SHARMA COMMERICAL PRIVATE LIMITED, 91-91A JHOTWARA INDUSTRIAL AREA, JAIPUR-302012,JHOTWARA INDUSTRIAL, AREA, JAIPUR vs. INCOME TAX OFFICER WARD-3(1), JAIPUR, WARD-3(1) JAIPUR

At the outset, it is noted that the matter was initially fixed for hearing on 16.04.2019 however, none appeared on behalf of the assessee. The matter was again listed for hearing on 07.01.2020 again none appeared on behalf of the assessee and the matter has now come up for hearing today i.e. 17.02.2020, again there is no appearance on behalf of the assessee nor any written submissions have been filed. Accordingly, it was decided to hearing the matter ex-parte qua the assessee after hearing the ld. DR and considering the material available on record.

In this case, the assessment was completed U/s 143(3) of the Act wherein the AO had made a disallowance of Rs. 6,71,879/- U/s 14A of the Act which on appeal has been confirmed by the ld. CIT(A). From perusal on records, the undisputed facts which are emerging from the records are that the assessee has made investment in shares of Jaipur Syntex Ltd., M/s Shree Sharma Steel Rolling Mills Pvt. Ltd. and Shree Sharma Steel Tech (India) Pvt. Ltd. totaling to Rs. 97,17,500/-. These investments were made in the previous financial years and there are no fresh investments which have been made during the year. Further, the assessee has not earned any income on this investment which has been claimed as exempt during the year under consideration. However, given that the assessee has claimed interest expenditure in its profit and loss account, the AO had made disallowance U/s 14A of the Act r/w Rule 8D amounting to Rs. 6,71,879/-.

Given the fact that the assessee has not made any fresh investment during the under consideration and all this investments were made in the previous financial years, there cannot be any disallowance of interest expenditure which can be related to making of such investments during the year. Further, there is nothing on record to suggest that in the previous financial years, the investments have been made out of the borrowed funds and there is recurring interest liability relatable to borrowed funds which were utilized to make such investments. Further, given that there is no movement during the year in the investments so made, and the investments at the beginning of the year and the investments at the end of the year are the same, they cannot be any administrative expenditure which can be related to have been incurred in relation to such investments. In light of the same and given the fact that there is no exempt income during the year which has been claimed as exempt by the assessee in respect of its investments, the disallowance so made by the Assessing Officer U/s 14A of the Act is hereby deleted and the order of the lower authorities are set aside to this extent.