ITO 6(1)(1), MUMBAI vs. ADELWISE INVESTMENTS PVT. LTD., MUMBAI

O R D E R Per Shamim Yahya, A. M.: This appeal by the Revenue is directed against the Order by the Commissioner of Income Tax (Appeals)-12, Mumbai (‘CIT(A)’ for short) dated 09.05.2016 and pertains to the assessment year (A.Y.) 2012-13. The grounds of appeal

read as under:

(A.Y. 2012-13) ITO vs. M/s. Adelwise Investments Pvt. Ltd. 2. The assessee company is engaged in the business of finance and investment activities. During the year under consideration, the assessee company has not earned any exempt income. However, the Assessing Officer noted that the assessee has made capital investment in Gliders Buildcon LLP, for which the assessee has used interest bearing borrowed funds. The assessee has received interest income of Rs.45,21,74,296/- from this concern, which was offered for taxation. However, the assessee had not received any share profit from the said company, i.e., Gliders Buildcon LLP. Hence, despite noting that the assessee has not earned any exempt income during the year, the Assessing Officer made disallowance u/s. 14A read with Rule 8D amounting to Rs.45,03,43,030/-.

(A.Y. 2012-13) ITO vs. M/s. Adelwise Investments Pvt. Ltd. 6. Upon hearing both the counsel and perusing the records, we find that the preposition that when no exempt income has been earned, no disallowance for earning the exempt income is required has been considered by the Hon'ble jurisdictional High Court in the case of Pr. LD. CIT(A) vs. Ballarpur Industries Ltd. (in of 2016). In the said case, the Hon’ble High Court has held as under:

By this income tax appeal the appellant – Department challenges the orders of the Commissioner of Income Tax and the Income Tax Appellate Tribunal, Nagpur.

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. The findings of facts recorded by both the Authorities do not give rise to any substantial question of law. Since no substantial question of law arises in this income tax appeal, the income tax appeal is dismissed with no order as to costs.