Palco Metals Limited, Ahmedabad V. The Addl. CIT, Circle-5, Ahmedabad

ITA 2488/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0939 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 04-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 23-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER PALCO METALS LTD, OPP KHANWADI, RAMOL ROAD, AHMEDABAD - 382449 PAN - AAACP9154D (APPELLANT) VS THE ACIT, CIRCLE - 5, AHMEDABAD (RESPONDENT) REVENUE BY : S H RI PRASOON KABRA , SR. D . R. ASSESSE E BY: S H RI TUSHAR HEMANI , A.R. DATE OF HEARING : 04 - 08 - 2 016 DATE OF PRONOUNCEMENT : 19 - 08 - 2 016 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL F OR A.Y. 2009 - 10 , AR IS ES FROM ORDER OF THE CIT(A) - XI, AHMEDABAD DATED 12 - 08 - 2013 IN APPEAL NO. CIT(A) - XI/2 17 / ADDL. CIT . R - 5/11 - 12 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 2488 / A HD/20 13 A S SESSMENT YEAR 2009 - 10 I .T.A NO. 2488 /AHD/20 13 A.Y. 2009 - 10 PAGE NO PALCO METALS LTD. VS. ACIT 2 2. THE ASSESSEE HAS FILED THE APPEAL RAIS ING FOLLOWING SUBSTANTIVE GROUNDS: - 1. THE LD . CIT(A) XI HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS 1,04,000 MADE BY THE LD . ASSESSING OFFICER WHILE MAKING THE ASSESSMENT U/S 143(3), IN RESPECT OF THE DEDUCTION OF L/5 TH OF THE EXPENDITURE INCURRED FOR INCREASE IN AUTHORISED CAPITAL OF THE COMPANY. THE APPELLANT PRAYS THAT THE ORDER BEING BAD IN LAW AND ON FACTS MAY KINDLY BE QUASHED AND THE ADDITION MAY KINDLY BE DELETED. 2. THE LD . CIT(A) XI HAS FURTHER ERRED ON FACTS IN CONFIRMING THE ADD ITION OF RS 3,26,457 MADE BY THE LD . ASSESSING OFFICER WHILE MAKING THE ASSESSMENT U/S 143(3), BEING DISALLOWANCE U/S 14 - A RWR 8 - D. THE APPELLANT PRAYS THAT THE ORDER BEING BAD ON FACTS MAY KINDLY BE QUASHED AND THE ADDITION MAY KINDLY BE DELETED. GROUN D NO. 1 3. THE FACT OF THE CASE IS THAT THE ASSESSING OFFICER O N PERUSAL OF THE P & L A/C OF THE COMPANY, NOTICED THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 1,04,000/ - AS P RELIMINARY EXPENSES WRITTEN OFF. ON QUERY, THE ASSESSEE SUBMITTED BEFORE THE ASSESS ING OFFICER THAT PRELIMINARY EXPENSES INCURRED IN THE YEA R 2005 - 06 IS IN THE NATURE OF INCREASE IN THE CAPITAL OF THE COMPANY HENCE QUALIFY TO BE AMORTIZED AS STIPULATED IN SECTION 35D OF INCOME - TAX ACT, 1961 . THE ASSESSEE ALSO STATED THAT THE DETAILS OF THE ADDITIONS TO FIXED ASSETS MADE BY THE COMPANY DURING THAT YEAR IS A PART OF EXTENSION OF THE IND USTRIAL UNDERTAKING. HE FUR THER STATED THA BA NK LOAN WAS TAKEN AN D ALSO INCREASE D THE AUTHORIZED CAPITAL FOR FURTHER ISSUANCE OF SHARES. HE EXPLAINED THAT THE ASSESSEE - COMPANY WAS