The Assistant Commissioner of Income Tax Circle-4(1)(1), Bangalore V. M/s Karle International Pvt Ltd , Bangalore

ITA 399/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7734 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 09-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Non-deduction of tax
• Section: 14A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 399/BANG/2018 ASSESSMENT YEAR : 2014 - 15 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4(1)(1), BANGALORE. VS. M/S. KARLE INTERNATIONAL PVT. LTD., NO.151, INDUSTRIAL SUBURB, YESHWANTPUR, BANGALORE 560 022. PAN: AADCK 4886C APP ELL ANT RESPONDENT A PP EL LANT BY : MS. NEERA MALHOTRA, CIT(DR - II )(ITAT), BENGALURU. RE SPONDENT BY : SMT. SU MAN LUNKAR, CA DATE OF HEARING : 04.06 .201 8 DATE OF PRONOUNCEMENT : 06.07. 201 8 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDE R DATED 30.10.2017 OF THE CIT(APPEALS)-IV, BANGALORE RELATING TO ASSES SMENT YEAR 2014-15. 2. GROUND NOS.1 TO 3 RAISED BY THE REVENUE READS A S FOLLOWS:- 1. THE ORDER OF THE LD. CIT(A), IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, IS OPPOSED TO LAW A ND THE FACT AND CIRCUMSTANCES OF THE CASE. ITA NO. 399/BANG/2018 PAGE 2 OF 11 2. ON FACTS OF THE CASE, WHETHER THE DECISION OF TH E LD CIT(A) IS RIGHT IN ALLOWING THE APPEAL OF THE ASSES SEE EASING THE PROVISIONS OF SECTION 40(A)(IA) IN FAVOUR OF THE AS SESSEE, WHEREIN NO WHERE IT WAS HELD THAT THE ASSESSEE IS AT HIS LI BERTY WHETHER TO DEDUCT THE TDS OR NOT, WHICH IS AGAINST THE INTENT AND PURPOSE OF THE STATUTE. 3. WHETHER THE LD. CIT(A) IS RIGHT IN ALLOWING THE APPEAL OF THE ASSESSEE, WHEREIN THE LEARNED APPELLATE AUTHORI TY HIMSELF IS STATING THAT THE ASSESSEE IS A CHRONIC DEFAULTER OF TDS. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURE OF READYMADE GARMENTS. THE ASSESSEE HA S ITS OWN MANUFACTURING FACILITY. IN CASE OF THE NEED, THE A SSESSEE ALSO OUTSOURCES THE WORK OF MANUFACTURING TO OTHERS. IN RESPECT OF WORK OF MANUFACTURING OUTSOURCED TO OTHERS, THE ASSESSEE PAID A SUM OF RS .39,60,85,470 TO M/S. L.T. KARLE & CO. OUT OF THE ABOVE PAYMENT, ON A SU M OF RS.29,72,63,800 THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE AS WAS RE QUIRED BY THE PROVISIONS OF SEC.194C OF THE ACT. THE AO THEREFOR E ADDED A SUM OF RS.29,72,63,800 TO THE TOTAL INCOME OF THE ASSESSEE FOR NON-DEDUCTION OF TAX AT SOURCE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME- TAX ACT, 1961 [THE ACT], WHICH LAYS DOWN THAT WHE RE TAX IS DEDUCTIBLE ON A PAYMENT AND TAX IS NOT SO DEDUCTED, THEN THE SUM IN RESPECT OF WHICH TAX IS NOT DEDUCTED AT SOURCE, IF IT IS CLAIMED AS EXPENDI TURE IN COMPUTING INCOME FROM BUSINESS, THE SAME WILL NOT BE ALLOWED AS A DE DUCTION, WHILE COMPUTING THE INCOME FROM BUSINESS. THE AO ACCORDI NGLY MADE THE IMPUGNED DISALLOWANCE AND ADDITION TO THE TOTAL INC OME U/S. 40(A)(IA) OF THE ACT. ITA NO. 399/BANG/2018 PAGE 3 OF 11 4. BEFORE THE CIT(APPEALS), THE ASSESSEE SUBMITTED THAT THE RECIPIENT