ASST CIT 15(2)(1), MUMBAI vs. HCC CONCESSION LTD, MUMBAI

Effective ground of appeal is about disallowance of Rs. 17.57 crores, made u/s.14 A of the Act.During the assessment proceedings,the AO asked the assessee to furnish the details of dis -allowance made u/s.14A. He observed that in the financial statements the assessee had shown other income of Rs.20,67,36,417/-,that for the year under consideration it had shown current investment at Rs. 43.64 crores and non-current investment at Rs. 540.47 crores. After considering the submission of the assessee,the AO held that earning any income from investment could not be without systematic planning and management, that investment decisions required substantial market research and day to day analysis of market trends, that expenditure incurred towards earning such income could not be limited to salary of the employees, that the term expenditure would take in its sweep not only direct expenditure but also all forms of expenditure, that it could not be ruled out that interest-bearing funds would not be utilised for making investments, that he was not satisfied with the correctness of the claim of the assessee in respect of such expenses disallowed in the computation. He made a 6203/Mum/16-(12-13) M/s. HCC Concessions Ltd. disallowance of Rs.17,57,51,160/-(Rs. 15.81 crores under rule 8D(ii) + Rs. 1.76 crores under Rule 8D(iii) of the Income Tax Rules, 1962 (Rules). 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA)and made elaborate submissions. After considering the available material, he held that the assessee had earned no exempt income during the year under consideration, that the funds owned by the assessee exceeded Rs. 950 crores,that investment in the equity and Preference shares of the subsidy companies was only Rs. 540 crores, that the investments were also made as per the directions of National Highway Authority of India.He referred to the judgment of Cheminvest India of the Honorable Delhi High Court and held that AO was not justified in making the disallowance. 4.Before us,the Departmental Representative(DR)stated that CBDT had issued a circular on 11/2/2014 (circular number 5 of 2014) in that regard, that as per the circular disallowance of expenditure was to be made even if the assessee had not earned any exempt income in a particular year.The Authorised Representative(AR)supported the order of the FAA. 5.We have heard the rival submissions.We find that the assessee had not earned any exempt income during the year under consideration,that the AO had invoked the provisions of Rule 8D of the Rules r.w.s.14A of the Act, that the FAA has given a categorical finding of fact that funds owned by the assessee were much more than the investments made.In our opinion,in absence of exempt income and claim of expenditure made against such income,disallowance u/s.14 A should not have been made.The provisions were brought on statute to prevent the misuse of double deduction i.e.claiming exempt income and claiming expenditure against such income.No disallowance can be made if assessee does not show any exempt income and expenditure against the income that does not form part of the total income. Considering the above,we are of the opinion that FAA has rightly deleted the disallowance made by the AO.So,confirming his order, we decide the effective ground of appeal against the AO. As a result, appeal filed by the AO stands dismissed. फलतः िनधा"रती अिधकारी "ारा दािखल क" गई अपील नामंजूर क" जाती है. Order pronounced in the open court on 3rd January, 2018. आदेश क" घोषणा खुले "यायालय म" "दनांक 03 जनवरी, 2018 को क" गई । (रिवश सूद रिवश सूद /Ravish Sood) (राजे"" / RAJENDRA) रिवश सूद रिवश सूद "याियक सद"य / JUDICIAL MEMBER लेखा लेखा लेखा सद"य लेखा सद"य सद"य / ACCOUNTANT MEMBER सद"य मुंबई Mumbai; "दनांक/Dated :03 .01.2018. Jv.Sr.PS. 2