ACIT, Khandwa V. M/s C.P. Industrial Products Pvt. Ltd. , Burhanpur

ITA 603/Ind/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3216 (ITAT-INDORE)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-02-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 27-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K G GOYAL
• Assessee Lawyers: S N AGRAWAL
• Keywords: Earning of tax free income; Retrospective amendment
• Section: 143(3); 14A; 147; 148

Judgement Text

C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE V. DURGA RAO, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO. 603/IND/2018 ASSESSMENT YEAR 2010-11 REVENUE BY SHRI K.G. GOYAL. SR. D.R. ASSESSEE BY S/SHRI S.N. AGRAWAL & PANKAJ MOGRA, CAS DAT E OF HEARING 2 5 . 0 2. 201 9 DATE OF PRONOUNCEMENT 27 . 02.2019 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEAL IS FILED AT THE INSTANCE OF REVENUE PERTAINING TO ASSESSMENT YEAR 2010-11 AND IS DIREC TED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)- II (IN SHORT LD.CIT(A)], INDORE DATED 03.04.2018 WHICH IS ARIS ING OUT OF THE ORDER U/S 147/143(3) OF THE INCOME TAX ACT 1961(IN SHORT THE ACT) DATED 23.11.2016 FRAMED BY ACIT, KHANDWA. ASSISTANT COMMISSIONER OF INCOME TAX, KHANDWA VS. M/S. C.P. INDUSTRIAL PRODUCTS PVT. LTD, BURHANPUR (M.P) ( APPELLANT ) (RESPONDENT ) PAN NO. A ACCC1362 C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 2 2. THE BRIEF FACTS OF THE CASE AS CULLED OUT FROM T HE RECORDS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFAC TURING AND TRADING OF F.P. COTTON BALES AND COTTON SEEDS. IT HAS FILED ITS ORIGINAL INCOME TAX RETURN FOR THE ASSESSMENT YEAR 2010-11 ON 30.9.2010 DECLARING TOTAL INCOME OF RS.27,62,570/-. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT ORDER WAS PASS ED U/S 143(3) OF THE I.T. ACT ON 12.03.2013 ASSESSING TOTAL INCOM E AT RS.47,98,020/- ADDING DISALLOWANCE OUT OF INTEREST PAID AT RS.18,72,945/- BY HOLDING THAT INTEREST BEARING FUN DS HAS BEEN DIVERTED AS INTEREST FREE LOANS AND MAKING DISALLOW ANCE U/S 14A OF THE ACT AT RS.1,62,500/- . LATER ON THE CASE OF THE ASSESSEE WAS REOPENED U/S 148 OF THE ACT VIDE NOTICE DATED 21.09 .2015 FOR MAKING A FURTHER DISALLOWANCE U/S 14A OF THE ACT OF RS.20,74,273/- (RS.22,36,773/- () RS.1,62,500/-). THE ASSESSEE H AS FILED ITS OBJECTION FOR REOPENING OF THE CASE, HOWEVER THE LE ARNED ASSESSING OFFICER (IN SHORT LD. A.O) DID NOT AGREED WITH THE SAME AND HAS FINALLY MADE FURTHER DISALLOWANCE U/S 14A OF RS.20, 74,273/- BY PASSING THE ASSESSMENT ORDER U/S 147 R.W.S. 143(3) OF THE ACT DATED 23.11.2016. AGGRIEVED ASSESSEE PREFERRED APPEAL BE FORE LD. CIT(A) WHO DELETED THE ENTIRE AMOUNT OF DISALLOWANCE OF RS .20,35,445/- C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 3 VIDE ORDER DATED 27.07.2017. 3. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL RAISING FOLLOWING GROUNDS OF APPEAL; 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES C ASE, LEARNED CIT(A) IS JUSTIFIED IN DELETING THE ADDITIONS OF RS.20,74,272 /- MADE BY A.O U/S 14A OF THE I.T. ACT, 1961. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF INTEREST U/S 14A WORKED OUT AS PER RULE 8D OF RS.20,74,272/-. 3. THE APPELLANT CARES LEAVE TO ADD TO OR DEDUCT FR OM OUR OR OTHERWISE AMEND THE ABOVE GROUNDS OF APPEAL. 4. THE LD. DEPARTMENTAL COUNSEL VEHEMENTLY ARGUED A ND SUPPORTED THE ORDERS OF LD. A.O. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHILE PASSING THE ORIGINAL ASSESSMENT ORDER THE ASSESSING OFFICER HAD MADE ADDITION OF RS 1,62,500/- TO THE INCOME OF THE ASSESSEE BY APPLYING RULE 8D READ WITH SEC. 14A OF THE ACT BEING 0.5 OF THE AVERAGE INVESTMENT IN SHARES. THAT LATER ON NOTICE U /S 148 OF THE INCOME TAX ACT WAS ISSUED AND COMPLETED ASSESSMENT OF THE ASSESSEE WAS RE-OPENED. THAT IN THE RE-ASSESSMENT ORDER AS PASS ED UNDER C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 4 SECTION 147 R.W.S. 143(3) OF THE ACT, ADDITION AS M ADE IN THE ORIGINAL ASSESSMENT ORDER UNDER SECTION 14A OF THE INCOME WA S INCREASED FROM RS 1,62,500/- TO RS 22,36,773/- AND THEREBY MAKING FURTHER ADDITION OF RS. 20,74,273/- [22,36,773 - 162500]. THAT IN THE ORIGINAL ASSESSMENT ORDER ADDITION WAS MADE MERELY 0.50 OF A VERAGE INVESTMENT IN SHARES. HOWEVER, IN THE RE-ASSESSMENT PROCEEDING WHILE CALCULATING DISALLOWANCE UNDER SECTION 14A OF THE ACT NET AMOUNT OF INTEREST PAID OF RS. 1,30,16,839/- WAS ALSO CONSIDERED. IT IS SUBMITTED THAT THE LD. ASSESSING OFFICER HAS GRO SSLY ERRED IN CONSIDERING THE AMOUNT OF INTEREST PAID FOR COMPUTI NG THE ADDITION AS MADE U /S 14A BY HOLDING THAT ASSESSEE HAS DIVERTED ITS INTER EST BEARING FUNDS FOR EARNING EXEMPT INCOME. THAT IN TH E PRESENT CASE, THE ASSESSEE WAS HAVING INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES AND SURPLUS OF RS 1,44,14,000/- AND RS 1,80,83,283/ TOTALLING TO RS 3,29,73,283/- AS ON 31.03.2010 WHICH WAS DULY REFLECTED IN THE BOOKS OF THE ASSESSEE COM PANY AND ON WHICH NO INTEREST WAS PAID BY THE COMPANY. S.NO. PARTICULARS AMOUNT [RS] 01. SHARE CAPITAL 14414000 02. RESERVES & SURPLUS 18083283 TOTAL 32973283 C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 5 THAT INVESTMENT IN SHARES AS SHOWN IN THE BOOKS OF ACCOUNT WAS OF RS 3,25,00,000/- WHICH WAS LOWER THAN THE INTEREST FREE FUNDS AS AVAILABLE WITH THE ASSESSEE. HENCE, THERE WAS NO JUSTIFICATION FOR MAKING DISALLOWANCE BY INV OKING THE PROVISION OF SECTION 14A OF THE ACT. J FURTHER ON PERUSAL OF THE BALANCE SHEET, YOUR HON' OUR WILL FIND THAT THE ASS ESSEE@ TAKEN LOAN FROM IDBI BANK IN FORM OF CASH CREDIT LI MIT AND WAS HAVING OUTSTANDING BALANCE OF LOAN OF RS. 5,79,24,439/- AS ON 31.03.2010 WHERE AS IT WAS HAVING STOCK OF RS. 9,79,61,808/- AND DEBTORS OF RS. 14,49,67,663/- AS ON 31.03.2010 TOTALLING TO RS. 24,29,29,471/- . THUS F ROM THE ABOVE ALSO IT IS CLEAR THAT NO INTEREST BEARING FUN D WAS ACTUALLY UTILIZED BY THE ASSESSEE FOR MAKING INVESTMENT IN S HARES. THE AMOUNT SO BORROWED BY THE ASSESSE ON INTEREST WAS U TILIZED TOWARDS THE OBJECTS FOR WHICH THE