M/s. Indian Armour Systems P. Ltd., New Delhi V. ACIT, Faridabad

ITA 1219/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6934 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 03-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KUMAR YADAV SENIOR
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Earning of tax free income
• Section: 14A; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI N.K. CHOUDHRY, JUDICIAL MEMBER ITA NO.1219/DEL./2015 (ASSESSMENT YEAR : 2010-11) ITA NO.1220/DEL./2015 (ASSESSMENT YEAR : 2011-12) M/S. INDIAN ARMOUR SYSTEMS P. LTD., VS. ACIT, CIRCL E II, 22, FEET ROAD, VILLAGE DUDHOLA, FARIDABAD. P.O. BHAGOLA, PALWAL. (PAN : AABCI5575Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAKESH GUPTA, SENIOR ADVOCATE SHRI SOMIL AGGARWAL, ADVOCATE REVENUE BY : SHRI ARUN KUMAR YADAV, SENIOR DR DATE OF HEARING : 25.07.2018 DATE OF ORDER : 26.07.2018 O R D E R PER N K CHOUDHRY, JUDICIAL MEMBER : THE INSTANT APPEALS HAVE BEEN PREFERRED BY THE ASSE SSEE ON FEELING AGGRIEVED AGAINST THE SEPARATE ORDERS DATED 28.01.2015 PASSED BY THE LD. CIT (APPEALS), FARIDABAD UNDER SE CTION 250 (6) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED AS TH E ACT). 2. AS ONE OF THE ISSUES WITH REGARD TO THE DISALLOW ING OF DEDUCTION CLAIMED U/S 10B OF THE ACT IS INVOLVED IN BOTH THE APPEALS, THEREFORE, FOR THE SAKE OF CONVENIENCE AND BREVITY, BOTH THE APPEALS HAVE BEEN TAKEN TOGETHER FOR DISPOSING OFF BY THIS CONSOLIDATED ORDER. ITA NO.1219 & 1220/DEL./2015 2 3. THE GROUNDS RAISED BY THE ASSESSEE IN BOTH THE A PPEALS ARE AS FOLLOWS :- ITA NO.1219/DEL/2015 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF THE LD. A.O. IN DISALLOWING DEDUCTION SO CLAIMED BY ASSESSEE U/S 10B OF RS.4,77,34,675/- WITHOUT CON SIDERING THE MATERIAL PLACED ON RECORD AND BY RECORDING INCO RRECT FACTS AND INCORRECT FINDING ARID THUS STATING THAT THE AS SESSEE ALLEGEDLY DOES NOT FULFILL THE CONDITIONS, OUTLINED IN SECTION 10B, NECESSARY FOR CLAIMING EXEMPTION. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.4,77 ,34,675/- IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF THE LD. A.O. THAT THE PROPRIETORSHIP CONCERN WAS TAKEN OVER BY THE ASSESSEE IN EARLIER YEARS. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF THE LD. A.O. THAT THE RATIO OF NEWLY INSTALLED TO RENTED PLANT AND MACHINERY WAS NOT 81.72 : 18.28 AL LEGEDLY FOR THE REASON THAT COMPUTER SOFTWARE, GENERATOR, E LECTRIC INSTALLATION AND PALLET RACKING SYSTEM DO NOT QUALI FY AS PLANT & MACHINERY. 5. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF THE LD. A.O. THAT THE ASSESSEE COMPAN Y HAS BEEN FORMED BY TRANSFER OF MACHINERY PREVIOUSLY USED, WH ICH IS AGAINST THE SPIRIT OF THE PROVISIONS OF SECTION 10B . 6. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF THE LD. A.O. THAT THE ASSESSEE COMPAN Y IS FORMED BY SPLITTING UP OF THE PROPRIETORSHIP BUSINESS ALRE ADY IN EXISTENCE. ITA NO.1219 & 1220/DEL./2015 3 7. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN PASSING THE IMPU GNED ORDER WITHOUT GIVING ADEQUATE OPPORTUNITY OF BEING HEARD. 8. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER A CTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. A.O IN M AKING THE IMPUGNED ADDITIONS ARE BAD IN LAW AND AGAINST THE F ACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.1220/DEL/2015 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF THE LD. A.O. IN DENYING THE EXEMPTION OF PROFITS CLAIMED BY THE ASSESSEE U/S 10B AMOUNTING TO RS. 64,01,284/- ON THE GROUND ALLEGEDLY THAT THE ASSESS EE DID NOT FULFILL THE CONDITIONS NECESSARY FOR CLAIMING EXEMP TION. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.64,0 1,284/- IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF THE LD. A.O. IN DISALLOWING A SUM OF RS.1,65,200/- U/S 14A OF THE INCOME TAX ACT, R.W. R ULE 8D OF THE INCOME TAX RULES ,ALLEGEDLY ON THE GROUND THAT THE SAME ARE EXPENSES INCURRED IN RELATION TO EXEMPT INCOME. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN PASSING THE IMPU GNED ORDER WITHOUT GIVING ADEQUATE OPPORTUNITY OF BEING HEARD. 5. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER A CTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. A.O IN M AKING THE IMPUGNED ADDITIONS ARE BAD IN LAW AND AGAINST THE F ACTS AND CIRCUMSTANCES OF THE CASE. 4. AS THE FACTS OF BOTH THE APPEALS ARE COMMON, THE REFORE, THE FACTS OF ITA NO.1220/DEL/2015 HAVE BEEN TAKEN INTO CONSIDERATION FOR ADJUDICATION OF APPEALS. IN BRIEF, THE FACTS A RE AS UNDER. ITA NO.1219 & 1220/DEL./2015 4 THE ASSESSEE HAD FILED RETURN OF INCOME ON 11.10.20 10 DECLARING NET INCOME OF RS.21,75,778/- AFTER CLAIMI NG EXEMPTION U/S 10B OF THE ACT. THE ASSESSMENT WAS FRAMED U/S 143 (3) OF THE ACT AT A TOTAL INCOME OF RS.4,99,22,970/- VIDE ORDE R DATED 30.03.2013 WHILE DISALLOWING THE AMOUNT OF RS.4,77, 34,675/- CLAIMED BY THE ASSESSEE U/S 10B OF THE ACT AND THE SAME WAS ADDED IN THE INCOME OF THE ASSESSEE. THE SAID ADDI TION WAS CHALLENGED BEFORE THE LD. CIT (A) WHO ALSO UPHELD T HE SAME. ON FEELING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD. THE SIMILAR AND IDENTICAL ISSUE WAS CONSID ERED BY THE CO- ORDINATE BENCH AT DELHI IN ASSESSEES OWN CASES IN ITA NOS.808/DEL/2014 & 5647/DEL/2014 FOR AYS 2008-09 & 2009-10 RESPECTIVELY. THE COORDINATE BENCH VIDE ITS ORDER DATED 29.01.2018 IN AFORESAID APPEALS, WHILE