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TMI Blog2024 (6) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 14A of the Act will come into play only in such cases where there is a claim by the assessee that particular income is exempt u/s.10 of the Act or is not liable to be included in the total income of the assessee, and the assessee had incurred expenditure in relation to such exempted income. In the present case, it is evident that there is no claim of any exempted income. When there is no claim of exemption in respect of any income during the year, provisions of Section 14A of the Act has no applicability, particularly so when the appellant has not incurred any expenditure whatsoever for making the investments. As decided in the case of CIT vs. Corrtech Energy Limited [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] that in a case where there is no income which is not chargeable to tax, provisions of Section 14A of the I.T. Act is not applicable. It is also a settled law that when assessee has substantial interest free funds disallowance u/s.14A of the Act is unwarranted - See Suzlon Energy Ltd [ 2013 (7) TMI 697 - GUJARAT HIGH COURT] - Decided in favour of assessee. Disallowance towards Interest on Unpaid Purchase Price - CIT(A) has deleted the addition - HELD THAT:- assessee pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year under consideration on 30-11-2013 declaring loss of Rs. 3,91,59,525/- and the return was processed u/s 143(1) of the Act as per the returned income. Later on, the case was selected for scrutiny. The AO completed the assessment making an addition of Rs. 15,10,05,722/- The addition was made on account of under valuation of closing stock, disallowance u/s 14A of the Act, disallowance in respect of ESI, disallowance on account of interest on unpaid purchase price and disallowance towards insurance expenses. 3. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld.CIT(A), who partly allowed the appeal. Hence, the Revenue is in appeal before us with the following grounds of appeal: 1. The CIT(A) has erred in law and on facts of the case in deleting the Addition of Rs. 13,23,88,046/- without appreciating the fact that the decision of CIT(A) in the case of Riddhi Steels Tubes Ltd. was not accepted and a SLP was proposed against the order of the Hon'ble High Court of Gujarat. 2. The CIT(A) has erred in law and on facts of the case in deleting the disallowance of Rs. 34,57,503/- u/s 14A towards investment made in shares. 3. The CIT(A) has erred in law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. In case of valuation for bank the value including excise duty and other elements were considered, whereas for the purpose of valuation for accounts the consistent method of valuation was adopted. f. In case of goods in transit the difference between stock as per books of accounts and as per stock statements submitted to bank was on account of ad hoc value adopted for submission to the bank. g. The AO has not found any defect in purchases, consumption and sales of stock. h. The stock statement submitted to bank is prepared on estimated and ad-hoc basis. As against that, book stock is accounted for in accordance with the accounting standards and also certified by Chartered Accountant. 5.1. He further stated that the AO, however, was not convinced with the assessee's submissions and proceeded to make an addition of Rs. 13,23,88,046/- on account of under-valuation of closing stock. The AO rejected the value of closing stock disclosed in the books of accounts under section 145(3) of the Act and adopted the value shown in the stock statement furnished to the bank, with certain adjustments. Upon appeal, the Ld.CIT(A) deleted the impugned addition, noting that the stock statement su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of closing stock was made only for AY 2013-14, while in previous years no such additions were made despite similar differences. The principle of consistency demands that such an addition should not be made in isolation for one year. g. Auditor of the company has not given any adverse comments on such discrepancies. 6.1. While respecting the judgment of Hon ble High Court of Gujarat in case of Riddhi Steel Tube Pvt. Ltd. (Supra), for the sake of clarity, we reproduce the relevant part of the judgement - 9.1 Again, the Court cannot be oblivious of the fact that the assessee had been subjected to statutory audit under the Companies Act, 1956 and also tax audit under the Income-tax Act. No errors were found at any stage in the report submitted by these auditors and for the past eight years, the assessee had been following continuously/consistently the method of accounting, as provided under section 145 of the Act, valuing the closing stock and inventory, as provided under section 145A of the Act. The assessee was also subjected to Excise and VAT and the books of account were found genuine and no discrepancies were found even by the Excise Audit report for the period January 2009 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee contented that there was no fresh investment made by the assessee-company in equity shares. The Ld.Counsel further submitted that the addition is made out of expenses which are incurred wholly and exclusively for the purpose of earning the income which is chargeable to tax. He further submitted that during the year under consideration, the assessee has not earned any exempt income and the assessee has not claimed exemption in respect of any part of income earned by it. The assessee-company has neither incurred any expenditure, nor has it claimed any expenditure in relation to any exempt income. The Ld.Counsel for the assessee explained that the company has not incurred any expenditure or financial cost with respect to the investment made by it and, in fact, the investment was made out of the assessee's own fund, the share capital and reserves surpluses of the appellant-company as on 01- 04-2012 stood at Rs. 26.82 Crores, which was much more than the total investment of Rs. 12.22 Crores. 7.2. The assessee placed reliance on the decision of Hon ble Jurisdictional High Court of Gujarat in the case of CIT vs. Corrtech Energy Limited (in ITA No. 239 of 2014). 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins to disallowances made by the assessing officer under section 14A of the Act in respect of interest expenses incurred for investments made in subsidiaries and administrative expenses. Commissioner (Appeals) deleted such disallowances, upon which, Revenue approached the Tribunal. The Tribunal rejected Revenues appeal, making following observations: - 3.5 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. Regarding the grounds raised by the revenue in respect of disallowance of interest expenditure made by the assessing officer under section 14A and deletion made by learned Commissioner (Appeals), we find that no interference is called for in the order of learned Commissioner (Appeals). We hold so because we find that with regard to the investment of Rs. 5907.18 lac in foreign subsidiaries, no disallowance can be made under section 14A because dividend income from foreign subsidiaries is taxable in India. Regarding balance investment of ` 38 crore approximately in Indian subsidiaries, we find that interest free own funds of the assessee is many time more than this investment because interest free funds av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was at the rate of 15% or more per annum. POSCO is enjoying monopoly among suppliers of electrical steel coils and importantly purchases from POSCO have not been doubted by the AO. 13.1. The Ld.Counsel stated that the Ld.CIT(A) has deleted the addition considering these points and relying on the decision of co-ordinate bench in case of assessee itself in AY 2012-13. The ITAT had decided the issue in favour of assessee in AY 2012-13 in ITA No. 2446/Ahd/2016 dated 24-01-2019. 13.2. Considering the facts and the decision of Co-ordinate Bench, we dismiss this ground by upholding order passed by the Ld.CIT(A). On Ground No. 4: 14. The assessee incurred insurance expenses of Rs. 24,66,506/- in relation to Keyman Insurance Policy, where the beneficiary of such policies was assessee company and not the individual directors. The AO disallowed this expenditure concluding that the same were incurred towards personal expenses. This was deleted by the Ld.CIT(A) as the same issue was decided by the Ld.CIT(A) for AY 2012-13 and later upheld by the ITAT in ITA No. 2446/Ahd/2016 dated 24-01-2019. 15. The Ld.DR relied on the order of AO and counsel for the assessee on the order of the Ld.CIT(A). Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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