M/s Chadha Super Cars Pvt. Limited, Ludhiana V. ACIT, Ludhiana

ITA 100/CHANDI/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6937 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 09-10-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 11-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMANDEEP VATS
• Keywords: Earning of tax free income; Proportionate interest; Corroborative evidences; Commercial expediency
• Section: 14A; 36 (1) (iii)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A , CHANDIGARH , !' #! $ % , &' BEFORE: SHRI SANJAY GARG, JM & SMT.ANNAPURNA GUPTA, AM ./ ITA NO.100/CHD/2017 / ASSESSMENT YEAR : 2012-13 M/S CHADHA SUPER CARS PVT. LIMITED, VILLAGE BHANOHAR, OPP. HAWELL RESTAURANT MULLANPUR, FEROZEPUR ROAD, LUDHIANA. THE A.C.I.T., CIRCLE-V, LUDHIANA ./ PAN NO.AABCC6944R / APPELLANT / RESPONDENT /ASSESSEE BY : SHRI AMANDEEP VATS, CA ! / REVENUE BY : SMT.CHANDERKANTA, SR.DR '# $ /DATE OF HEARING : 09.10.2018 %&'(# /DATE OF PRONOUNCEMENT: 08 .01.2019 &( /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA (IN SHORT CIT(A) DATED 19.1 1.2016 PASSED U/S 250(6) OF THE INCOME TAX AT, 1961 (HEREI NAFTER REFERRED TO AS ACT). 2. GROUND NOS.1 AND 2 RAISED BY THE ASSESSEE RELATE TO DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT AND READ AS UNDER: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA HAS ERRED : N SUSTAINING THE ADDITION OF RS.48,329/- MADE U/S 36 (1) (III) OF TH E INCOME TAX ACT, 1961 BY THE LD. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-V, LUDHIANA ON ITA NO.100/CHD/2017 A.Y.2012-13 2 ACCOUNT OF AMOUNT ADVANCED TO M/S NIKKAMAL JEWELLERS FOR PURCHASE OF COINS, REQUIRING FOR DIWA LI POOJA WITHOUT CONSIDERING THE REPLY FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS DURING THE COURSE OF APPELLATE PROCEEDINGS AND WITHOUT CONSIDERING THE FACTS OF THE CASE, THEREFORE, ADDITION OF RS.48,329/- MADE BY THE LD. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-V, LUDHIANA ON ACCOUNT OF AMOUNT ADVANCED TO M/S NIKKAMAL JEWELLERS AND SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA IS ILLEGAL, UNWARRANTED, UNCALLED FOR AND MAY BE DELETED. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA HAS ERRED IN SUSTAINING THE DISALLOWANCE OF INTEREST OF RS.4,69,863/- MADE U/S 36 (1) (III) OF THE INCOME TAX ACT, 1961 BY THE LD. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-V, LUDHIANA ON ACCOUNT OF LOANS GIVEN TO VARIOUS PARTIES AND INTEREST CHARGED FROM THEM AT 9% AND THE LD. ASSESSING OFFICER ESTIMATING THAT THE INTEREST TO BE CHARGED FROM PARTIES @ 12% AND MAKING THE ADDITION AT 3% ON LOANS ADVANCED TO VARIOUS PARTIES WITHOUT CONSIDERING THE REPLY FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS DURING THE COURSE OF APPELLATE PROCEEDINGS AND WITHOUT CONSIDERING THE FACTS OF THE CASE WHEREAS, LOANS TO THE VARIOU S PARTIES WERE ADVANCED OUT OF THE 'CURRENT ACCOUNT' AGAINST THE SALE PROCEEDS OF THE BUSINESS WERE CREDITED. THEREFORE, DISALLOWANCE OF INTERES T OF RS.4,69,863/- MADE BY THE LD. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-V, LUDHIANA ON ACCOUNT OF LOANS ADVANCED TO VARIOUS PARTIES AND SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA IS ILLEGAL, UNWARRANTED, UNCALLED FOR AND MAY BE DELETED. 3. BRIEFLY STATED, THE A.O. NOTED THAT THE ASSESSEE HAD MADE ADVANCES TO ONE M/S NIKKAMAL JEWELLERS PVT. LT D. AMOUNTING TO RS.10 LACS WHICH HAD REMAINED OUTSTAND ING DURING THE YEAR FOR A PERIOD OF 147 DAYS. THE A.O. ASKED THE ASSESSEE TO EXPLAIN WHY PROPORTIONATE DISALLOWANCE OF INTEREST BE NOT MADE ON THE SAID INTEREST FREE ADVA NCE, TO WHICH THE ASSESSEE REPLIED THAT THE ADVANCES HAD BE EN MADE ON ACCOUNT OF PURCHASE OF GOLD COINS FOR THE PURPOS E OF POOJA FOR DIWALI AND HAD BEEN GIVEN, THEREFORE, IN THE OR DINARY ITA NO.100/CHD/2017 A.Y.2012-13 3 COURSE OF BUSINESS. THE A.O. WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND ACCORDINGLY MADE DISALLOWANCE OF PROPORTIONATE INTEREST @ 12% ON THE IMPUGNED ADVANCE WHICH CAME TO RS.48,329/-. THE A.O. FURTHER NOTED THAT THE ASSESSEE HAD MADE ADVANCE TO MANY OTHER PARTIES AND CHARGED INTEREST @ 9% AS UNDER: NAME (S./SHRI/SMT/MRS. AMOUNT (IN RS.) INT EREST PERIOD CHARGED RAHUL SALES 44,67,2 07/- NIL 365 DAYS RENNY STEEL CASTINGS 10,00,0007- 9% 365 DAYS RENNY STRIPS PVT. LTD. 49,00,000/- NIL 365 DAYS AMIT KUMAR 10,01,973/- 9% 365 DAYS JANAK RAJ 20,36,962/- 9% 365 DAYS PAWAN KUMAR 16,40,055/- 9% 36/5 DAYS ADVENT IMPEX 11,35,468/- 9% 365 DAYS A.V. ENGINEERING INDUSTRIES 11,20,000/- 9% 365 DAYS KAMALDEEP 3,36,000/- 9% 365 DAYS RAJNISH ENTERPRISES 11,35,468/- 9% 365 DAYS RAVI NANDAN KUMAR 23,61,515/- 9% 365 DAYS RAJNISH AHUJA 38,94,653/- 9% 365 DAYS TOTAL 2,50,29,301/- 4. THE A.O. ASKED THE ASSESSEE WHY PROPORTIONATE I NTEREST BE NOT DISALLOWED U/S 36(1)(III) OF THE ACT SINCE T HE ADVANCES HAD BEEN MADE AT LOWER RATE OF INTEREST AS COMPARED TO THE RATES CHARGED BY BANKS ON LOANS TAKEN. THE ASSESSEE EXPLAINED THAT NO BORROWED FUNDS HAD BEEN USED FOR THE PURPOSE OF MAKING THESE ADVANCES AND THAT THE ENTIR E ADVANCES HAD BEEN MADE FROM THE CURRENT ACCOUNT OF THE ITA NO.100/CHD/2017 A.Y.2012-13 4 ASSESSEE. NOT BEING SATISFIED WITH THE REPLY OF THE ASSESSEE THE A.O. HELD THAT THERE WERE MIXED FUNDS AVAILABLE WITH THE ASSESSEE AND NO COMMERCIAL EXPEDIENCY HAD BEEN ESTABLISHED FOR THE PURPOSE OF MAKING THESE ADVANCE S. HE, THEREFORE, DISALLOWED THE SHORT INTEREST CHARGED ON THESE ADVANCES @ 3% BY TAKING APPROPRIATE RATE OF INTERES T @ 12% AND MADE A DISALLOWANCE OF INTEREST AMOUNTING TO RS.6,26,484/-. 