A r.w.r. 8 if no exempt income was earned by the assessee. We are of the considered view that it is a well-settled law on the subject that no disallowance can be made under section 14A in case the assessee has not earned any exempt income or in excess of income claimed to be exempt. The Hon'ble Supreme Court in the case of State Bank of Patiala [2018] 99 taxmann.com 286 (SC) held that where High Court took a view that amount of disallowance under section 14A could be restricted to amount of exempt income only, SLP filed against said order was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e effect from 01-04-2022 and cannot be presumed to have retrospective effect and therefore will not apply to the impugned assessment year under consideration. 8. In the light of the above observations, ground no. 1 of Department s appeal is dismissed. Ground No. 2 CIT(A) erred in deleting addition of Rs. 20,77,01,000/- made on account of R D expenditure 9. The brief facts in relation to this ground of appeal are that the assessee, in his statement of income had shown expenditure of R D of Rs. 20,77,01,000/- out of which Rs. 20,77,01,000/- was claimed as revenue expenditure. The Assessing Officer held that entire R D expenditure is of capital nature and disallowed the sum of Rs. 20,77,01,000/- and added the same to the total income of the assessee. 10. The assessee filed appeal before ld. CIT(A) and contended that it is engaged in manufacturing of customized cages and R D expenditure incurred towards product developed in accordance with the specifications of the customers and its benefits are endured only till such time the assessee delivers the cages to the customer and therefore such R D expenditure cannot be termed as capital expenditure. The assessee further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance of Rs. 10,42,41,078/-. The facts and circumstances of the present appeal is similar to the order mentioned above, hence, following the judgment of Hon'ble ITAT Ahmadabad, the disallowance of Rs.20,77, 01, 000/- made by the assessing officer is deleted. Hence, this ground is allowed. 11. The Department is in appeal before us against the order passed by ld. CIT(A), allowing the appeal of the assessee with respect to this ground of appeal. Before us, the ld. Departmental Representative placed reliance on the observations made in order passed by the Assessing Officer for the impugned assessment year. In response, the counsel for the assessee submitted that the case of the assessee is covered in its favour in view of the decision of Ahmedabad ITAT in assessee s own case for assessment year 2013-14, which was rendered on identical set of facts. Further, the counsel for the assessee submitted that ld. CIT(A) allowed the appeal of the assessee with respect to this ground of appeal by placing reliance on the aforesaid decision of ITAT Ahmedabad for assessment year 2013-14. He further submitted that the relevant extracts of the ITAT ruling is reproduced as part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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