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TMI Blog2024 (7) TMI 1520X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be disallowed u/s 14A and the decision of Maxopp Investment Ltd [ 2018 (3) TMI 805 - SUPREME COURT] is an authority for the aforesaid proposition that the provision is relatable to earning of actual income. The object of section 14A is to curb the practice to claim deduction of expenses incurred in relation to exempt income against taxable income and at the same time avail of the tax incentive by way of exemption of exempt income without making any apportionment of expenses incurred in relation to exempt income. The High Court of Madras has relied on the decision of the Supreme Court in Walfort Share and Stock [ 2010 (7) TMI 15 - SUPREME COURT] wherein it has been held that Section 14A is relatable to income of actual income or not noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-18 against disallowance u/s. 14A of the Act. 2. Briefly stated the facts of the case are that the assessee filed return of income on 29.11.2014 declaring income of Rs. 17,48,03,210. The case was selected for scrutiny under CASS and statutory notices were issued to the assessee. In response to notices, the assessee filed submissions and it was noticed that there is closing balance in the balance sheet on investment in shares of Rs. 61,71,89,269 in three companies. It was also noted that assessee has debited interest of Rs. 43,14,10,974 on term loan, however, the assessee has not disallowed any interest u/s. 14A while computing its income. In this regard, the assessee was asked to substantiate its case against proposal to disallow expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements and no disallowance u/s. 14A could be made and relied on the judgments noted supra. 6. The ld. DR relied on the order of lower authorities. 7. Considering the rival submissions, we note that during the impugned year, the AO has calculated disallowance u/s. 14A r.w. Rule 8D(2)(ii) (iii) of Rs. 2,83,83,345. Considering the entire facts of the case, we note from financial statements that the assessee has not received any exempt income during the year and therefore no disallowance could be made. This view is supported by the judgment of jurisdictional High Court in the case of PCIT v. Delhi International Airport P. Ltd. [2022] 138 taxmann.com 112 (Kar) dated 25.05.2021 in which it is held as under:- 6. The order dated 15-2-2021 passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is pertinent to note that for Assessment Year 2009-10 the assessee has not earned dividend income. The aforesaid fact has not been disputed by the revenue. It is also relevant to mention that Circular No. 5/2014 dated 11-2-2014 is not applicable in the instant case as the instant case pertains to Assessment Year 2009- 10. The aforesaid Circular has no retrospective operation. It is noteworthy that aforesaid Circular was not even relied by the parties. This court in Commissioner of Income Tax v. Kingfisher Investment India Ltd. vide judgment dated 29-9-2020 inter alia held that disallowance under section 14A read with rule 8D has to be made even when taxpayer in a particular year has not earned any exempt income. This court relied on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e held as 'stock-in-trade', it becomes a business activity of the assessee to the deal in those shares as a business proposition. Whether dividend is earned or not becomes immaterial. In fact, it would be a quirk of fate that when the investee company declared dividend, those shares are held by the assessee, though the assessee has to ultimately trade those shares by selling them to earn profits. The situation here is therefore, different from the case like Maxopp Investment Ltd. where the assessee would continue to hold those shares as it wants to retain control over the investee company. In that case, whenever dividend is declared by the investee company that would necessarily be earned by the assessee and the assessee alone. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of exempt income without making any apportionment of expenses incurred in relation to exempt income. The High Court of Madras has relied on the decision of the Supreme Court in Commissioner of Income Tax v. Walfort Share and Stock Brokers (2010) 326 ITR 1 wherein it has been held that Section 14A is relatable to income of actual income or not notional or anticipated income. Therefore, the conclusion arrived at by us in Novel Software India (P.) Ltd. is affirmed but for different reasons. It is also clarified by us that while recording the conclusion in Kingfisher Finvest Ltd. that disallowance under section 14A has to be made even taxpayer has not earned any exempt income, this court has misread the ratio of the decision of the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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