SETTING ASIDE THE ORDER S OF THE AUTHORITIES BELOW, DIRECTED THE AO TO GRANT DEDUCTI ON U/S 10B OF THE ACT TO THE ASSESSEE. THE CRUX OF THE ORDER IS REPR ODUCED HEREIN BELOW FOR THE SAKE OF CLARITY AND READY REFERENCE:- 11. AFTER CONSIDERING RIVAL SUBMISSIONS AND MATERIAL O N RECORD AS ARE REFERRED TO LD. COUNSEL FOR THE ASSES SEE DURING THE COURSE OF ARGUMENTS AND HAVE NOT BEEN DISPUTED BY THE LD. DR, WE ARE OF THE VIEW THAT THE ASSESSEE HAS BE EN ABLE TO SATISFY THE CONDITIONS OF SECTION 10B OF THE ACT. L D.CIT(A) ACCEPTED THAT THE ASSESSEE HAS OBTAINED APPROVAL OF 100% EOU FROM THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT. THE ASSESSEE FILED SITE PLAN TO SHOW TH AT IT IS AN INDEPENDENT UNIT DIFFERENT FROM USI. THE NATURE OF BUSINESS OF THE ASSESSEE AND USI ARE TOTALING DIFFERENT. THE AS SESSEE IS MANUFACTURING HELMETS AND MAKING 100% EXPORT SALES WHEREAS USI IS IN TRADING OF ELECTRONICS ITEMS AND DEALT WITH LOCAL MARKET ONLY. THE ASSESSEE PROVED THAT IT HAS MADE FRESH ITA NO.1219 & 1220/DEL./2015 5 INVESTMENT IN THE COMPANY AND ALSO INVESTED THE LOA NS. THE ASSESSEE TAKEN PLANT & MACHINERY ON LEASE FROM USI FROM MANUFACTURING OF HELMETS WHICH IS PROVED FROM THE M ATERIAL OF RECORD TO SHOW USI PURCHASED NEW MACHINERY WHICH WA S LEASED OUT TO THE ASSESSEE. NO EVIDENCE HAS BEEN BR OUGHT ON RECORD AS TO HOW USI HAS USED THE NEW MACHINERY WHI CH HAS BEEN LEASED OUT TO THE ASSESSEE FOR ITS OWN PURPOSE . ALL MACHINES GIVEN ON LEASE TO THE ASSESSEE ARE NEW EXC EPT JUKI SEWING MACHINE OF THE VALUE OF RS.89,800/- WHICH WA S APPROXIMATE 5.56% OF THE TOTAL VALUE OF THE MACHINE RY AS PER DETAILS SUBMITTED BY THE ASSESSEE AT PAGE 314 OF TH E PAPER BOOK (SUPPORTED BY INVOICES) WHICH IS VERY NEGLIGIB LE. THE ASSESSEE PRODUCED SUFFICIENT EVIDENCE ON RECORD TO SUPPORT ITS CLAIM THAT THE ASSESSEE UNDERTAKING WAS NOT FORMED AS A RESULT OF RECONSTRUCTION OF AN EXISTING UNDERTAKING . THE ASSESSEE ALSO PROVED THAT THE ASSESSEE UNDERTAKING WAS NOT FORMED AS A RESULT OF TRANSFER OF PREVIOUSLY USED P LANT AND MACHINERY. THE ALLEGATIONS THAT THE ASSESSEE HAS GI VEN INTEREST FREE SECURITY DEPOSITS FOR PLANT AND MACHI NERY IS INCORRECT BECAUSE IT IS GIVEN FOR LAND AND BUILDING . THE ASSESSEE ALSO EXPLAINED THAT A VERY NEGLIGIBLE AMOU NT WAS SPENT FOR REPAIR ON PLANT & MACHINERY AND THAT USI HAS CLAIMED DEPRECIATION BEING OWNER OF PLANT & MACHINE RY GIVEN ON LEASE TO THE ASSESSEE. AUTHORITIES BELOW FAILED TO POINT OUT AS TO HOW LEASE OF PLANT AND MACHINERY WAS TRANSFER OF CAPITAL ASSETS. MERELY BECAUSE LEASED PLANT AND MAC HINERY KEPT BY USI SOMETIME WOULD NOT PROVE IT IS USED BY USI. CLAIM OF ASSESSEE HAS BEEN DENIED MERELY ON PRESUMPTIONS. ALL