OF PAYMENT FROM THE ASSESSEE HAS INCLUDED THE AMOUN T RECEIVED FROM ASSESSEE IN THE RETURN OF INCOME FILED FOR AY 2014- 15. THE ASSESSEE ALSO FILED FORM 26A WHICH IS THE CERTIFICATE OF AUDITOR CERTIFYING THAT THE PAYEE HAS INCLUDED THE AMOUNT RECEIVED FROM THE ASSESSEE IN HIS RETURN OF INCOME FILED FOR THE RELEVANT ASSESSMENT YEAR AND P AID TAXES THEREON. THE ASSESSEE POINTED OUT THAT THE 2N D PROVISO TO SECTION 40(A)(IA) OF THE ACT WHICH WAS INTRODUCED BY THE FINANCE ACT, 2012 W.E.F . 1.4.2013 PROVIDED AS FOLLOWS:- PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB- SECTION (1) OF SECTION 201, THEN, FOR THE PURPOSE OF THIS SUB-CLAU SE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME B Y THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO. 5. THE 2 ND PROVISO TO SEC.40(A)(IA) LAYS DOWN THAT FOR NON-DE DUCTION OF TAX AT SOURCE, IF THE ASSESSEE IS NOT TREATED AS AS SESSEE IN DEFAULT UNDER THE FIRST PROVISO TO 201(1) OF THE ACT THEN NO DISA LLOWANCE U/S.40(A)(IA) OF THE ACT SHOULD BE MADE. THE FIRST PROVISO TO SECTIO N 201(1) REFERRED TO THE 2 ND PROVISO TO SEC.40(A)(IA) OF THE ACT WHICH WAS ALSO INTRODUCED BY THE FINANCE ACT, 2012 W.E.F. 1.7.2012 PROVIDED AS FOLLO WS:- PROVIDED THAT ANY PERSON, INCLUDING THE PRINCIPA L OFFICER OF A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER ON T HE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPE CT OF SUCH TAX IF SUCH RESIDENT (I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECT ION 139; ITA NO. 399/BANG/2018 PAGE 4 OF 11 (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME, AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFE CT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED: 6. THE GIST OF THE FIRST PROVISO TO SEC.201(1) OF T HE ACT IS THAT TAXES DUE ON THE PAYMENT ON WHICH TAX HAS NOT BEEN DEDUCTED A T SOURCE SHOULD HAVE BEEN PAID BY THE PAYEE BY INCLUSION OF SUCH PAYMENT AS PART OF HIS INCOME AND THE RETURN OF INCOME INCLUDING THE PAYMENT FROM THE PAYER AS PART OF PAYEES INCOME. THE FURTHER REQUIREMENT IS A CERTI FICATE OF A CHARTERED ACCOUNTANT REGARDING COMPLIANCE OF THE ABOVE CONDIT IONS. 7. THE ASSESSEE FURTHER SUBMITTED THAT THE SECOND P ROVISO TO SECTION 40(A)(IA) WAS INSERTED IN THE ACT BY FINANCE ACT, 2 012 W.E.F. 1.4.2013 WHEREAS THE FIRST PROVISO TO SECTION 201(1) WAS INS ERTED BY THE FINANCE ACT, 2012 W.E.F. 1.7.2012. THE PROVISIONS OF SECTION 20 1(1) AND SECTION 40(A)(IA) AS REFERRED TO ABOVE ONLY IMPLEMENT THE L AW WHICH HAS BEEN ELUCIDATED BY THE VARIOUS HIGH COURTS, MUCH EARLIER . AS PER THESE PROVISIONS, IF ULTIMATELY THE TAX DUE TO THE EXCHEQ UER IS RECEIVED THEN NO DISALLOWANCE U/S.40(A)(IA) OF THE ACT SHOULD BE MAD E. THESE PROVISIONS ARE CLARIFICATORY AND THEREFORE WILL APPLY TO ALL THE P ROCEEDINGS PENDING ON THE DATE WHEN THEY WERE BROUGHT INTO STATUTE BOOK. THE ASSESSEE PLACED RELIANCE ON CERTAIN JUDICIAL PRONOUNCEMENTS IN RESP ECT OF THE ABOVE PROPOSITION. 