SAID LOAN WAS TAK EN BY THE ASSESSEE. THUS, FROM THESE FIGURES IT IS VERY CLEAR THAT THE ASSESSEE HAS NOT DIVERTED ITS INTEREST BEARING FUND S FOR INVESTMENT IN SHARES. THUS THE A.O. WAS WRONG IN CO NSIDERING THE AMOUNT OF INTEREST FOR CALCULATION DONE BY HIM AS PER RULE 8D AS THE ASSESSEE HAS JUSTIFIED THE PROPER UTILIZA TION OF INTEREST BEARING FUNDS AND THE DEPARTMENT HAS FAILE D TO PROVE THE CONTRARY. THUS THE SAID ADDITION AS MADE BY THE A.O UNDER SECTION 14A OF RS. 2236773/- WAS RIGHTLY BEEN DELETED BY THE LD. CIT(A). YOU ARE VERY KINDLY REQUESTED TO APPROV E THE SAME. IT MAY ALSO BE PERTINENT TO NOTE THAT IT HAS BEEN H ELD BY VARIOUS COURTS THAT NO ADDITION CAN BE MADE U /S 14A OF THE C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 6 ACT IF NO EXEMPT INCOME WAS RECEIVED BY THE ASSESSE E AND IN ANY CASE DISALLOWANCE UNDER SECTION 14A CANNOT EXCE ED THE DIVIDEND AMOUNT RECEIVED BY IT. FOR THIS PREPOSITIO N, RELIANCE WAS PLACED ON THE FOLLOWING DIRECT DECISIONS:- S.NO NAME OF DECISION CITATION 01. CIT V/S LAKHANI MARKETING 49 TAXMANN.COM 257 (P&H) 02. CIT V/S CORTECH ENERGY P. LTD. 45 TAXMANN.COM 116 (GUJ) 03. CIT V/S SHIVAM MOTORS P. LTD. 55 TAXMANN.COM 262 (ALL) 04. CHEM INVESTMENT LTD V/S CIT 61 TAXMANN.COM 118 (DEL) 05. JOINT INVESTM ENTS P. LTD. V/S CIT 372 ITR 694 (DELHI) RELIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE ITAT, INDORE BENCH, INDORE IN THE CASE OF M/S RAVI SEEDS & RESEARCH P LIMITED [ APPEAL NO ITA NO 978 I IND/ 2016 DT 18- 07-2018]. THAT IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT EVE N OTHERWISE ALSO NO ADDITION U/S 14A CAN BE MADE TO THE INCOME OF THE ASSESSEE BY INVOKING THE PROVISION OF SECTION 14A OF THE INC OME TAX ACT. THE ADDITION AS MADE BY THE LD. A.O. OF RS. 22,36,773/- HAS RIGHTLY BEEN DELETED BY THE LD. CIT(A). IT IS THEREFORE RE QUESTED TO APPROVE C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 7 THE SAID ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. SOLE GRIEVANCE OF THE REVENUE IS AGAINST THE FINDING OF LD. CIT(A) DELETING THE INTEREST DISALLO WANCE U/S 14A OF THE ACT AT RS.20,74,272/-. LD. CIT(A) WHILE DELETE D THE IMPUGNED ADDITION OBSERVING AS FOLLOWS; 3.0 THESE GROUNDS OF APPEAL ARE WITH REGARD TO MAKING D ISALLOWANCE OF RS.20,74,273 [RS. 22366773/- - RS. 1,62,500/-] U/S 14A OF THE INCOME TAX ACT. I HAVE CAREFULLY GONE THROUGH THE ORDER AS WELL AS SUBMISSION OF THE APPELLANT IN THIS REGARD. 3.1 THE AO HAD MADE ADDITION OF R S 1,6'2,500 TO THE INCOME OF THE APPELLANT BY APPLYING RULE 8D R. W.S 14A OF THE ACT BEING 0.5% OF THE AVERAGE INVESTMENT IN SHARES WHILE FRAMING THE ORIGINAL ASSESSMENT ORDER U/S 143(3) OF THE ACT . IT WAS FURTHER ARGUED THAT IN THE CASE THE APPELLANT WHILE F RAMING THE RE ASSESSMENT ORDER U/S 147 R.W.S. 143(3) OF THE ACT, A FURTHER DISALLOWANCE U/ S 14A OF THE ACT RS.20,74,273/- (22,36,773 - 162500) BY CONSIDERING THE AMOUNT OF NET INTEREST PAID OF RS. 1,30,16,839/- FUR MAKING ADDIT ION US/ 14A AS PER CALCULATION MENTIONED ON