THE ISSUES RAISED BY THE LD.CIT(A) FOR DENYING DEDUCTIO N U/S 10B OF THE I.T. ACT HAVE BEEN MET BY THE ASSESSEE DURIN G THE COURSE OF ARGUMENTS SUPPORTED BY THE MATERIAL FILED IN THE PAPER BOOK. LD. DR HAS NOT BEEN ABLE TO REBUT THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE. THE REFORE, THE ASSESSEE HAS BEEN ABLE TO SATISFY THE CONDITIONS OF SECTION ITA NO.1219 & 1220/DEL./2015 6 10B OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION AND MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THE ASSESSEE UND ERTAKING WAS NOT FORMED AS A RESULT OF RECONSTRUCTION OF AN EXISTING UNDERTAKING AND THAT IT WAS AT FORMED AS A RESULT O F TRANSFER OF PREVIOUSLY USED PLANT & MACHINERY, THEREFORE, DI SALLOWANCE U/S 10B OF THE ACT IN THE CASE OF THE ASSESSEE IS UNJUSTIFIED. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORIT IES BELOW AND DIRECT THE AO TO GRANT DEDUCTION U/S 10B OF THE INCOME TAX ACT TO THE ASSESSEE. 6. IT IS WELL SETTLED BY THE APEX COURT IN CASE OF S.I. ROOPLAL AND ANR VS LT. GOVERNOR THROUGH CHIEF SECRETARY ( 2000 1 SCC 644) THAT THE ORDERS OF THE CO-ORDINATE BENCHES ARE SUPP OSED TO BE FOLLOWED IN ITS TRUE SPIRIT BY LATER BENCHES. FOR T HE SAKE OF CLARITY AND READY REFERENCE, THE RELEVANT OBSERVATION OF TH E APEX COURT IS REPRODUCED HEREIN BELOW;- THIS IS A FUNDAMENTAL PRINCIPLE WHICH EVERY PRESIDI NG OFFICER OF A JUDICIAL FORUM OUGHT TO KNOW, FOR CONSISTENCY I N INTERPRETATION OF LAW ALONE CAN LEAD TO PUBLIC CONFIDENCE IN OUR J UDICIAL SYSTEM. THIS COURT HAS LAID DOWN TIME AND AGAIN PRECEDENT L AW MUST BE FOLLOWED BY ALL CONCERNED; DEVIATION FROM THE SAME S HOULD BE ONLY ON A PROCEDURE KNOWN TO LAW. A SUBORDINATE COURT IS BOUNDED BY THE ENUNCIATION OF LAW MADE BY THE SUPERIOR COURTS. A COORDINATE BENCH OF A COURT CANNOT PRONOUNCE JUDGMENT CONTRARY TO DECLARATION OF LAW MADE BY ANOTHER BENCH. IT CAN ONLY REFER IT T O A LARGER BENCH IF IT DISAGREES WITH THE EARLIER PRONOUNCEMENT. THI S COURT IN THE CASE OF TRIBHUVANDAS PURSHOTTAMDAS THAKAR V. RATILAL MOTIL AL PATEL , [1968] 1 SCR 455 WHILE DEALING WITH A CASE IN WHICH A JUDGE OF THE HIGH COURT HAD FAILED TO FOLLOW THE EARLIER JUDGMEN T OF A LARGER BENCH OF THE SAME COURT OBSERVED THUS: 'THE JUDGMENT OF THE FULL BENCH OF THE GUJARAT HIGH COURT WAS BINDING UPON RAJU, J. IF THE LEARNED JUDGE WAS O F THE VIEW THAT THE DECISION OF BHAGWATI, J., IN PINJARE KARIMBHAI'S CASE AND OF ITA NO.1219 & 1220/DEL./2015 7 MACLEOD, C.J., IN HARIDAS `S CASE DID NOT LAY DOWN THE CORRECT LAW OR RULE OF PRACTICE, IT WAS OPEN TO HIM TO RECOMMEND TO THE CHIEF JUSTICE THAT THE QUESTION BE CONSIDERED BY A LARGER BENCH. JUDICIAL DECORUM, PROPRIETY AND DISCIPLINE REQUIRED THAT HE SHOULD NOT IGNORE IT OUR SYSTEM OF ADMINISTRATION OF JUSTI CE AIMS AT CERTAINTY IN THE LAW AND THAT CAN BE ACHIEVED ONLY IF JUDGES DO NOT IGNORE DECISIONS BY COURTS OF COORDINATE AUT HORITY OR OF SUPERIOR AUTHORITY . GAJENDRAGADKAR, C.J. OBSERVED IN LALA SHRI BHAGWAN AND ANR, V. SHRI RAM CHAND AND ANR . 