8. THE CIT(APPEALS) OBTAINED A REMAND REPORT FROM T HE AO ON THE ABOVE CONTENTION AND CERTIFICATE FILED BY THE ASSES SEE BEFORE THE CIT(A). IN THE REMAND REPORT, THE AO DID NOT MAKE ANY ADVERSE COMMENTS, BUT ONLY ITA NO. 399/BANG/2018 PAGE 5 OF 11 TOOK THE PLEA THAT SUCH A CERTIFICATE WAS NOT FILED IN THE COURSE OF ASSESSMENT PROCEEDINGS. ON A CONSIDERATION OF THE REMAND REPORT OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND THE JUDI CIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE, THE CIT(APPEALS) DELET ED THE ADDITION MADE U/S. 40(A)(IA) OF THE ACT, OBSERVING AS FOLLOWS:- IV) THE ASSESSEE DURING THE COURSE OF APPEAL-PROCE EDINGS HAS PLACED RELIANCE ON NUMEROUS JUDICIAL PRONOUNCEMENTS ON THE SUBJECT UNDER CONSIDERATION. THE ASSESSEE HAS DRAWN REFERENCE TO THE FINDINGS OF THE HON'BLE SUPREME COURT IN THE CA SE OF HINDUSTAN COCA COLA BEVERAGES PVT. LTD V/S CIT 163 TAXMAN 55 IN THE CONTEXT OF SECTION 201(1) AND 201(1A), WHERE IN IT WAS HELD THAT, WHERE DEDUCTEE (RECIPIENT OF INCOME) HAS ALRE ADY DECLARED INCOME / PAID TAXES ON AMOUNTS RECEIVED FROM DEDUCT OR, THE DEPARTMENT COULD NOT SUBJECT THE SAME TO DOUBLE TAX ATION. THE APPELLANT HAS ALSO PLACED RELIANCE ON NUMEROUS OTHE R JUDICIAL DECISIONS IN THIS REGARD, INCLUDING GUJARAT PIPAVAN PORT LTD., VS DCIT TDS CIRCLE RAJKOT ( 614, 615, 641 & 642 RJT 20 12); RAJEEV KUMAR AGARWAL V/S. ACIT (ITA NO. 337/AGRA/20 13); G. SHANKAR VS ACIT ITA NO. 1832/BANG/2013 DATED 10/10/ 2014. HAVING PERUSED THE SAME, IT IS QUITE APPARENT THAT THE JUDICIAL POSITION IS IN FAVOUR OF THE APPELLANT, IN RESPECT OF THE ISSUE, PRESENTLY UNDER CONSIDERATION. 5.6. IN BACKGROUND OF THE ABOVE DETAILED DISCUSSION , JUDICIAL POSITION ON THE SUBJECT AND FACTS & CIRCUMSTANCES O F THE PRESENT CASE, IT IS APPARENT THAT THE INCOMES IN RESPECT OF WHICH PROVISION U/S 40A(IA) HAS BEEN INVOKED, HAVE BEEN C ERTIFIED (AS PER CA'S CERTIFICATE IN FORM 26A) TO BE REFLECTED / OFFERED AS INCOME IN THE HANDS OF THE RECIPIENT I.E. M/S L.T. KARLE & CO. THE DISALLOWANCE IN THE HANDS OF THE APPELLANT WOUL D THEREFORE RESULT IN DOUBLE-TAXATION. IN THIS VIEW OF THE MATTER, THE DISALLOWANCE U/S 40A(IA) CANNOT BE UPHELD WITHO UT ANY EVIDENCIARY JUSTIFICATION BROUGHT ON RECORD AGAINST THE APPELLANT'S CLAIM. THE ASSESSEE'S GROUNDS OF APPEAL ARE THEREFO RE TO BE ALLOWED. ITA NO. 399/BANG/2018 PAGE 6 OF 11 9. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE REVE NUE HAS RAISED GROUNDS 1 TO 3 BEFORE THE TRIBUNAL. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE UPON THE DECISION OF THE H ONBLE DELHI HIGH COURT IN THE CASE OF CIT V. ANSAL LAND MARK TOWNSHIP (P) LTD. (377 ITR 6 35)(DEL) WHEREIN THE HONBLE DELHI HIGH COURT HELD THAT AMEN DMENT TO THE PROVISIONS OF SECTION 201(1) AND SECTION 40(A)(IA) OF THE ACT BY FINANCE ACT, 2012 W.E.F. 1.7.2012 AND 1.4.2013 BY INSERTION OF F IRST PROVISO AND THIRD PROVISO RESPECTIVELY WERE APPLICABLE RIGHT FROM THE BEGINNING WHEN SECTION 40(A)(IA) OF THE ACT WAS ENACTED. 