THEREFORE REQUIRED TO INCUR EXPENSES IN THE NATURE OF FEES AND STAMP DUTY PAYABLE AS PER I .T.A NO. 2488 /AHD/20 13 A.Y. 2009 - 10 PAGE NO PALCO METALS LTD. VS. ACIT 3 THE PROVISIONS OF THE COMPANIES ACT 1956, TO INCREASE THE AUTHORIZED CAPITAL. T HE EXPENSES SO INCURRED ARE NOT REVENUE EXPENSES AS THE Y LIKELY TO GIVE BENEFIT OF ENDURING NATURE, SO IT TREATED THE SAME AS DEFERRED REVENUE EXPENSES. A CCORDINGLY, IT HAS BEEN CLAIMING 1/5 OF THE TOTAL EXPENDITURE INCURRED THEN EVERY YEAR, FOR FIVE YEARS. THE ASSESSING OFFICER STATED THAT T HE JURISDICTIONAL HIGH COURT DECISION IN M/S VARELI TEXTILES LTD 284 ITR 238(G UJ), WHICH HAS FOLLOWED THE DECISION OF SUPREME COURT REPORTED IN 225 ITR 798 (SC) IN BROOKE BOND INDIA VS CIT HAS HELD THAT EXPENSES FOR INCREASE IN AUTHORIZED SHARE CAPITAL ARE CAPITAL EXP ENSES WHICH CANNOT BE ALLOWED AS DEDUCTION AS REVENUE EXPENSES . HE FURTHER STATED THAT AS PER SECTION 35 D (2), THE NATURE OF EXPENSES ELIGIBLE FOR DEDUCTION U/S 35 D HAVE BEEN SPECIFIED WHICH DO NOT INCLUDE EXPENSES FOR INCREASE IN AUTHORIZED SHARE CAPITAL. ACC ORDINGLY, A SUM OF RS. 1,04,000/ - CLAIMED AS REVENUE EXPENDITURE IS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. AGAINST THE ORDER OF ASSESSING OFFICER, THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX(A). THE COMMISSIONER OF INCOME TAX(A) HELD AS UNDER: - 2.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. HON'BLE SUPREME COURT IN THE CASE OF BROOK BOND INDIA LTD. 225 ITR 798 HAS HELD THAT THE FEES PAID TO REGISTRAR FOR INCREASE IN AUTHORISED SHARE CAPITAL IS A CAPITAL EXPENDITURE. ON GOING THROUGH THE PROVISIONS OF SEC. 35D, I FIND THAT THE FEES FOR REGISTERING THE COMPANY HAS BEEN COVERED IN SECTION 35D(2)(C)(III). THE PROVISION ONLY ALLOW THE FEES WHICH IS PAID FOR REGISTERING THE COMPANY UNDER THE PROVISIONS OF COMP ANIES ACT, 1956. THE PAYMENT MADE TO REGISTRAR FOR INCREASE IN AUTHORISED SHARE CAPITAL IS NOT COVERED IN THE ABOVE CLAUSE OR IN ANY OTHER CLAUSE OF SEC.35D. 2.2 IN THE CASE OF CIT VS HINDUSTAN INSECTICIDES LTD. 250 ITR 338 (DEL) IT IS HELD THAT 'A READIN G OF SCH.X OF THE COMPANIES ACT WOULD I .T.A NO. 2488 /AHD/20 13 A.Y. 2009 - 10 PAGE NO PALCO METALS LTD. VS. ACIT 4 GO TO SHOW THAT ITEMS 1 AND 2 DEAL WITH REGISTRATION OF A COMPANY DEPENDING ON THE NOMINAL SHARE CAPITA!, IN RESPECT OF A COMPANY HAVING A SHARE CAPITAL. ITEM 3, ON THE OTHER HAND, DEALS WITH FEES PAYABLE FOR FILING A NOTICE FOR INCREASE IN THE NOMINAL SHARE CAPITAL OF THE COMPANY. THE FIRST TWO ITEMS AND THE THIRD ITEM OPERATE IN CONCEPTUALLY AND CONTEXTUALLY DIFFERENT FIELDS. THIS IS ALSO CLEAR FROM A READING OF ITEM 4 WHICH PROVIDES