5. AGGRIEVED BY THE SAME, THE MATTER WAS CARRIED IN APPEAL BEFORE THE CIT(A) WHO UPHELD THE DISALLOWANCES MADE FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LT D., 286 ITR 1. 6. THE ASSESSEE HAS NOW COME UP IN APPEAL BEFORE US CHALLENGING THE DISALLOWANCE OF INTEREST MADE PERTA INING TO ADVANCES GIVEN TO M/S NIKKAMAL JEWELLERS AND OTHER PARTIES AS STATED ABOVE. BEFORE US, THE LD. COUNSEL FOR ASS ESSEE DREW OUR ATTENTION TO THE SUBMISSIONS FILED BEFORE THE C IT(A), LACED AT PAPER BOOK PAGE NO.A-1 TO A-60 AND TO THE SUPPORTING EVIDENCES FILED FROM PAGE NO.1 TO PAGE N O.183. REFERRING TO THE SAME,, THE LD. COUNSEL FOR ASSESSE E STATED THAT THE ASSESSEE HAD SUFFICIENT OWN INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL, RESERVES AND SURPLUS WHI CH FAR EXCEEDED THE LOANS AND ADVANCES MADE AND IT WAS THE SE FUNDS WHICH HAD BEEN UTILIZED FOR GIVING THE IMPUGN ED LOANS SINCE ALL THE ADVANCES HAD BEEN MADE FROM THE CURRE NT ACCOUNT OF THE ASSESSEE WHICH CARRIED NO INTEREST. DRAWING ITA NO.100/CHD/2017 A.Y.2012-13 5 OUR ATTENTION TO THE FUNDS AVAILABLE WITH THE ASSES SEE IT WAS POINTED OUT THAT THE SHARE CAPITAL AND RESERVES FOR THE IMPUGNED YEAR STOOD AT RS.78,35,750/- AND RS.8,46,25,794/- RESPECTIVELY. IT WAS POINTED OUT THAT THE PROFITS DURING THE YEAR WERE RS.2,45,50,893/- WHICH WERE MORE THAN SUFFICIENT FOR MAKING THE IMPUGNED ADVANC ES AMOUNT IN ALL TO RS.2.60 CRORES. OUR ATTENTION WAS ALSO DRAWN TO THE COPY OF ACCOUNT OF THESE PARTIES AND A LSO COPIES OF BANK ACCOUNT SHOWING THAT ALL THE ADVANCES HAD B EEN MADE FROM THE CURRENT ACCOUNT OF THE ASSESSEE WHERE ALL TRADING RECEIPTS WERE DEPOSITED. IT WAS FURTHER POI NTED OUT THAT THE INTEREST BEARING FUNDS OF THE ASSESSEE WER E SPECIFIC PURPOSE LOANS WHICH WERE USED FOR THE SAID PURPOSE AND NOT FOR GIVING ANY OF THE IMPUGNED ADVANCES. OUR ATTENT ION WAS DRAWN TO THE BALANCE SHEET OF THE ASSESSEE FOR THE IMPUGNED YEAR, PLACED AT PAPER BOOK PAGE NOS.300 AND 301 POI NTING OUT THEREFROM THAT ALL THE LONG TERM BORROWINGS REL ATED TO CAR LOANS TAKEN FROM BANKS AND OTHER TERM LOANS TAK EN FROM BANKS AND INVESTMENT FUNDING LOANS TAKEN, WHICH WER E ALL SPECIFIC PURPOSE LOANS AND WERE USED FOR THE SAID P URPOSE. IT WAS, THEREFORE, CONTENDED THAT THE DISALLOWANCE OF INTEREST MADE WAS AGAINST THE LAW AND FACTS OF THE CASE AND OUGHT TO BE DELETED. 7. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF THE LOWER AUTHORITIES STATING THAT THERE WERE MI XED FUNDS AVAILABLE WITH THE ASSESSEE AND, THEREFORE, DISALLO WANCE OF PROPORTIONATE INTEREST HAVE BEEN RIGHTLY DONE CONSI DERING THE ITA NO.100/CHD/2017 A.Y.2012-13 6 FACT THAT THE BUSINESS EXPEDIENCY FOR MAKING THE IM PUGNED ADVANCES HAD NOT BEEN DEMONSTRATED BY THE ASSESSEE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND MER IT INTEREST HE CONTENTION OF THE ASSESSEE. ADMITTEDLY, THE ASSESSEE HAD DEMONSTRATED TO THE LOWER AUTHORITIES THAT THE IMPUGNED ADVANCES HAD BEEN MADE FROM ITS CURRENT AC COUNT ON WHICH NO INTEREST WAS BEING PAID. IT WAS ALSO DEMONSTRATED THAT THE ASSESSEE HAD MORE THAN SUFFIC IENT INTEREST FREE FUNDS IN THE SHAPE OF SHARE CAPITAL A ND RESERVES AMOUNTING TO RS.78,35,750/- AND RS.8,46,25,794/- RESPECTIVELY AND ITS PROFITS DURING THE YEAR, LOAN AMOUNTING TO RS.2,45,50,893/- AND FURTHER THE IMPUGNED ADVANC ES AMOUNTED TO RS.2.60 CRORES. ALL THE ABOVE FACTS HAV E NOT BEEN CONTROVERTED BY THE REVENUE. IN VIEW OF THE SA ME, IT STANDS SUFFICIENTLY ESTABLISHED THAT THE ASSESSEE H AD SUFFICIENT OWN INTEREST FREE FUNDS AND IT WAS THESE FUNDS WHICH HAD BEEN USED FOR MAKING THE IMPUGNED ADVANCE S WHICH IS EVIDENT FROM THE FACT THAT ALL THE TRADING RECEIPTS, WHICH WERE INTEREST FREE IN NATURE, WERE DEPOSITED IN THE CURRENT ACCOUNT OF THE ASSESSEE AND IT WAS OUT OF T HIS CURRENT ACCOUNT THAT THE ADVANCES HAD BEEN MADE. UNDOUBTEDLY, THEREFORE, IT STANDS ESTABLISHED THAT THE ASSESSEE HAD USED INTEREST FREE FUNDS FOR MAKING TH E IMPUGNED ADVANCES AND, THEREFORE, THERE WAS NO OCCA SION FOR MAKING ANY DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT. CONSIDERING THE ABOVE FACTS, THERE IS NO MERIT IN T HE CONTENTION OF THE REVENUE THAT THE MIXED FUNDS WERE ITA NO.100/CHD/2017 A.Y.2012-13 7 AVAILABLE WITH THE ASSESSEE AND, THEREFORE, THE PRO PORTIONATE INTEREST NEEDED TO BE DISALLOWED. IN FACT, IN THE P RESENT CASE, THE ASSESSEE HAS ESTABLISHED THE NEXUS BETWEEN THE INTEREST FREE FUNDS AND THEIR DEPLOYMENT FOR THE ADVANCES MA DE. THEREFORE, THE MIXED FUNDS THEORY CANNOT BE BROUGHT INTO OPERATION OR APPLIED IN THE PRESENT CASE. IN VIEW O F THE ABOVE, THE DISALLOWANCE MADE OF INTEREST U/S 36(1)( III) OF THE ACT AMOUNTING TO RS.48,329/- & RS.4,69,863/- IS DEL ETED . THE GROUND OF APPEAL NOS.1 AND 2 ARE ACCORDINGLY AL LOWED. 9. GROUND OF APPEAL NOS. 3 AND 4 RAISED BY THE ASSE SSEE RELATE TO DISALLOWANCE OF EXPENSES MADE FOR THE PUR POSE OF EARNING EXEMPT INCOME AS PER THE PROVISIONS OF SECT ION 14A OF THE ACT AND READ AS UNDER: 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA HAS ERRED IN SUSTAINING THE ADDITION OF RS.64,07,002/- MADE U/S 14A OF THE INCOME TAX ACT, 1961 BY THE LD. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-V, LUDHIANA WITHOUT CONSIDERING THE REPLY FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS DURING THE COURSE OF APPELLA TE PROCEEDINGS, WHEREAS SECTION 14A IS NOT APPLICABLE IN THE CASE OF ASSESSEE. THEREFORE, ADDITION OF RS.64,07,002/- MADE BY THE LD. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-V, LUDHIANA AND SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA IS ILLEGAL, UNWARRANTED, UNCALLED FOR AND MAY BE DELETED. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA, WITHOUT ANY PREJUDICE TO ABOVE STATED GROUNDS HAS ERRED IN SUSTAINING THE ADDITION OF RS.64,07,002/- MADE U/S 14A OF THE INCOME TAX ACT, 1961 BY THE LD. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-V, LUDHIANA AFTER IGNORING THE FACTS OF THE CASE THAT THE CALCULATION OF DISALLOWANCE U/S 14A IS NOT IN ACCORDANCE WITH THE PROVISIONS OF LAW WHERE THE ADDITIONS SHOULD BE RESTRICTED TO THE EXTENT OF EXEMPT INCOME AS HELD HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MASCOT FOOTCARE IN ITA ITA NO.100/CHD/2017 A.Y.2012-13 8 NO.67 OF 2009 (0 &M) DATED 2.4.2014 AND BY THE JURISDICTIONAL APPELLATE TRIBUNAL I.E. HON'BLE BEN CH OF ITAT CHANDIGARH IN THE CASE- OF M/S AARTI STEE LS LIMITED VS. DCIT [ITA NO. 268/CHD/2015] DATE D 30/11/2015 [A.Y. 2009-10] AND ALSO INTEREST PAID ON LOAN TAKEN BY ASSESSEE FOR SPECIFIC PURPOSES ARE NOT TO BE INCLUDED WHILE CALCULATING AMOUNT U/S 14A OF THE INCOME TAX ACT, 1961. THEREFORE, ADDITION OF RS.64,07,002/- MADE BY THE LD.ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-V, LUDHIANA AND SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA IS ILLEGAL, UNWARRANTED, UNCALLED FOR AND MAY BE DELETED. 10. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A.O. NOTED THAT THE ASSESSEE HAD SHOWN INVESTMENTS OF RS.9,70,32,778/- AS ON 31.3.2012. THE INCOME FROM THESE INVESTMENTS WAS NOT TAXABLE. THE DETAILS OF THE SAI D INVESTMENTS ARE AS UNDER: PARTICULARS AMOUNT (LN RS.) CHADHA MOTORS 9,13,90,778/- DSP BLACK ROCK EQUITY FUND 3,92,000/- HDFC MUTUAL FUND-TOP 200 2,50,000/- RENNY STRIPS PVT LTD 50,00,000/- TOTAL 9,70,32,778/- 11. THE A.O. OBSERVED THAT THE EXPENDITURE INCURRED IN RELATION TO THESE INVESTMENTS WAS REQUIRED TO BE DI SALLOWED U/S 14A OF THE ACT. THE ASSESSEE CONTENDED THAT THE INVESTMENT IN CHADHA MOTORS AMOUNTING TO RS. 9,13,90,778/- WAS IN THE FORM OF CAPITAL BY A PARTN ER FROM WHICH NO TAXABLE INCOME HAD BEEN DISTRIBUTED TO THE PARTNERS SINCE IT HAD MADE LOSSES DURING THE YEAR. THE ASSESSEE CONTENDED THEREFORE THAT NO DISALLOWANCE U /S 14A WAS REQUIRED TO BE MADE. THE A.O. WAS NOT SATISFIED WITH THE CONTENTION OF THE ASSESSEE. HE REFERRED TO THE DECI SION OF THE HON'BLE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 WHERE THE DISALLOWANCE U/S 14A HAD CONFIRME D. THE ITA NO.100/CHD/2017 A.Y.2012-13 9 A.O. OBSERVED THAT THE CLAIM OF THE ASSESSEE THAT T HE INVESTMENT IN PARTNERSHIP FIRM, M/S CHADHA MOTORS, DOES NOT MERIT DISALLOWANCE U/S 14A HAD BEEN DEALT IN DE PTH BY HON'BLE ITAT, CHANDIGARH IN ASSESSEES OWN CASE AND HAD DECIDED THE ISSUE IN FAVOUR OF THE REVENUE. THE A.O . ACCORDINGLY WORKED OUT THE DISALLOWANCE U/S 14A R.W .R. 8D AT RS.64,07,002/-. 