10. THE LD. DR RELIED ON THE ORDER OF THE AO AND RE MAND REPORT OF THE AO WHICH WAS FILED BEFORE THE CIT(APPEALS). 11. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (I) PVT.LTD. , IN ITA NO.160/2015 JUDGMENT DATED 26.8.2015 HAS TAKEN THE VIEW THAT THE INSERTION OF THE SECOND PRO VISO TO SEC.40(A)(IA) OF THE ACT IS RETROSPECTIVE AND WILL APPLY FROM 1.4.20 05. SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE HONBLE CALCUTTA HIGH COURT IN TH E CASE OF M/S.TIRUPATI CONSTRUCTION (SUPRA). THEREFORE THE ASSESSEE IS ENTITLED TO TH E BENEFIT OF 2ND PROVISO TO SEC.40(A)(IA) OF THE ACT. THE ASSES SEE HAS FILED CERTIFICATE AS IS NECESSARY UNDER THE 2 ND PROVISO TO SEC.40(A)(IA) OF THE ACT AND THE AO IN THE REMAND REPORT AFTER VERIFICATION HAS NOT DRAWN ANY ADVERSE INFERENCE AGAINST THE CLAIM OF THE ASSESSEE. IT IS THUS CLEAR THAT THE RECIPIENT OF PAYMENT FROM THE ASSESSEE HAS FILED RE TURN OF INCOME FOR THE RELEVANT PREVIOUS YEAR WITHIN TIME ALLOWED U/S.139( 1) AND ALSO INCLUDED THE SUM RECEIVED FROM THE ASSESSEE IN THEIR RETURN OF I NCOME. SINCE THE RECIPIENTS HAVE INCLUDED THE RECEIPTS PAID BY THE A SSESSEE IN THEIR RESPECTIVE RETURNS OF INCOME AND ALSO PAID TAXES ON THE SAME, NO DISALLOWANCE U/S.40(A)(IA) OF THE ACT SHOULD BE MAD E. IN OUR VIEW THE ITA NO. 399/BANG/2018 PAGE 7 OF 11 CIT(A) WAS FULLY JUSTIFIED IN ALLOWING THE RELIEF T O THE ASSESSEE. WE FIND NO GROUNDS TO INTERFERE WITH THE ORDER OF THE CIT(A). CONSEQUENTLY, GROUND NOS.1 TO 3 RAISED BY THE REVENUE ARE DISMISSED. 12. GROUND NOS.4 & 5 RAISED BY THE REVENUE READS AS FOLLOWS:- 4. ON FACTS OF THE CASE, WHETHER THE DECISION OF THE LD CIT(A) IS RIGHT IN ALLOWING THE APPEAL OF ASSESSEE DESPITE THE FACT THAT THE PROVISIONS TO SECTION 14A MAKES IT CLEAR T HAT THE EXPENDITURE HAS TO BE WORKED OUT AS PER RULE 8D(2)( II) & 8D(2)(III). 5. ON FACTS OF THE CASE, WHETHER THE DECISION OF TH E LD CIT(A) IS RIGHT IN ALLOWING THE APPEAL OF ASSESSEE AS THE SAME CONTRAVENES THE PROVISIONS OF SECTION 14A AND ALSO THE LD CIT(A) HAS NOT FOLLOWED THE INSTRUCTIONS LAID DOWN IN THE BOARD'S CIRCULAR NO. 5/2014 DATED 11/02/2014 WHEREI N, THE BOARD'S HAS MADE IT CLEAR THAT THE DISALLOWANCE U/S . 14A R.W.R 8D HAS TO BE MADE EVEN WHERE THE TAX PAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPTED INCOME. 13. THE ASSESSEE HAD MADE INVESTMENT IN SHARES AND MUTUAL FUNDS OF RS.2 LAKHS. THE ASSESSEE HAD ALSO INCURRED INTERES T EXPENSES DEBITED IN THE PROFIT & LOSS ACCOUNT OF RS.73,73,16,995. THE A O WAS OF THE VIEW THAT SINCE THE ASSESSEE HAD MADE INVESTMENT WHICH ARE LI KELY TO YIELD TAX-FREE INCOME, DISALLOWANCE OF EXPENSES INCURRED IN EARNIN G TAX-FREE INCOME HAVE TO BE DISALLOWED U/S. 14A OF THE ACT R.W. RULE 8D O F THE INCOME-TAX RULES, 1962 (THE RULES). THE AO ACCORDINGLY COMPUTED THE DISALLOWANCE U/S. 14A OF THE ACT AS FOLLOWS:- 3.5 IN VIEW OF THE ABOVE DISCUSSION, THE DISALLOW ANCE U/S. 14A OF THE INCOME TAX ACT R.W.R. 8D OF THE ACT IS WORKE D OUT AS UNDER: ITA NO. 399/BANG/2018 PAGE 8 OF 11 DISALLOWANCE ATTRACTED U/S. 14A R.W.R 