THAT FOR REGISTRATION OF ANY EXIST ING COMMPANY, EXCEPT SUCH COMPANIES AS ARE BY THE COMPANIES ACT EXEMPTED FROM PAYMENT OF FEES IN RESPECT OF REGISTRATION UNDER COMPANIES ACT, THE SAME FEE AS IS CHARGED FOR REGISTERING A NEW COMPANY IS PAYABLE. SEC. 35D (2}(C)(III) DEALS WITH EXPENDITURE I NCURRED BY WAY OF FEES FOR REGISTRATION OF A COMPANY UNDER THE ACT. AS THE ANALYSIS OF THE POSITION ABOVE WOULD GO TO SHOW, FEES PAID UNDER ITEM 3 OF SCH. X CANNOT BE STATED TO BE FEES PAID FOR REGISTERING A COMPANY. THAT BEING THE POSITION S. 35D(2)(C)(II I) HAS NO APPLICATION TO THE FACTS OF THE CASE.' SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF SHAKTI FINANCE LTD. 250 JTR 488 MADRAS. 2.3 FROM THE ABOVE DISCUSSION WHAT EMERGES IS THE FACT THAT THE FEES PAID TO REGISTRAR FOR INCREASE IN THE AUTHORISED SHAR E CAPITAL IS A CAPITAL EXPENDITURE AND IS THEREFORE NOT ALLOWED UNDER THE GENERAL PROVISIONS OF SEC. 37 OF THE I.T. ACT. THE SAME IS NOT ALLOWED UNDER THE SPECIFIC PROVISIONS OF SEC.35D OF THE I.T. ACT ALSO. ACCORDINGLY, THE DISALLOWANCE MADE BY THE A.O. O F RS. 1 ,04,000/ - U/S. 35D OF THE I.T. ACT IS HELD TO BE CORRECT. THIS GROUND OF APPEAL IS DISMISSED. 4. THE LD. COUNSEL CONTENDED THAT THE EXPENSES CLAIMED BE ALLOWED AS PER SECTION 35D(II) INDICATING THAT THE LANGUAGE OF THAT SECTION IS SO WIDE IN NAT URE THAT IT WOULD MEAN TO INCLUDE EVEN THE ABOVE EXPENSES. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF LD. COMMISSIONER OF INCOME TAX(A). WE HAVE CAREFULLY CONSIDERED THE CONTENTION OF BOTH THE SIDES AND GONE THROUGH THE MATERIALS AVAILABLE ON RECORD. THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 104,000/ - AS PRELIMINARY I .T.A NO. 2488 /AHD/20 13 A.Y. 2009 - 10 PAGE NO PALCO METALS LTD. VS. ACIT 5 EXPENSES ON ACCOUNT OF EXPENDITURE INCURRED IN THE CASE OF FEES AND STAMP DUTY PAYABLE TO INCREASE THE AUTHORIZED CAPITAL U/S. 35D OF THE I.T. ACT WE FIND THAT ACCORDING TO PROVISIONS OF SECTION 35D(II) OF THE ACT THE KINDS OF EXPENSES CLAIMED BY THE ASSESSEE ARE NOT SPECIFICALLY COVERED IN THE SECTION 35D(II). HON BLE SUPREME COURT IN THE CASE OF BROOK BOND INDIA LTD. 225 ITR 798 HAS HELD THAT THE FEES P AID TO REGISTRAR FOR INCREASE IN AUTHORIZED SHARE CAPITAL IS A CAPITAL EXPENDITURE. IN COMMISSIONER OF INCOME TAX VS. HINDUSTAN INSECTICIDES LTD (2001) 250 ITR 338 (DEL) HELD THAT THE FEE PAID TO REGISTRAR OF COMPANIES FOR INCREASING THE AUTHORIZED CAPITAL IS A CAPITAL EXPENDITURE. IT IS NOT POSSIBLE TO GET SUCH DEDUCTION UNDER SECTION 35D UNLESS IT IS COUPLED WITH THE EXTENSION OF AN INDUSTRIAL UNDERTAKING OR IN CONNECTION WITH SETTING UP OF A NEW INDUSTRIAL