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TMI Blog2018 (8) TMI 2118X X X X Extracts X X X X X X X X Extracts X X X X ..... LALIET KUMAR, JUDICIAL MEMBER For the Assessee : Shri. V. Srinivasan, Advocate For the Revenue : Dr. P. V. Pradeep Kumar, Addl. CIT ORDER PER BENCH: These are appeals filed by the Revenue against the separate orders of the CIT (A), Bengaluru-6, dt. 30.11.2017, for the assessment year 2010-11, 2011-12 and 2014-15, on the following common effective ground of appeal : 2. On the facts and in the circumstances of the case, the learned CIT (A) erred in directing the Assessing Officer to delete the addition since the assessee should have made disallowances even if the company did not earn any tax exempt income in a particular year. The Board vice circular no. 5/2015 has clarified that disallowance have to be made u/s.14 r.w. Rule 8D even when the assessee in a particular year did not earn any exempt income. 02. In this regard, the CIT (A) in para 4, 4.1 and 4.2 has noted the submissions of the assessee to the following effect : 4. The next issue in appeal relates to the disallowance made by the learned A. 0. by invoking the provisions of section 14A of the Act. The total disallowance made by the learned A.O. is Rs. 3,81,32,243/-. Initially, while filing the return of income, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaining to investment in capital account of M/s. Padmavathi Associates 86,12,500/- Interest paid pertaining to the amount advanced to M/s. Sastri Family Benefit Trust 67,40,024/- Interest paid pertaining to the investment made in share of Sterling Urban Development Pvt. Ltd. 11,26,250/- Interest paid pertaining to the investment made in the debenture of Sterling Urban Development 2,52,41,251/- Total Interest disallowed under the head "Business" for the assessment year 2008-09 4,17,20,025/- Total Interest allowed as a deduction under the head "Business" for the assessment year 2008-09 2,69,01,799/- 03. Thereafter in para 12, had adjudicated the issue in the following manner : 12. Disallowance u/s.14A amounting to Rs.2,75,14,155/- : It has been held by the Hon'ble ITAT Bangalore in appellant's own case for assessment year 2009-10 in ITA No.1417/Bang/2012 dated 23.06.2015 that in the absence of exempt income, no disallowance made u/s.14A of the Act can be made. In the light of the above judicial decision of Hon'ble jurisdictional ITAT which is squarely applicable in the instant appeal, and in view of the fact that the decision is binding, and since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made." 5.3.2 From a perusal and comparison of both these provisions, namely sections 80 I(6) and 80 IA(5) of the Act, it is seen that the provisions of section 80 IA(5) of the Act, it is seen that the provisions of section 80 IA(5) of the Act are couched in similar language to the erstwhile provisions of section 80 I(6) of the Act. In other words, the restriction contemplated under section 80 I (6) of the Act, is the same as the restriction contemplated under section 80 IA(5) of the Act. It is in this context that the Hon'ble Apex Court in the case of Synco Industries Ltd (supra) held after an elaborate analysis of the provisions at paras 12 and 13 of its order which are extracted and reproduced hereunder : "12. The contention that under section 80-I(6) the profits derive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction, the loss sustained in one of the units, cannot be taken into account because sub-section (6) contemplates that only the profits shall be taken into account as if it was the only source of income. However, section 80A(2) and section 80B(5) are declaratory in nature. They apply to all the sections falling in Chapter VI-A. They impose a ceiling on the total amount of deduction and therefore the non obstante clause in section 80-I(6) cannot restrict the operation of sections 80A(2) and 80B(5) which operate in different spheres. As observed earlier section 80-I(6) deals with actual computation of deduction whereas section 80-I(1) deals with the treatment to be given to such deductions in order to arrive at the total income of the assessee and therefore while interpreting section 80-I(1), which also refers to gross total income one has to read the expression 'gross total income' as defined in section 80B(5). Therefore, this court is of the opinion that the High Court was justified in holding that the loss from the oil division was required to be adjusted before determining the gross total income and as the gross total income was 'Nil' the assessee was not entitled to claim de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no concept of initial assessment year under section 80IB(10) of the Act, we are also of the view that the provisions of section 80 IA(5) of the Act would not be applicable to the deduction claimed under section 80 IB(10) of the Act. From this angle of the matter also, we find no merit in the view taken by revenue. Following the above view, we dismiss the appeal filed by Revenue. 05. On the other hand the Ld. DR supported the order passed lower authorities . 06. We have heard the rival contentions and perused the record. In the present case, there is no change in facts as facts are similar to the facts of the earlier decision rendered by the Tribunal in the case of the assessee for AY 2009-10, where the Tribunal has deleted the disallowance on the premise that no exempt income has accrued to the assessee from the investment made in the sister concerns. Therefore, following the decision of the coordinate bench in the case of the assessee, for earlier year and also following the judgment of the Hon'ble Delhi High Court, in the matter of Chem Chem Investment [2015] 61 taxmann.com 118 (Delhi) we dismiss the appeals of the Revenue. Chem Investment(supra) it was held as under : 15. Tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and is not an improbability. Dividend may or may not be declared. Dividend is declared by the company and strictly in legal sense, a shareholder has no control and cannot insist on payment of dividend. When declared, it is subjected to dividend distribution tax." 17. On facts, it was noticed in Holcim India (P.) Ltd's. case (supra) that the Revenue had accepted the genuineness of the expenditure incurred by the Assessee in that case and that expenditure had been incurred to protect investment made. 18. In the present case, the factual position that has not been disputed is that the investment by the Assessee in the shares of Max India Ltd. is in the form of a strategic investment. Since the business of the Assessee is of holding investments, the interest expenditure must be held to have been incurred for holding and maintaining such investment. The interest expenditure incurred by the Assessee is in relation to such investments which gives rise to income which does not form part of total income. 19. In light of the clear exposition of the law in Holcim India (P.) Ltd's. case (supra) and in view of the admitted factual position in this case that the Assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed is 'for the purpose of making or earning such income'. Section 14A of the Act on the other hand contains the expression 'in relation to income which does not form part of the total income.' The decision in Rajendra Prasad Moody's case (supra) cannot be used in the reverse to contend that even if no income has been received, the expenditure incurred can be disallowed under Section 14A of the Act. 22. In the impugned order, the ITAT has referred to the decision in Maxopp Investment Ltd's. case (supra) and remanded the matter to the AO for reconsideration of the issue afresh. The issue in Maxopp Investment Ltd's. case (supra) was whether the expenditure (including interest on borrowed funds) in respect of investment in shares of operating companies for acquiring and retaining a controlling interest therein was disallowable under Section 14A of the Act. In the said case admittedly there was dividend earned on such investment. In other words, it was not a case, as the present, where no exempt income was earned in the year in question. Consequently, the said decision was not relevant and did not apply in the context of the issue projected in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X
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