Case Law Details
Counsel for the assessee submits that assessee has not received any exempt income and in the absence of the assessee receiving any exempt income, there is no justification in deriving expenses attributable for earning income which is not received by the assessee. He places reliance on the recent decision of the Hon’ble Allahabad High Court in the case of CIT Vs. M/s. Sivam Motors Pvt.Ltd. in I.T. Appeal No.88 of 2014 dated 5.5.2014 for the assessment year 2008-09, the decision of the Hon’ble Gujarat High Court in the case of CIT Vs. Corrtech Energy Pvt. Ltd. in Tax Appeal No.239 of 2014 dated 24.3.2014 for the assessment year 2009-10 and the decision of Hon’ble Bombay High Court in the case of CIT Vs. Delite Enterprises in Tax Appeal No.110 of 2009 dated 26.2.2009. Counsel for the assessee submits that even otherwise the Assessing Officer should have excluded share application money in various companies which will not produce any exempt income. He submits that if such share application money is excluded the disallowance under section 14A of the Act will works out to Rs. 5,61,125/- as against disallowance of Rs. 19,28,666/- made by the Assessing Officer. For the proposition that share application money is not investment for the purpose of section 14A, he places reliance on the decision of the Tribunal in the case of Rainy Investments Pvt. Ltd. Vs. ACIT in I.T. Appeal No.5491/Mum/2011 dated 16.1.2013.
Heard both sides. Perused orders of lower authorities and submissions made by the assessee and the decisions in relied on. No doubt in the decision of the Special Bench of Delhi Tribunal in the case of Cheminvest Ltd. Vs. ITO (supra), the Special Bench held that disallowance under section 14A can be made even in the year in which no exempt income has been earned or received by the assessee. This decision of Special Bench of the Tribunal has been impliedly overruled by the decisions of High Courts in the following cases:
- CIT Vs. M/s. Sivam Motors Pvt.Ltd. (Allahabad High Court ) I.T. Appeal No.88 of 2014 dated 5.5.2014
- CIT Vs. Corrtech Energy Pvt. Ltd. (Gujarat High Court) Tax Appeal No.239 of 2014 dated 24.3.2014
- CIT Vs.Delite Enterprises (Bombay High Court ) Tax Appeal No.110 of 2009 dated 26.2.2009
- CIT Vs. M/s. Lakhani Marketing (Punjab & Haryana High Court) ITA No.970 of 2008 dated 2.4.2014
- CIT Vs. Winsome Textiles Industries Ltd. (Punjab & Haryana High Court ) (319 ITR 204)
In the case of CIT Vs. Winsome Textiles Industries Ltd. (319 ITR 204) the Hon’ble Punjab & Haryana High Court held that when there is no claim for exemption of income in such situation section 14A has no application. Respectfully following the above decisions, we delete the disallowance made under section 14A as the assessee has not earned / received for exempt income during the previous year relevant to the assessment year under appeal.
