DCIT CIR. 2(2)(1), MUMBAI V. L & T POWER DEVELOPMENT LTD., MUMBAI

ITA 874/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4450 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 07-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT SAMAIYA
• Assessee Lawyers: GOVIND JHAVERI
• Keywords: Rule of consistency; Earning of tax free income; Assessment record
• Section: 143(3); 14A

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 874 / MUM/2017 ( / ASSESSMENT YEAR : 2013 - 14 ) DCIT CIT 2(2)(1) ROOM NO. 545, 5 TH FLOOR, AAYAKAR BHAVAN, M.K ROAD, MUMBAI - 400020 / V. L&T POWER DEVELOPMENT LTD., L&T HOUSE, N.M. ROAD, BALLARD ESTATE, MUMBAI - 400038 ./ PAN : AABCL3867C ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY: SHRI. NISHANT SAMAIYA, DR ASSESSEE BY : SHRI GOVIND JHAVERI / DATE OF HEARING : 09 .08.2018 / DATE OF PRONOUNCEMENT : 09 .08.2018 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE R EVENUE , BEING ITA NO. 874 /MUM/2017, IS DIRECTED AGAINST APPELLATE ORDER DATED 09.11.2016 PASSED BY LEARNED COMMISS IONER OF INCOME TAX (APPEALS) - 5 , MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2013 - 14 , THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM ASSESSMENT ORDER DATED 30.11.2015 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED T HE AO) U/S 143 (3) OF THE INCOME - TAX ACT, 1961 (HEREI NAFTER CALLED THE ACT) FOR ASSESSMENT YEAR 2013 - 14 . I.T.A. NO.874/MUM/2017 2 2. THE GROUNDS OF APPEAL RAISED BY R EVENUE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUN AL) READ AS UNDER: - 1. 'WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE OF RS.6,87,36,342/ - MADE U/S. 14A R. W. RULE 8D(III) OF THE I . T. RULE WITHOUT APPRECIATING THE FACT THAT ASSESSEE CANNOT EARN DIVIDEND INCOME WITHOUT SYSTEMATIC MANAGEMENT AND THAT DIVIDEND INCOME CAN BE EARNED BY INCURRING NO OR NOMINAL EXPENDITURE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT (A) WAS RIGHT IN DELETING THE DISALLOWANCE OF RS.6,87,36,342/ - MADE U/S. 14A R.W.RULE 8D(III) OF THE I T RULE WITHOUT APPRECIATING THE FACT THAT AFTER ANALYZING VARIOUS JUDICIAL PRONOUNCEMENT CBDT HAS CLARIFIED AND CRYSTALLIZED THIS MATTER THROUGH THE CIRCULAR NO.5/2014 DATED 11/02 /2014 AN D THIS ISSUE WAS PUT TO REST. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING, INVESTING, OPERATING AND MAINTAINING POWER GENERATION PROJECTS. THE DISPUTE WHICH HAS ARISEN BETWEEN RIVAL PARTIES BEFORE US IS IN VERY NARROW COMPASS . THE ASSESSEE HAD MADE SUBSTANTIAL INVESTMENT IN SHARES OF COMPANIES AND AVERAGE INVESTMENT OF THE ASSESSEE DURING THE YEAR STOOD AT 13,74,72,86,430/ - . IT IS AN UNDISPUTED FACT BETWEEN RIVAL PARTIES THAT T HE ASSESSEE DID NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION BY WAY OF DIVIDEND OR EVEN OTHERWISE . THE AO APPLIED PROVISION OF SECTION 14A OF 1961 ACT R.W.R. 8D ( 2 ) (III) OF THE INCOME - TAX RULES, 1962 AND MADE DISALLOWANCE OF EXPENDITURE OF RS. 6 ,87,36,432/ - PURPORTED TO BE INCURRED IN RELATION TO EARNING OF AN EXEMPT INCOME BY RELYING ON CBDT CIRCULAR NO. 5/2014 DATED 11.02.2014 AND JUDICIAL PRECEDENTS , VIDE ASSESSMENT ORDER DATED 30.11.2015 PASSED BY THE AO U/S 143(3) OF THE 1961 ACT . 