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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
This appeal filed by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-47, Mumbai [in short CIT(A)], Appeal No. CIT(A)-47/AP.21/15-16 vide order dated 30.03.2017. The ITAs No. 4658/Mum/2017 Assessment was framed by the Dy. Commissioner Income Tax, Circle- 1(4), Mumbai (in short ‘DCIT/ITO/ AO’) for the A.Y. 2012-13 vide order dated 24.03.2015 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of Revenue is against the order of CIT(A) deleting the disallowance of expenses relatable to exempt income on the ground that the assessee has not earned any exempt income during the year under consideration. For this Revenue has raised the following ground: - “i. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 7,55,68,875/- u/s 14A on the ground that dm11 assessee did not earn any exempt income during the year without appreciating that the disallowance u/s 14A was required to be made irrespective of whether if the assessee had earned exempt income during the year or not." ii. On the facts and circumstances of the case and in law, the ld. ClT(A) erred deleting the disallowance u/s 14A for the A.Y.-2012-13 without appreciating the fact that the circular No.5 of 2014 dated 11th February, 2014, issued by Central Board of Direct Taxes clearly provides for disallowance of expenditure even ITAs No. 4658/Mum/2017 where taxpayer in a particular year has not earned any exempt income."
At the outset, the learned Counsel for the assessee took us through the Para 4 of the order of the AO, wherein the AO has categorically noted that the assessee has not earned any exempt income and the relevant para reads as under: - “4. On verification of the details of investment it is found that the assessee company has made certain investments which may result exempt income, however, the assessee company has not earned any exempt income during the year but there are investments which are likely give exempt income in the hands of the assessee……………………”
The learned Counsel for the assessee from the very ground raised by Revenue stated that this is only issue. On the other hand, the learned Sr. Departmental Representative relied on the assessment order.
We have heard rival contentions and gone through the facts and circumstances of the case. We are of the view that once the assessee has not earned any exempt income, the issue is squarely covered by the decision of Hon’ble Bombay High Court, Nagpur Bench in the case of Pr. CIT vs. Ballarpur Industries Limited in Income Tax Appeal No. 51 of 2016, wherein this issue has been considered and finally following the judgment of Hon’ble Delhi High Court in the case of Cheminvest Limited vs. CIT (2015) 378 ITR 33 (Delhi) held as under: - ITAs No. 4658/Mum/2017 “On hearing the learned Counsel for the Department and on a perusal of the impugned orders, it appears that both the Authorities have recorded a clear finding of fact that there was no exempt income earned by the assessee. While holding so, the Authorities relied on the judgment of the Delhi High Court in Income Tax Appeal No. 749/2014, which holds that the expression “does not form part of the total income” in Section 14A of the Income Tax Act, 1961 envisages that there should be an actual receipt of the income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. The Income Tax Appellate Tribunal held that the provisions of Section 14A of the Income Tax Act, 1961 would not apply to the facts of this case as no exempt income was received or receivable during the relevant previous year. It is not the case of the Assessing Officer that any actual income was received by the assessee and the same was includible in the total income. In the facts of the case, the Authorities held that since the investments made by the assessee in the sister concerns were not the actual income received by the assessee, they could not have been included in the total income.”