PAGE 2 OF THE RE-AS SESSMENT ORDER PASSED BY T HE AO. 3.2 IT HAS BEE N SUBMITTED BY THE APPELLANT THAT THE ASSESSING OFFICER HAD GROSSLY ERRED IN CONSIDERING THE AMOUNT OF INTEREST PAID FOR COMPUTING THE ADDITION AS MADE U/S 14A BY HOLDING THAT ASSESSEE HAS DIVERTED ITS INTEREST BEARING FUNDS FOR EARNING EXEMPT INCOME. C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 8 3.3 IN THE PRESENT CASE, THE ASSESSEE WAS HAVING IN TEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES AND SURPLUS OF RS. 14414000/ - AND RS 18083283/- TOTALLING TO RS 32973283/- WHICH WAS DULY REFLECTED IN THE BOOKS OF THE ASSESSEE COMPANY AND ON WHICH NO INTEREST WAS PAID B Y THE COMPANY. S.NO. PARTICULARS AMOUNT (RS.) 01 SHARE CAPITAL 14414000 02 RESERVES & SURPLUS 18083283 TOTAL 32973283 THUS, IT HAS BEEN ARGUED BY THE APPELLANT THE ADDIT ION AS MADE BY THE A.O U/ S 14A BY CONSIDERING THE AMOUNT OF INTEREST FOR CALCULATION AS PER RULE 8D WAS WRONG SINCE THE ASSE SSEE HAD NUT NOT UTILISED ANY INTEREST BEARING FUND BUT IT HAD SUFFI CIENT AMOUNT OF INTEREST FREE FUNDS AVAILABLE WITH IT. 3.4 ON PERUSAL OF THE BALANCE SHEET, IT IS CLEAR T HE ASSESSEE HAD TAKEN LOAN FROM IDBI BANK IN FORM OF ITS CASH CREDI T LIMIT AND WAS HAVING OUTSTANDING BALANCE OF LOAN OF RS, 5,79,24,4 39/- AS ON 31,03,2010 WHERE AS IT WAS HAVING STOCK OF RS. 9,79 ,61,808/- AND DEBTORS OF RS. 14,49,67,663/- AS ON 31.03.2010 TOTA LLING TO RS.29,29.471/- 3.5 THUS, IT IS CLEAR FROM THE ABOVE FACTS THAT NO INTEREST BEARING FUND WAS ACTUALLY UTILIZED BY THE ASSESSEE FOR MAKING INVESTMENT IN SHARES. THE AMOUNT SO BORROWED BY THE ASSESSEE ON INTEREST WAS UTILIZED TOWARDS THE O BJECTS FOR WHICH THE SAID LOAN WAS TAKEN BY THE ASSESSEE. THUS, FROM THESE FIGURES IT IS VERY CLEAR THAT THE ASSESSEE HAD NOT C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 9 DIVERTED ITS INTEREST BEARING FUNDS FOR INVESTMENT IN SHARES. 3.6 IT WAS ARGUED THAT DURING THE YEAR UNDER CONSID ERATION THE ASSE SSE HAD NOT CLAIMED ANY EXPENSES IN ITS COMPUTATION OF INCOME TO EARN THE EXEMPT INCOME HENCE, THE ASSESSING OFFICER WAS TOTA LLY WRONG IN DISALLOWING AN AMOUNT OF RS. 22,36,773/- T OWARDS 14A. SECTION 14A HAS BEEN INSERTED IN CHAPTER IV OF THE INCOME TAX ACT BY THE FINANCE ACT, 2001, WITH RETROSPECTIVE EFFECT FROM 1-4-1962. THIS SECTION PROVIDES FOR DISA LLOWANCE OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH IS NOT INCLUDED IN THE TOT AL INCOME OF THE ASSESSEE (I E. EXEMPT INCOME). THE OPERATIVE PART O F THIS SECTION READS AS UNDER:- 'FOR THE PURPOSES OF COMPUTING 'THE TOTAL INCOME UN DER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. IT MAY BE NOTED THAT THE EXPLANATORY MEMORANDUM ISSUED W ITH THE FI NANCE BILL) 2001) GIVES THE PURPOSE FOR WHICH THE AMENDMENT IS MADE. THIS READS AS UNDER :- CERTAIN IN COMES ARE NOT INCLUDIBLE WHILE COMPUTING THE TOTAL INCOME AS TH ESE ARE EXEMPT UNDER VARIOUS PROVISIONS OF THE ACT. THERE HAVE BEEN CASES W HERE DEDUCTIONS HAVE BEEN RESPECT OF SUCH EXEMPT INCOME. THIS