8D A TOTAL AMOUNT OF DIRECT INTEREST/OTHER EXPENSES PERT AINING TO TAX- EXEMPT INVESTMENT NA B TOTAL AMOUNT OF INDIRECT INTEREST PERTAINING TO TAX -EXEMPT INVESTMENTS 13,73,16,995 AS AT 31/03/14 AS AT 31/03/13 AVERAGE C AVERAGE AMOUNT OF TAX EXEMPT INVESTMENTS 2,00,000 2,00,000 2,00,000 D AVERAGE AMOUNT OF TOTAL ASSETS 251,71,14,117 248,65,22,583 250,18,18,350 E PROPORTIONATE INDIRECT INTEREST TO BE DISALLOWED 10,977 B X C I.E. D 13,73,16,995 X 2,00,000 250,18,18,350 F 0.5% OF AVERAGE AMOUNT OF TAX EXEMPT INVESTMENTS 2,00,000*0.5% 1,000 G TOTAL DISALLOWANCE ATTRACTED U/S. 14A R.W.R 8D A+E+F 11,977 3.5 AN AMOUNT OF 11,977/- IS DISALLOWED U/S. 14A O F THE INCOME TAX ACT, 1961 R.W.R 8D(2)(II) OF 10,977/- AN D R.W.R 8D(III) OF 1,000/- RESPECTIVELY. ADDITION: 11,977/- 14. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) DEL ETED THE ADDITION MADE BY THE AO FOR THE REASON THAT THERE COULD BE N O DISALLOWANCE OF EXPENSES U/S. 14A OF THE ACT WHEN THERE IS NO EXEMP T INCOME EARNED DURING THE RELEVANT PREVIOUS YEAR. 15. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE REV ENUE IS IN APPEAL BEFORE THE TRIBUNAL. 16. THE LD. DR RELIED ON THE ORDER OF THE AO, WHERE AS THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(APPEAL S). ITA NO. 399/BANG/2018 PAGE 9 OF 11 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E TIME OF HEARING OF THIS APPEAL, IT WAS BROUGHT TO OUR NOTICE BY THE LD . COUNSEL FOR THE ASSESSEE THAT THE ADMITTED FACTUAL POSITION IN THE PRESENT C ASE IS THAT THERE WAS NO DIVIDEND INCOME OR OTHER EXEMPT INCOME EARNED BY TH E ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. THE LD. COUNSEL FOR TH E ASSESSEE DREW OUR ATTENTION TO THE DECISION OF THE BANGALORE BENCH OF ITAT IN THE CASE OF M/S UB INFRASTRUCTURE PROJECTS LTD., VS. DCIT, ITA NO. 2098/BANG/2016 (ASST. YEAR 2012-13) ORDER DATED 22/12/2017 , WHEREIN THIS TRIBUNAL TOOK THE VIEW THAT THERE CAN BE NO DISALLOWANCE OF EXPENSES U/S 1 4A OF THE ACT, IF THERE IS NO EXEMPT INCOME EARNED DURING THE RELEVANT PREVIOU S YEAR. THE FOLLOWING ARE THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN TH IS REGARD:- 3. HAVING CAREFULLY EXAMINED THE ORDERS OF AUTHOR ITIES BELOW, WE FIND THAT UNDISPUTEDLY THE ASSESSEE HAS NOT EARN ED ANY EXEMPTED INCOME. NOW IT IS SETTLED POSITION OF LAW THAT WHEN EVER ASSESSEE DID NOT EARN ANY EXEMPT INCOME, NO DISALLOWANCE COULD B E MADE U/S. 14A OF THE ACT. THE HONBLE DELHI HIGH COURT IN THE CAS E OF CHEMINVEST LTD. V. CIT, 378 ITR 33 (DEL) HAS CATEGORICALLY HEL D THAT SECTION 14A ENVISAGES THAT THERE SHOULD BE ACTUAL RECEIPT OF IN COME WHICH WAS NOT INCLUDIBLE IN THE TOTAL INCOME DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE IN RELATION TO THE SAID INCOME. WHEREVER THERE IS NO EXEMPT INCOME INCLUDIBLE IN TH E TOTAL INCOME OF THE ASSESSEE, THE PROVISIONS OF SECTION 14A CANNOT BE INVOKED. THE RELEVANT OBSERVATIONS OF THE JUDGMENT OF THE HONBL E DELHI HIGH COURT ARE EXTRACTED HEREUNDER:- 15. TURNING TO THE