UNDERTAKING. THE HON BLE APEX COURT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORP LTD. VS. COMMISSIONER OF INCOME TAX (1997) 225 ITR 792/93 ALSO HELD THAT FEE PAID TO REGISTRAR OF COMPANIES FOR EXPANSION OF CAPITAL BASE OF THE COMPANY IS CAPITAL EXPENDITURE. THE CO - ORDINATE BENCH OF THIS TR IBUNAL I N THE CASE OF GUJARAT POWER CORPORATION LTD. VS. ACIT (2013) 33 TAXMANN.COM 318 AHMEDABAD TRI BUNAL HAS DISALLOWED THE CLAIM OF ASSESSEE U/S. 35D AS THE ASSSESSEE WAS NOT FULFILLING THE CONDITIONS LAID DOWN UNDER SUB - SECTION (1) AND (2) OF SECTIO N 35D. WE FIND THAT THIS DISALLOWANCE WAS CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX(A) BY GIVING A SPECIFIC FINDING THAT THE ASSESSEE IS NOT FULFILLING THE CONDITIONS IMPOSED UNDER SUB - SECTIONS (1) AND (2) OF SECTION 3 5D, WE, THEREFORE, I .T.A NO. 2488 /AHD/20 13 A.Y. 2009 - 10 PAGE NO PALCO METALS LTD. VS. ACIT 6 UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(A) AND DISMISSED THE APPEAL OF THE ASSESSEE ON THIS GROUND. GROUND NO. 2 5. FACT OF THE CASE IS THAT THE ASSESSING OFFICER O N PERUSAL OF THE BALANCE SHEET NOTICED THAT T HE ASSESSEE HAS SHOWN INVESTMENT OF R S. 80,12,500/ - BOTH AT THE BEGINNING OF THE YEAR AND AT THE END OF THE YEAR, THE DIVIDEND INCOME FROM WHICH ARE EXEMPT FROM TAX. IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS NOT DISALL OWED ANY AMOUNT TOWARDS DISALLOWANCE U/S 14A. ON BEING QUERIED AS T O WHY THE PROVISIONS OF SECTION 14A R.W. RULE 8D BE NOT APPLIED TO THE FACTS OF THE PRESENT CASE, THE ASS ESSEE CONTENDED THAT SINCE THE COMPANY HAS NOT RECEIVED ANY INCOME EXEMPT FROM TAX, THE PROVISIONS OF SEC. 14A ARE NOT APPLICABLE. THE ASSESSEE FURTHE R SUBMITTED THAT PROVISIONS OF 14A R.WS. 8D ARE APPLICABLE ONLY WHEN THE ASSESSEE HAS ANY INCOME WHICH IS EXEMPT FROM TAX . THE ASSESSING OFFICER STATED THAT T HE CONTENTI ON OF THE ASSESSEE IS NOT CORRECT. HE POINTED OUT THAT T HE ASSESSEE HAS NOT STATED A NYTHING IN ITS REPLY AS TO WHETHER ANY EXPENDITURE HAS BEEN INCURRED BY IT IN RELATION TO THE EXEMPT I NCOME (WHETHER EARNED OR NOT). THE ASSESSING OFFICER FURTHER STATED THAT IT IS TO BE NOTED THAT SECTION 14A DISALLOWS EXPENDITURE 'IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME' AND IN ORDER TO DISALLOW THE EXPENDITURE ACTUAL INCOME NEED NOT BE EARN ED. HE RELIED ON THE JUDGMENT IN THE CASE OF CHEMINVEST LTD. VS. ITO (ITAT, DELHI (SB)) IN ITA NO. 87/DEL/2008 . THE I .T.A NO. 2488 /AHD/20 13 A.Y. 2009 - 10 PAGE NO PALCO METALS LTD. VS. ACIT 7 ASSESSING OFFICER POIN TED OUT THAT THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT NO INTEREST EXPENSES INCURRED IN RELA TION TO EXEMPT INCOME. THE ASSESSING OFFICER HELD THAT THE PROVISIONS OF SEC. 14A IS APPLICABLE IN THE CASE OF THE ASSESSEE AND WORKED OUT DISALLOWANCE U/S. 14A OF THE ACT TO THE AMOUNT OF RS. 326457/ - . THE ASSESSEE FILED APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX(A) AGAINST THE ORDER OF THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME TAX(A) HELD AS UNDER: - 3.