IN EFFECT MEANS THAT THE TAX INCENTIVE GIVEN BY WAY OF EXEMPTIONS TO CERTAIN CATEGORIES OF INCOME IS BEING USED TO REDUCE ALSO THE TAX PAYABLE ON THE NON EXEMPT INCOME BY DEBITING THE EXPENSES INCURRED TO EARN THE EXEMPT INCOME AGAINST TAXABLE INCOME. THIS IS AGAINST THE BASIC PRINCIPLES OF TAXATION W HEREBY ONLY THE NET INCOME, I. E., GROSS INCOME MINUS THE EXPENDITURE) IS TAXED. OIL THE ANALOGY, THE EXEMPTION IS ALSO IN RESPECT OF THE NET INCOME. EXPENSES I NCURRED CAN BE ALLOWED ONLY TO THE EXTENT THEY ARE RELATABLE TO THE EARNING OF TAXABLE INCOME. C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 10 IT IS PROPOSED TO INSERT A NEW S. 14A AS TO CLARIFY THE INTENTION OF THE LEGISLATURE SINCE THE INCEPTION OF THE INCOME TAX ACT, 1961, THAT NO DEDUCTION SHALL BE MADE 771 RESPECT OF ANY EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE INCOME-TAX ACT. ' 3.7 IN THE PRESENT CASE SINCE NO EXPENDITURE WAS I NCURRED AND CLAIMED BY THE ASSESSEE WHILE COMPUTING ; HIS GROSS TAXABLE INCOME, THUS, PROVISIONS OF SECTION 14A OF THE INCOME TAX A CT WAS NOT APPLICABLE IN THE PRESENT CASE. 3.8 THE APPELLANT HAS RELIED ON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS HERO CYCLES REPORTED IN 323 ITR 518 WHICH HAD HELD THAT 'FOR INVOKI.NG THE PROVISION OF SECTION 14A, FINDING OF EXPENSES INCURRED BY THE ASSESSEE FOR EARNING OF EXEMPTED INCOME MUST REQUIR ES. 3.9 THE APPELLANT HAS FURTHER ARGUED THAT THE ASSESSEE HAD AN APPEAL BEFORE THE LD. CIT (A) AGAINST THE ADDITION MADE U/S 14A IN THE ORIGINAL ASSESSMENT ORDER AS PASSED U/S 143(3) OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE COMPANY IN THE YEAR UNDER CONSIDERATION DID NOT RECEIVE ANY DIVIDEND AND AS HELD BY VARIOUS COURTS THAT NO ADDITION COULD BE MADE U/S 14A OF THE ACT I F NOT EXEMPT INCOME WAS RECEIVED BY THE ASSESSE AND IN CA SE, DIVIDEND AMOUNT WAS RECEIVED IN ANY YEAR THEN ADDITION U/S 14A COULD NOT EXCEED THE AMOUNT OF DIVIDEND RECEIVED BY IT. FOR T HIS PREPOSITION, RELIANCE WAS PLACED ON THE FOLLOWING DIRECT DECISIONS:- S.NO. NAME OF DECISION CITATION 01 CIT V/S LAKHANI 49 TAXMANN.COM 257 (P&H) C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 11 MARKETING 02 CIT V/S CORTECH ENERGY P. LTD 45 TAXMANN.COM 116 (GUJ) 03 CIT V/S SHIVAM MOTORS P. LTD 55 TAXMANN.COM 262 (ALL) 04 CHEM INVESTMENT LTD V/S CIT 61 TAXMANN.COM 118 (DEL) 05 JOINT INVESTMENTS P. LTD V/S CIT 372 ITR 694 (DELHI) 3.10 THE UNDERSIGNED HAD PASSED THE ORDER IN APPEAL FILED AGAINST ORDER U/S 143(3) IN THE CASE OF ASSESSEES COMPANY FOR THE A.Y. 2010-11 VIDE ORDER DT. 27.07.2017 AND HAD DELETED THE ENTIRE AMOUNT OF ADDITION MADE U / S 14A OF THE .ACT BY HOLDING THAT UNLESS THERE WAS RECEIPT OF EXEMPTED INCOME DURING THE YEAR SEC. 14A COULD NOT BE INVOKED. HENCE, IN VIEW OF THE ABOVE EVEN OTHERWISE ALSO NO ADDITION U/S 14A CAN BE MADE TO T-HE INCOME OF THE ASSESSEE BY INVOKING THE PROVISION OF SECTION 14A OF THE INCOME T AX ACT. THE ADDITION AS MADE BY THE A.O. OF RS.22,36,7 73/- NOW REQUIRES TO BE DELETED IN FULL AND ACCORDINGLY, THE SE GROUNDS OF APPEAL ARE ALLOWED. 