CENTRAL QUESTION THAT ARISES FO R CONSIDERATION, THE COURT FINDS THAT THE COMPLETE AN SWER IS PROVIDED BY THE DECISION OF THIS COURT IN CIT V. HO LOLCIM INDIA (P) LTD. (DECISION DATED 5TH SEPTEMBER 2014, IN I.T. A. NO. 486 OF 2014). IN THAT CASE, A SIMILAR QUESTION AROSE, VIZ., WHETHER THE INCOME-TAX APPELLATE TRIBUNAL WAS JUSTI FIED IN ITA NO. 399/BANG/2018 PAGE 10 OF 11 DELETING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT WHEN NO DIVIDEND INCOME HAD BEEN EARNED BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR ? THE COURT REFERRED TO TH E DECISION OF THIS COURT IN MAXOPP INVESTMENT LTD. (SUPRA) AND TO THE DECISION OF THE SPECIAL BENCH OF THE INCOME-TAX APP ELLATE TRIBUNAL IN THIS VERY CASE, I.E., CHEMINVEST LTD. V . CIT [2009] 317 ITR (AT) 86 (DELHI) [SB]. THE COURT ALSO REFERR ED TO THREE DECISIONS OF DIFFERENT HIGH COURTS WHICH HAVE DECIDED THE ISSUE AGAINST REVENUE. THE FIRST WAS THE DECISI ON IN CIT V. LAKHANI MARKETING INCL. (DECISION DATED APRIL 2, 20 14, OF THE HIGH COURT OF PUNJAB AND HARYANA IN I. T. A. NO. 97 0 OF 2008)--SINCE REPORTED IN [2015] 4 ITR-OL 246 (P&H)- - WHICH IN TURN REFERRED TO TWO EARLIER DECISIONS OF THE SA ME COURT IN CIT V. HERO CYCLES LTD. [2010] 323 ITR 518 (P&H) AN D CIT V. WINSOME TEXTILE INDUSTRIES LTD. [2009] 319 ITR 2 04 (P&H). THE SECOND WAS OF THE GUJARAT HIGH COURT IN CIT V. CORRTECH ENERGY (P.) LTD. [2014] 223 TAXMANN 130 (G UJ) ; [2015] 372 1TR 97 (GUJ) AND THE THIRD OF THE ALLAHA BAD HIGH COURT IN CIT V. SHIVAM MOTORS (P) LTD. (DECISION DA TED 5TH MAY, 2014, IN T.A. NO. 88 OF ITA NO.1 1071BANG12016 2014). THESE THREE DECISIONS REITERATED THE POSITIO N THAT WHEN AN ASSESSEE HAD NOT EARNED ANY TAXABLE INCOME IN TH E RELEVANT ASSESSMENT YEAR IN QUESTION 'CORRESPONDING EXPENDIT URE COULD NOT BE WORKED OUT FOR DISALLOWANCE.' 4. THIS WAS ALSO EXAMINED BY THE TRIBUNAL IN THE AS SESSEE'S OWN CASE FOR ASSESSMENT YEAR 2010-11 AND HELD THAT WHEN THERE IS NO EXEMPT INCOME, PROVISION OF SECTION 14 OF THE AC T CANNOT BE APPLIED. 5. IN THE LIGHT OF THE AFORESAID JUDGMENT, THE PROV ISIONS OF SECTION 14A CANNOT BE INVOKED AS THERE IS NO EXEMPT INCOME IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(APPEALS) WHO HAS RIGHTLY DELET ED THE ADDITION. 18. IN VIEW OF THE AFORESAID DECISION OF THE TRIBUN AL, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF EXPENDITURE U/S 14A OF THE ACT WAS RIGHTLY DELETED ITA NO. 399/BANG/2018 PAGE 11 OF 11 BY THE CIT(A). WE FIND NO GROUNDS TO INTERFERE WIT H THE ORDER OF THE CIT(A). CONSEQUENTLY, GR.NOS. 4 & 5 RAISED BY THE REVENUE A RE DISMISSED. 19. THE OTHER GROUNDS OF APPEAL ARE GENERAL AND ACA DEMIC CALLING FOR NO SPECIFIC ADJUDICATION. 20. IN THE RESULT, THE APPEAL BY THE REVENUE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS 06 TH DAY OF JULY, 2018. SD/- SD/- ( A.K. GARODIA ) ( N.V. VASUDEVAN ) ACCOUNTA NT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 06 TH JULY, 2018. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.