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CON TENTIONS. AS FAR AS THE CLAIM OF THE APPELLANT THAT NO EXEMPT INCOME HAS BEEN EARNED DURING THE YEAR IS CONCERNED THE SAME IS NOT ACCEPTED SINCE THE ACT PROVIDES THAT THE INVESTMENTS MADE BY THE APPELLANT SHOULD BE CAPABLE OF PRODUCING OR GENERATING EXEMPT INCOME. THIS ISSUE IS AMPLY COVERED BY THE DECISION OF HON'BLE DELHI SPECIAL BENCH IN THE CASE OF KEN INVESTMENT LTD 121 ITD 318 (2009) (S.B). WITH REGARD TO THE CLAIM THAT THE INVESTMENTS MADE BY THE APPELLANT WERE IN THE NATURE OF TRADE INVESTMENT MADE WITH AN OBJECTIVE OF FURTHERING THE BUSINESS INTEREST OF THE COMPANY, THIS ASPECT HAS BEEN CONSIDERED BY VARIOUS JUDICIAL AUTHORITIES. IN THE CASE OF MAXOPP INVESTMENTS LTD. [203 TAXMAN 185 (DEL)] THE HON'BLE SPECIAL BENCH HAS HELD THAT SEC.14A DISALLOWANC E IS APPLICABLE TO THE INTEREST PAID ON BORROWINGS USED FOR BUSINESS RELATED INVESTMENTS. EVEN THOUGH EARNING OF DIVIDEND INCOME IS ONLY INCIDENTAL. RELIANCE IS ALSO PLACED ON THE DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF SMT. LEENA RAMCHANDRAN REPORTED IN 339 ITR 296 AND DECISION OF HON'BLE COCHIN BENCH OF ITAT IN THE CASE OF STATE BANK OF TRAVENCORE REPORTED IN 124 ITD 332. APPELLANT'S CASE IS CLEARLY A CASE OF MIXED FUND AS HIGHLIGHTED BY THE A.O. BEING USED FOR THE PURPOSE OF EARNING TAXABLE AS WELL AS EXEMPT INCOME. APPELLANT HAS NOT BEEN ABLE TO SHOW BEFORE THE A.O. THAT NO INTEREST EXPENSES HAVE BEEN INCURRED BY IT IN RELATION TO THE ASSETS CAPABLE OF GENERATING EXEMPT INCOME. IN VIEW OF THE ABOVE FACTS AND DECISIONS THE DISALLOWANCE MADE BY THE A.O. OF R S.3, 26,457/ - IS HEREBY CONFIRMED AND THIS GROUNDS OF APPEAL IS DISMISSED. I .T.A NO. 2488 /AHD/20 13 A.Y. 2009 - 10 PAGE NO PALCO METALS LTD. VS. ACIT 8 6. THE LD. COUNSEL CONTENDED THAT THE ASSESSEE COMPANY HAS NOT EARNED ANY INCOME EXEMPT FROM INCOME TAX, HENCE THE PROCEEDINGS OF SECTION 14A ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE. THE LD. COUNSEL FURTHER STATED IT IS ALSO EVIDENT FROM THE PROFIT AND LOSS ACCOUNT AND RETURN OF INCOME THAT ASSESSE - COMPANY HAS NOT EARNED ANY EXEMPT INCOME. HE ALSO RELIED ON THE DECISION OF CO - ORDINATE BENCH OF THIS TRIBUNAL . ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE LOWER AUTHORITIES. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE PROVISIONS OF SECTION 14 - A ARE BEING RE - PRODUCED AS UNDE R: '(1) FOR THE PURPOSE OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. (2) THE ASSE SSING OFFICER SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE AND WITH SUCH METHOD AS MAY BE PRESCRIBED IF THE ASSESSING OFFICER HAVING REGARD TO THE AC COUNTS OF THE ASSESSEE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT.' I .T.A NO. 2488 /AHD/20 13 A.Y. 2009 - 10 PAGE NO PALCO METALS LTD. VS. ACIT 9 FROM THE PLAIN READING OF THE PROVISIONS OF SECTIO N 14 - A IT CLEARLY EMERGES THAT: - 1. THE ASSESSEE MUST HAVE EARNED AN EXEMPT INCOME 2. THE ASSESSEE MUST HAVE INCURRED AN EXPENDITURE IN RELATION TO THAT INCOME 3. THE ASSESSING OFFICER SHALL WORK OUT THE EXPENDITURE INCURRED TO EARN SUCH INCOME. IN THE CASE OF THE COMPANY IT IS EVIDENT FROM THE PROFIT & LOSS ACCOUNT AND RETURN OF INCOME FILED BY THE COMPANY THAT IT DID NOT EARN ANY INCOME EXEMPT FROM INCOME TAX, HENCE THE PROVISIONS OF SECTION 14 - A ITSELF ARE NOT APPLICABLE TO THE CASE 7. WE FIND T HAT THE ASSESSEE SUBMITTED BEFORE THE LOWER AUTHORITIES THAT IT HA S NOT EARNED ANY EXEMPT INCOME DURING THE YEAR. THE ASSESSING OFFICER HA S ALSO NOT PROVIDED ANY DETAIL OF EXEMPT INCOME EARNED BY THE ASSSESSSE DURING F.Y. 2008 - 09. THE LD. COMMISSIONER OF INCOME TAX(A) HELD THAT THE APPELLANT HAS NOT BEEN ABLE TO SHOW BEFORE THE ASSESSING OFFICER THAT NO INTEREST EXPENSE S HAV E BEEN I NCURRED BY IT IN RELATION TO TH E ASSETS CAPABLE OF GENERATING EXEMPT INCOME . THE LD. COUNSEL RELIED ON T H E DECISION OF THE C O - ORDINATE BENCH OF IT AT AHMEDABD ITA NO. 1032/AHD/2011 IN THE CASE OF SHR NANDLAL J. AGARWAL VS. DCIT, CIRCLE - 1 AHMEDABAD WHERE IT WAS HELD THAT THE DISALLOWANCE UNDER SECTION 14A CANNOT BE MADE WHEN NO INCOME IS CLAIMED TO BE EXEMPT IN THAT PARTICULAR YE AR I .T.A NO. 2488 /AHD/20 13 A.Y. 2009 - 10 PAGE NO PALCO METALS LTD. VS. ACIT 10 AFTER RELYING ON THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. CORRTECH ENERGY (P) LTD. (272 ITR 262 ) . IN VIEW OF THE ABOVE MENTIONED FACTS AND CIRCUMSTANCES AND AFTER CONSIDERING THE LEGAL FINDINGS , WE ALLOW THE APPEAL OF THE ASSESSEE ON THIS GROUND AS LOWER AUTHORITY HAS NOT POINTED OUT GENERATION OF ANY EXEMPT INCOME DURING THE PARTICULAR YEAR . 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PR ONOUNCED IN THE OPEN C OURT ON 19 - 08 - 201 6 SD/ - SD/ - ( S.S. GODARA ) ( AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 19 /08 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CO NCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,