'IT IS HARDLY NECESSARY TO EMPHASIS THAT CONSIDERAT IONS OF JUDICIAL PROPRIETY AND DECORUM REQUIRE THAT IF A LE ARNED SINGLE JUDGE HEARING A MATTER IS INCLINED TO TAKE THE VIEW THAT THE EARLIER DECISIONS OF THE HIGH COURT, WHETHER OF A DIVISION BENCH OR OF A SINGLE JUDGE, NEED TO BE RE- CONSIDERED, LIE SHOULD NOT EMBARK UPON THAT ENQUIRY SITTING AS A SINGLE JUDGE, BUT SHOULD R EFER THE MATTER TO A DIVISION BENCH, OR, IN A PROPER CASE, PLACE THE RE LEVANT PAPERS BEFORE THE CHIEF JUSTICE TO ENABLE HIM TO CONSTITUT E A LARGER BENCH TO EXAMINE THE QUESTION. THAT IS THE PROPER AND TRADITI ONAL WAY TO DEAL WITH SUCH MATTERS AND IT IS FOUNDED ON HEALTHY PRIN CIPLES OF JUDICIAL DECORUM AND PROPRIETY.' WHILE COMING TO THE INSTANT CASE AS THE ISSUE UNDER CONSIDERATION IS SETTLED BY THE CO-ORDINATE BENCH V IDE ORDER DATED 29-01-2018 IN ASSESSEES OWN CASES IN ITA NOS.808/D EL/2014 & 5647/DEL/2014 FOR AYS 2008-09 & 2009-10 RESPECTIVEL Y AND EVEN THE LD. D.R. EXCEPT REPLYING UPON THE ORDERS PASSE D BY THE AUTHORITIES BELOW, DID NOT BRING ANY CONTRARY MATER IAL EITHER TO OUR NOTICE OR ON RECORD TO CONTROVERT THE FINDINGS GIVE N IN THE AFORESAID ORDER DATED 29-01-2018 BY CO-ORDINATE BENCH AT DELH I , THEREFORE IN VIEW OF THE RATIO LAID DOWN BY THE APEX COURT IN T HE CASE OF S.I. ROOPLAL AND ANR VS LT. GOVERNOR THROUGH CHIEF SECRE TARY(SUPRA), AS THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE S QUA ISSUE UNDER CONSIDERATION ARE SIMILAR AND IDENTICAL TO TH E APPEALS RELEVANT TO THE A.YS. 2008-09 AND 2009-10, WHICH HA VE BEEN ITA NO.1219 & 1220/DEL./2015 8 DECIDED BY CO-ORDINATE BENCH IN THE ASSESSEES OWN CASE, WE FEEL IT APPROPRIATE TO ALLOW THE CLAIM OF THE ASSESSEE U /S 10B OF THE ACT AND CONSEQUENTLY, THE ORDERS IMPUGNED HEREIN ARE SE T ASIDE AND DEDUCTION OF RS.4,77,34,675/- & RS.64,01,284/- FOR AYS 2010-11 & 2011-12 RESPECTIVELY AS CLAIMED U/S 10B OF THE ACT, BY THE ASSESSEE STANDS ALLOWED . IN THE RESULT, THE ISSUE PERTAINS TO SECTION 10B OF THE ACT, UNDER CONSIDERATION IN BOTH THE APPEALS STANDS ALLO WED IN FAVOUR OF THE ASSESSEE. 