12. THE LD.CIT(A) UPHELD THE DISALLOWANCE MADE BY T HE A.O. 13. BEFORE US, THE LD. COUNSEL FOR ASSESSEE REITER ATED THE CONTENTION MADE BEFORE THE LOWER AUTHORITIES THAT N O EXEMPT INCOME HAD BEEN EARNED FROM THE IMPUGNED INVESTMENT S MADE SINCE THE INVESTMENT MADE IN THE PARTNERSHIP C ONCERN HAD RETURNED LOSS AND THEREFORE NO DISALLOWANCE OF EXPENSES U/S 14A OF THE ACT WAS WARRANTED. THE LD. COUNSEL F OR ASSESSEE FURTHER CONTENDED THAT IN IT IS OWN CASE F OR ASSESSMENT YEAR 2011-12 THE I.T.A.T. HAD RESTRICTED THE DISALLOWANCE OF EXPENSES U/S 14A OF THE ACT TO THE EXTENT OF EXEMPT INCOME EARNED. COPY OF THE ORDER WAS PLACED BEFORE US. 14. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND FIND ME RIT IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE. IT IS SETTLED LAW THAT THE DISALLOWANCE OF EXPENSES U/S 14A OF TH E ACT CANNOT EXCEED THE QUANTUM OF EXEMPT INCOME EARNED A ND CONSEQUENTLY WHERE NO EXEMPT INCOME IS EARNED, NO DISALLOWANCE OF EXPENSES CAN BE MADE. THIS PROPOSIT ION OF ITA NO.100/CHD/2017 A.Y.2012-13 10 LAW HAS BEEN LAID DOWN BY THE HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT FARIDABAD VS. LAKHANI MARK ETING INC. LTD., 226 TAXMAN 45 (P&H) AND ALSO BY THE HON' BLE DELHI HIGH COURT IN THE CASE OF CHEMNIVEST LTD. VS. ITO (2015) 378 ITR 33. IN VIEW OF THE SAME SINCE NO EX EMPT INCOME HAS BEEN EARNED BY THE ASSESSEE DURING THE Y EAR, WHICH FACT HAS BEEN REITERATED TIME AND AGAIN BEFOR E THE LOWER AUTHORITIES AND HAS REMAINED UNCONTROVERTED A ND WHICH HAS ALSO BEEN DEMONSTRATED BY SHOWING THAT TH E MAJOR INVESTMENT OF RS.9 CRORES MADE IN THE PARTNERSHIP F IRM HAS RETURNED LOSS, WE HELD THAT NO DISALLOWANCE OF EXPE NSES IS WARRANTED IN THE PRESENT CASE U/S 14 A OF THE ACT. THE DISALLOWANCE SO MADE OF RS.64,07,002/- IS, THEREFOR E, DIRECTED TO BE DELETED. IN VIEW OF THE ABOVE, GROU ND NOS.3 AND 4 STAND ALLOWED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS, THERE FORE, ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ' #! $ % (SANJAY GARG ) (ANNAPURNA GUPTA) / JUDICIAL MEMBER &' / ACCOUNTANT MEMBER )' /DATED: 8 TH JANUARY, 2019 * ! * &) *+,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. - $ / CIT 4. - $ ( )/ THE CIT(A) 5. +./ 0 , #0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35' / GUARD FILE &) $ / BY ORDER, 6 ! / ASSISTANT REGISTRAR ITA NO.100/CHD/2017 A.Y.2012-13 11