M/S A.B. GRAINS SPIRIT (P) LTD.,CHANDIGARH vs. ITO, CHANDIGARH

आदेश/Order PER ANNAPURNA GUPTA, AM:

The impugned cross appeals by the assessee and the filed Revenue have been against the order of the Commissioner of Income Tax (Appeals)-2, Amritsar, Camp at Chandigarh (in short CIT(A) dated 25.10.2016 passed u/s 250 (6) of the Income Tax Act, 1961 (in short referred to as ‘Act’).

2 ITA No.1234/Chd/2017 & ITA No.113/Chd/2017 A.Y.2011-12

even date i.e. 5.11.2018 for seeking permission to withdraw

his appeal. The learned D.R. did not have objection against

the same. The appeal of the assessee is therefore dismissed

as withdrawn.

ITA No.113/Chd/2017.

expenses made u/s 14A of the Act, read with Rule 8D of the

Income Tax Rules, 1962 and the only effective ground raised

by the Revenue reads as under:

“2. The Ld.CIT(A) has erred in deleting the addition on disallowance of Rs.49,90,041/- u/s 14A r.w.s. 8D on account of investment in unquoted shares amounting to Rs.19,16,82,500/- the income earned (if any) from which is exempt from tax, without taking cognizance of Circular No. 5 of 2014 of CBDT on this issue?” 5. Briefly stated, the Assessing Officer had observed that

the assessee had made investment in unquoted shares of

Rs.19,16,82,500/-, dividend income from which was exempt

from tax. He, therefore, disallowed expenses amounting to

Rs.49,90,041/-under section 14A of the Act computed as

per Rule 8D of the Income Tax Rules, 1961.

noting that no exempt income was earned by the assessee

and following the decision of the Hon'ble Punjab & Haryana

High Court in the case of Hero Cycles Limited in ITA No. 331

of 2009 dated 4.11.2009 and the decision of the I.T.A.T.,

3 ITA No.1234/Chd/2017 & ITA No.113/Chd/2017 A.Y.2011-12

Chandigarh Bench in the case of ETE Electrogears Pvt. Ltd.

in ITA No.314/Chd/2016 dated 11.8.2016 holding that no

disallowance under section 14A is warranted where no

exempt income has been earned.

Assessing Officer while the Ld. counsel for the assessee

relied upon the order of the CIT (A) and further pointed out

that the Hon'ble Jurisdictional High Court in the case of CIT

Faridabad Vs. Lakhani Marketing INC. (1970) 208 (O&M)

decided on 2.4.2014 has categorically held that unless and

until there is receipt of exempt income in the concerned

assessment year, section 14A of the Act cannot be invoked.

orders of authorities below. We do not find any merit in the

present appeal The issue regarding disallowance of

expenses to be made in the absence of any exempt income

earned has been settled in favour of the assessee by the

Hon'ble Jurisdictional High Court in the case of Lakhani

Marketing INC. (supra).

decision of the Hon'ble Jurisdictional High Court or of the

Hon'ble Apex Court in this regard. In view of the same, we

see no reason to interfere in the order of the CIT (A) in

deleting the disallowance made u/ 14A in the present case

on finding that no exempt income was earned by the

assessee during the year which fact has also remained

4 ITA No.1234/Chd/2017 & ITA No.113/Chd/2017 A.Y.2011-12

uncontroverted before us. In view of the same, ground No.2 of the appeal raised by the Revenue is dismissed.

Order pronounced in the Open Court.

Sd/- Sd/- संजय गग� अ�नपणा� ग�ता (ANNAPURNA GUPTA) (SANJAY GARG ) �याय�क सद�य/ Judicial Member लेखा सद�य/ Accountant Member �दनांक /Dated: 8th January, 2019 *रती*

आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :

आदेशानसार / By order, सहायक पंजीकार/ Assistant Registrar