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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER AMIT SHUKLA, J.M.
The aforesaid appeal has been filed by the revenue against the impugned order dated 13.4.2016 passed by Ld. CIT(Appeals) -23, New Delhi, passed u/s 143(3) for the assessment year 2013-14. In the grounds of appeal the revenue, the only effective ground raised is as under:-
On the facts and circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 70,88,771/- made by A.O. on account of disallowance u/s 14A of the Income Tax Act, 1961.
At the outset, the Ld. Counsel submitted that during the year, assessee has not earned any exempt income which fact is evident from para 4.2 of the appellate order and therefore, in view of the judgment of Hon’ble Jurisdictional High Court in the case of Cheminvest Ltd. vs. ACIT reported in 378 ITR 33, no disallowance u/s 14A can be made. On the other hand Ld. DR Strongly relied upon the order of the A.O.
In view of the admitted fact that during the year assessee has not earned any exempt income, the disallowance u/s 14A cannot be triggered as held by the Hon’ble Jurisdictional High Court in the case of Cheminvest Ltd. vs. ACIT. This fact has been noted by the Ld. CIT (A) in para 4.2 in the following manner:-
4.2 Ground no. 03 relate to disallowance of Rs.70,88,771/- u/s 14A of the Act. From the assessment order it is apparent that there is no exempt income in the case of the apparent for this year. The A.O. has worked out the disallowance under Rule 8D (2)(ii) and (iii) of the Income Tax Rules 1962 (the Rules hereinafter). On perusal of the audited accounts of the appellant it is observed that there is no exempt income included in the total receipts, and the opening balance of investment of made by the appellant in its subsidiaries is Rs.54.28 crore and during the year there is no fresh investment and the AO has not brought on record any material to suggest that there is any nexus between borrowed money (which is only 4.35 crore). Moreover, it is settled law that Investment in subsidiary companies/concerns out of surplus funds are for business purposes and it is not the case of the AO that interest paid on borrowed funds is disallowable u/s 36 (1) (iii) of the Act. Even otherwise, in view of the Judgments of the jurisdictional High Court in CIT v. Holcim India Pvt. Ltd. [2015] 57 taxmann.com 28 (Delhi) and Cheminvest Ltd vs. ACIT 378 ITR 33 (Delhi), and those of the Hon'ble Punjab and Haryana High Court in CIT Vs. M/s. Lakhani Marketing Incl., decided on 02.04.2014, CIT Vs. Hero Cycles Limited [2010] 323 ITR 518 and CIT Vs. Winsome Textile Industries Limited [2009] 319 ITR 204, and those in CIT Vs. Corrtech Energy (P.) Ltd. [2014] 223 Taxmann 130 (Guj.) and, CIT Vs. M/s. Shivam Motors (P) Ltd. in ITA No. 88 of 2014 decided on 05.05.2014 wherein it has been held that no disallowance can be made u/s 14A if there is no exempt income in the relevant, no disallowance under section 14A of the Act could be made. The appellant has made further reliance on the decisions of the jurisdictional ITAT in M/s KEE Pharma Ltd. vs ACIT, 2015-TlOL-132- ITAT-DEL and M/s RLF Ltd vs ITO, 2015-TIOL-116-ITAT-DEL. Interestingly, relying on the judgment in Godrej Boyce Mfg. Co. Ltd. vs. CCIT and Anr. ITA No. 626/10 and WP No. 758/10, the A.O. has mentioned at para-4.3 of the assessment order that the assessing officer is duty bound to determine the expenditure incurred in relation to income which does not form part of total income but he has himself not made any disallowance under Rule 8D(2)(i) of the Rules admitting thereby that there is no expenditure attributable to exempt income. In this view of the matter the addition made by the A.O. is not sustainable and deleted.”
Since, the aforesaid order of the Ld. CIT (A) is in accordance with law laid down by the Hon’ble Jurisdictional High Court, therefore, same is affirmed.
In the result appeal of the revenue is dismissed.