7. EXAMINING THE FACTS OF THE INSTANT APPEAL WE FIN D THAT THERE IS NO DIVIDEND INCOME EARNED DURING THE YEAR. THE RAT IO THAT NO DISALLOWANCE U/S 14A OF THE ACT IS TO BE MADE IN CA SE NIL DIVIDEND INCOME FIND ITS SUPPORT BY THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVESTMENT LIMITED VS . CIT (SUPRA). C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 12 SIMILAR VIEW WAS TAKEN BY THE CO-ORDINATE BENCH IN THE CASE OF RAVI SEEDS V/S ACIT 4(1) (SUPRA) WHEREIN THE TRIBUNAL FOLLOWING THE JUDGMENT OF CHEMINVESTMENT LIMITED VS. CIT (SUPRA) HELD THAT IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE PREVIOUS YEAR THEN PROVISION OF SECTION 14A WILL NOT APPLY IN REL ATION TO THE INTEREST DISALLOWANCE. RELEVANT FINDINGS OF THE TR IBUNAL IS AS FOLLOWS; 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL WHICH IS. NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELE VANT AVAILABLE ON RECORD. AFTER GOING THROUGH THE JUDGME NT OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF CHEMINVE ST LIMITED (SUPRA), WE FIND THAT THE HON'BLE HIGH COURT HAS CA TEGORICALLY HELD THAT 'THE EXPRESSION 'DOES NOT FORM PART OF THE TOTAL INCOME' IN SECTION 14A OF THE ACT ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, PREVIOUS YEAR FOR THE PURPOSE 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.' WE, THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON'BLE HIGH COURT OF DELHI (SUPRA) HOLD THAT SINCE DURING THE YEAR, UNDE R CONSIDERATION, NO EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE, NO DISALLOWANCE U/S 14A OF THE ACT WAS CALLED FOR. IN THIS VIEW OF THE MATTER, THE ORDERS OF THE AUTHORIT IES BELOW ARE SET ASIDE AND THE GROUND OF APPEAL TAKEN BY THE ASS ESSEE IS ALLOWED. C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 13 8. REVENUE HAS BEEN UNABLE TO CONTROVERT THIS FACT THAT NO DIVIDEND INCOME HAS BEEN EARNED BY THE ASSESSEE DUR ING THE YEAR AND ALSO COULD NOT REBUT THE FINDING OF LD. CIT(A). EVEN OTHERWISE THE ASSESSEE HAS BEEN SUCCESSFUL TO DEMONSTRATE THA T INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVE AND SURPLUS WERE SUFFICIENT TO COVER UP THE INVESTMENTS FETCHING TA X FREE INTEREST INCOME. CASE OF ASSESSEE IS ALSO COVERED IN ITS FA VOUR BY THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT V/S RELIANCE UTILITIES & POWER LTD. (2009) 313 ITR 340 (BOM). 9. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANCE S OF THE CASE AND ALSO RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS , FIND NO INCONSISTENCY IN THE FINDING OF LD. CIT(A) DELETING THE DISALLOWANCE U/S 14A OF THE ACT AT RS.20,74,272/-. APPEAL OF THE REVENUE STANDS DISMISSED. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 27.02.201 9. SD/- SD/- ( V. DURGA RAO) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 27 FEBRUARY, 2019 C.P. INDUSTRIAL PRODUCTS PVT. LTD ITA NO.603/IND/2018 14 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE