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Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI
Before: SHRI H S SIDHU & SHRI O.P. KANT
O R D E R PER O.P. KANT, A. M.
This appeal by the assessee is directed against order dated 30/09/2013 of Ld. Commissioner of Income-tax (Appeals)-XXXIII, New Delhi for assessment year 2009-10 raising following grounds:
“That the Ld. Commissioner of Income Tax (Appeals) has passed the impugned assessment order without taking into consideration all the facts before him which make it unreasonable, unjustified and bad in law.
That the action on the part of the assessing officer is highly arbitrary, improper and without application of mind, unreasonable, unjustified and bad in law and deserves to be deleted, so that proper justice can be given to the applicant.
That on facts and circumstances of the case, the learned assessing officer has erred while making addition on account of Section 14A of Rs. 11,09,325/- which is illegal, unjustified and required to be deleted.
That the appellant craves leave to amend, change or add any ground of appeal
at the time of hearing.”
2. The facts in brief are that the assessee filed return of income on 26/09/2009 declaring total income of Rs. 6,10,42,953/-. The return of income was selected for scrutiny and the assessment under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) was completed on 28/12/2011 making disallowance of Rs. 11,09,325/-under section 14A of the Act, though there was no exempt income earned by the assessee during the year under consideration. The Ld. Commissioner of Income-tax (Appeals) also upheld the disallowance made by the Assessing Officer. Aggrieved, the assessee in appeal before the Tribunal.
3. In the grounds raised by the assessee, the effective grievance is in respect of disallowance of Rs. 11,09,325/- under section 14A of the Act.
4. Before us, the Ld. Authorised Representative of the assessee submitted that the assessee company made investment in hundred percent subsidiary company namely ‘K L J organic Thailand Ltd.’ but no dividend income was earned during the year under consideration from the investment. He further submitted that the investment was made out of capital and free reserves as during the year there was net profit of Rs. 6,15,05,425/- and after paying the tax, the net surplus remained was of Rs. 4,02,52,125/-. He further submitted that the investment was made according to the business strategy of the company and no extra efforts were made for this investment and therefore no disallowance should be made under section 14A of the Act. He also relied on the decision of the Tribunal Delhi ‘D’ bench in in the case of KLJ Town Planners(P) Ltd. pronounced on 18/01/2016, where the Tribunal has followed the judgement dated 02/09/2015 of the jurisdictional High Court in the case of Cheminvest versus CIT in ITA No. 749/2014 .
The Ld. Senior Departmental Representative, on the other hand relied on the findings of the authorities below.
We have heard the rival submission and perused the material on record. There is no dispute as to the fact that no exempt income was 3 earned by the assessee during the year under consideration from the investments made. We find that the case of Cheminvest versus Commissioner of Income-tax (2015) 378 ITR 33 (Del), the question before the Hon’ble Jurisdictional High Court for consideration was as under:
“Whether disallowance under Section 14A of the Act can be made in a year in which no exempt income has been earned or received by the Assessee?”
The Hon’ble High Court relying upon the case of CIT versus Holcim India private limited in answered the question as under:
“23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression ‘does not form part of the total income’ in Section 14A of the envisages that there should be an actual receipt of 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. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year.” 4
In view of the binding precedents , respectfully following the finding of the Hon’ble jurisdictional High Court in the case of Cheminvest versus CIT (supra) , we hold that no disallowance under section 14A of the Act is called for in the case of the assessee as no exempt income was received or receivable during the year under consideration.
Accordingly the effective ground of the appeal is allowed.
In the result appeal of the assessee is allowed.
Order pronounced in the open court on 24/06/2016.