8. NOW, COMING TO THE SECOND ISSUE WHICH RELATES TO THE DISALLOWANCE OF RS.1,65,200/- IN ITA NO.1220/DEL/20 15 IN CONNECTION WITH SECTION 14A OF THE ACT READ WITH RU LE 8D OF THE INCOME-TAX RULES, 1962, THE ADDITION WAS MADE BY TH E AO ON THE GROUND THAT MERE FACT THAT THE ASSESSEE HAS NOT EARNED EXEMPT INCOME FROM THE CAPITAL INVESTMENT WILL NOT PUSH TH E CASE OUT OF THE PURVIEW OF SECTION 14A AS IT IS IMMATERIAL THAT THE EXEMPT INCOME IS ACTUALLY EARNED DURING THE YEAR OR NOT . THE SAID DISALLOWANCE WAS AFFIRMED BY THE LD. CIT (A) AND THEREFORE IS IN CON SIDERATION BEFORE US. 9. WE HAVE HEARD THE PARTIES AND EXAMINED THE ORDER S OF AUTHORITIES BELOW. ISSUE UNDER CONSIDERATION RELAT ES TO DISALLOWANCE UNDER SECTION 14 A OF THE ACT. THE H ON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. V. CIT, 378 IT R 33 (DEL) CONSIDERED THE SIMILAR ISSUE UNDER CONSIDERATION AN D HAS CATEGORICALLY HELD THAT SECTION 14A ENVISAGES THA T THERE SHOULD BE ACTUAL RECEIPT OF INCOME WHICH WAS NOT INCLUDIBL E IN THE TOTAL INCOME DURING THE RELEVANT PREVIOUS YEAR FOR THE PU RPOSE OF DISALLOWING ANY EXPENDITURE IN RELATION TO THE SAID INCOME. WHEREVER THERE IS NO EXEMPT INCOME INCLUDIBLE IN THE TOTAL INCOME OF THE ASSESSEE, THE PROVISIONS OF SECTION 1 4A CANNOT BE ITA NO.1219 & 1220/DEL./2015 9 INVOKED. RELEVANT CONCLUSION DRAWN BY JURISDICTION HIGH COURT IS REPRODUCED HEREIN BELOW FOR THE SAKE OF CONVENIENCE AND BREVITY AND READY REFERENCE: 23.IN THE CONTEXT OF THE FACTS ENUMERATED HEREINBEF ORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT T HE 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 I N THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE P URPOSE 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. WHILE RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE AFORESAID JUDGMENT , AS IT IS WELL SETTLED POSITION OF LAW THAT WHENEVER ASSESSEE DID NOT EARN ANY EXEMPT INCOME, NO DISALLOWANCE COULD BE MADE U/S. 1 4A OF THE ACT. IN THE INSTANT CASE THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME, AS THE ASSESSEE HAS NOT CLAIMED ANY INTERES T ON INVESTMENT MADE IN ASSOCIATE COMPANIES AND HAS NOT RECEIVED AN Y DIVIDEND INCOME FROM THE COMPANIES WHERE AMOUNTS HAVE BEEN I NVESTED, WHICH IS EXEMPT, HENCE APPLICABILITY OF SECTION 14A READ WITH RULE 8D CANNOT BE JUSTIFIED. THEREFORE IN OUR CONSIDERED OPINION AS THE ASSESSEE DID NOT EARN ANY INCOME DURING THE RELEVAN T YEAR, THUS NO DISALLOWANCE CAN BE MADE UNDER SECTION 14A OF THE A CT AND HENCE ADDITION MADE ON THE BASIS OF DISALLOWANCE U/S 14A BY THE ASSESSING OFFICER AS AFFIRMED BY THE LD CIT(A) STAN DS DELETED . 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 26 TH DAY OF JULY, 2018. SD/- SD/- (R.S. SYAL) (N.K. CHOUDHRY) VICE PRESIDENT JU DICIAL MEMBER DATED THE 26 TH DAY OF JULY, 2018 ITA NO.1219 & 1220/DEL./2015 10 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A), FARIDABAD. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.