4. THE MATTER REACHED BEFORE LEARNED CIT(A) AT BEHEST OF THE ASSESSEE WHEREIN ASSESSEE FILED FIRST APPEAL AGAINST THE ASSESSMENT ORDER I.T.A. NO.874/MUM/2017 3 PASSED BY LEARNED AO . THE LD. CIT(A) CONSIDER ED THE SUBMISSIONS OF THE ASSESSEE AND ALLOWED RELIEF TO THE ASSESSEE BY DELETING THE ENTIRE ADDITION MADE BY THE AO BY RELYING ON DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF HOLCIM INDIA PRIVATE LIMITED 57 TAXMANN.COM 28(DEL) , VIDE APPELLATE ORDERS DATED 09.11.2016 , BY HOLDING AS UNDER: - 3.3. I HAD CONSIDERED THE SUBMISSIONS OF THE APPELLANT. IN THIS CASE THE APPELLANT HAD NOT RECEIVED ANY EXEMPT INCOME DURING THE YEAR . THE DELHI HIGH COURT IN ITS DECISION IN THE CASE OF CIT M /S HOLCIM INDIA P LTD IN ITA NO S 486/2014 AND 299/2014 HAS HELD AS UNDER: 'ON THE ISSUE WHETHER THE RESPONDENT - ASSESSEE COULD HAVE EARNED DIVIDEND INCOME AND EVEN IF NO DIVIDEND INCOME WAS EARNED, YET SECTION 14A CAN BE INVOKED, AND DISALLOWANCE OF EXPENDITURE CAN BE MADE, THER E ARE THREE DECISIONS OF THE DIFFERENT HIGH COURTS DIRECTLY ON THE ISSUE AND AGAINST THE APPELLAN T - REVENUE. NO CONTRARY DECISION OF A HIGH COURT HAS BEEN SHOWN TO US. THE PUNJAB & HARYANA HIGH COURT IN CIT V/S LAKHANI MARKETING INCOME. IT APPEAL NO 970/2008, DATED 02.04.2014, MADE REFERENCE TO TWO EARLIER DECISIONS OF THE SAME COURT IN CIT V/S HERO C YCLES LTD [2010] 323 ITR 518/189 TAXMAN 50 (PUNJ. & HAR.) AND CIT V/S WINSOME TEXTIME INDUSTRIES LTD [2009] 319 ITR 204 (PUNJ. AN D HAR) TO HOLD THAT SECTION 14A, CANNOT BE INVOKED WHEN NO EXEMPT INCOME WAS EARNED. THE SECOND DECISION IS OF THE GUJARAT HIGH COURT IN CIT V/S CORRTECH ENERGY (P) LTD. [2014] 223 TAXMAN 130/45 TAXMANN.COM 116. THE THIRD DECISION IS OF THE ALLAHABAD HIGH COURT IN INCOME TAX APPEAL NO 88 OF 2014, CIT V/S SHIVAM MOTORS (P) LTD [IT APPEAL NO 88 OF 2014, DOTED 05.08.2014]. IN THE SAI D DECISION IT HAS BEEN HELD: AS REGARDS THE SECOND QUESTION, SECTION 14A OF THE ACT PROVIDES THAT FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION T O INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. HENCE, WHAT SECTION 14A PROVIDES IS THAT IF THERE IS ANY INCOME WHICH DOES NOT FORM PART OF THE INCOME UNDER THE ACT, THE EXPENDITURE WHICH IS INCURRED FOR EARNING THE INCOME IS NOT AN AL LOWABLE DEDUCTION. FOR THE YEAR IN QUESTION, THE FINDING OF FACT IS THAT THE ASSESSEE HAD NOT EARNED ANY TAX FREE INCOME. HENCE, IN THE ABSENCE OF ANY TAX FREE INCOME, THE CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT FOR DISALLOWANCE. THE VIEW OF THE CIT(A), WHICH HAS BEEN AFFIRMED BY THE TRIBUNAL, HENCE DOES NOT GIVE RISE TO ANY I.T.A. NO.874/MUM/2017 4 SUBSTANTIAL QUESTION OF TAW. HENCE, THE DECISION OF THE DISALLOWANCE OF RS 2,03,752/ - MADE BY THE AO WAS IN ORDER.' IN VIEW OF THE ABOVE DECISION OF DELHI HIGH COURT, HERE A PPELLANT HAS NOT RECEIVED ANY EXEMPT INCOME HENCE, NO DISALLOWANCE U/S 14A CAN BE MADE. THE ADDITION MADE BY THE AO IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5 . AGGRIEVED BY THE APPELLATE ORDER DATED 09.11.2016 PASSED BY LEARNED CIT(A), R EVENUE HAS F ILED AN APPEAL BEFORE THE TRIBUNAL . T HE LD. DR RELIED UPON THE ASSESSMENT ORDER PASSED BY THE AO WHILE ON THE OTHER HAND LD. AR EXPLAIN ED THE FACTUAL MATRIX OF THE CASE AND SUBMITTED THAT THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND INCOME WHICH CAN BE CLAIMED AS AN EXEMPT INCOME OR AS A MATTER OF FACT THE ASSESSEE ALSO DID NOT RECEIVED ANY OTHER E XEMPT INCOME DURING THE RELEVANT PREVIOUS YEAR TO THE IMPUGNED ASSESSMENT YEAR UNDER CONSIDERATION BEFORE THE BENCH . I T WAS SUBMITTED THAT LD. CIT(A) RELIED UP ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. HOLCIM INDIA P. LTD. IN ITA NO. 486 OF 2014 AND 229 OF 2014 AND GAVE RELIEF OF THE ASSESSEE BY DELETING THE ADDITIONS AS WERE MADE BY THE AO BY INVOKING PROVISIONS OF SECTION 14A OF THE 1961 ACT READ WITH RULE 8D(2)(III) OF THE 1962 RULES . IT WAS SUBMITTE D THAT AO MERELY RELIED UPON CIRCULAR NO. 5/2014 DATED 11.02.2014 TO FASTEN LIABILITY AGAIN ST THE ASSESSEE BY MAKING ADDITIONS U/S. 14A OF THE 1961 ACT R.W.R. 8D( 2 ) (III) OF THE 1962 RULE DESPITE THE FACT THAT THE ASSESSEE DID NOT EARN ANY EXEMPT INCOME . T HE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF MUMBAI - TRIBUNAL IN ASSESSEE S O WN CASE FOR EARLIER YEARS VIZ. AY 2010 - 11 VIDE ITA NO. 3829/MUM/2015 ORDERS DATED 25.05.2017 AND FOR AY 2011 - 12 VIDE ITA NO.5333/MUM/2015 ORDERS DATED 21.03.2018, WHEREIN UNDER SIMILAR FACTUAL MATRIX OF THE CASE , THE MUMBAI - TRIBUNAL DECIDED THE ISSUE IN F AVOUR OF THE ASSESSEE AND HELD THAT NO DISALLOWANCE CAN BE MADE U/S 14A OF THE 1961 ACT WHEN NO EXEMPT INCOME IS EARNED BY THE ASSESSEE. THE AFORESAID DECISION OF MUMBAI - TRIBUNAL IN REVENUES APPEAL IN ITA NO. 5333/MUM/2015 FOR AY 2011 - 12 DATED 21.03.2018 , IS REPRODUCED I.T.A. NO.874/MUM/2017 5 HEREUNDER WHEREIN TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER : - 3. IN THIS APPEAL, THE SOLITARY DISPUTE RAISED BY THE ASSESSEE ARISES FROM THE ACTION OF CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSING OFF ICER U/S 14A OF THE ACT AMOUNTING TO RS.3,16,59,443/ - . NOTABLY, THE CIT(A) HAS DELETED THE ADDITION FINDING THAT DURING THE YEAR UNDER CONSIDERATION THERE WAS NO EXEMPT INCOME CLAIMED BY THE ASSESSEE AND THUS, THERE WAS NO NECESSITY OF INVOKING SEC. 14A OF THE ACT. 4. BEFORE US, THE LD. DR HAS NOT ASSAILED THE FINDING OF THE CIT(A) TO THE EFFECT THAT THERE WAS NO EXEMPT INCOME EARNED DURING THE YEAR UNDER CONSIDERATION. AS A CONSEQUENCE, WE FIND THAT THE CIT(A) MADE NO MISTAKE IN DELETING THE ADDITION INA SMUCH AS THE SAME IS IN CONFORMITY WITH THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. V. CIT [2015] 61 TAXMANN.COM 118 (DELHI). 5. BEFORE PARTING, WE MAY ALSO MAKE AN OBSERVATION THAT RIGHT FROM THE STAGE OF ASSESSMENT, ASSE SSEE HAS, INTER - ALIA, CANVASSED AGAINST INVOKING OF SEC. 14A OF THE ACT BY POINTING OUT THAT IN THIS YEAR IT HAS NOT EARNED ANY INCOME WHICH IS EXEMPT FROM TAX. AT THE TIME OF HEARING, THE LEARNED REPRESENTATIVE SUPPORTED THE SAID ASSERTION BY REFERRING TO THE PROFIT & LOSS ACCOUNT, WHEREIN ALSO NO SUCH INCOME HAS BEEN REPORTED. IN FACT, IN THE COURSE OF HEARING, THE LEARNED REPRESENTATIVE RELIED UPON THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR OF 20 10 - 11 IN ITA NO. 3829/MUM/2015 DATED 25.05.2017, WHICH HAS ALSO BEEN RENDERED ON SIMILAR LINES. 6. AT THE TIME OF HEARING, THE LD. DR RELIED UPON THE CBDT CIRCULAR NO. 5/2014 DATED 11.02.2014 TO PUT FORTH THAT INVOCATION OF SEC. 14A OF THE ACT IS PERMISS IBLE EVEN IN THE ABSENCE OF EXEMPT INCOME DURING A PARTICULAR YEAR. IN OUR CONSIDERED OPINION, THE SAID CIRCULAR OF CBDT DOES NOT DISTRACT FROM THE LEGAL POSITION LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. (SUPRA), AND WE FURT HER NOTICED THAT OUR CO - ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 - 11 (SUPRA) HAS CONSIDERED THE SAID CIRCULAR AND THEREAFTER, APPLIED THE RATIO OF HON'BLE DELHI HIGH COURT AND DELETED THE ADDITION. 7. IN VIEW OF THE AFORESAID DISCUSS ION, WE HEREBY AFFIRM THE ORDER OF CIT(A) AND APPEAL OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. THUS , IT WAS STRENUOUSLY SUBMITTED THAT MUMBAI - TRIBUNAL HAS GRANTED RELIEF TO THE ASSESSEE FOR AY 2011 - 12 BY HOLDING THAT IF NO EXEMPT INCOME IS EARNED DURING RELEVANT PREVIOUS YEAR , THEN NO DISALLOWANCE U/S 14A OF THE 1961 ACT IS WARRANTED AND KEEPING IN VIEW THAT FACTUAL MATRIX IN THE YEAR UNDER CONSIDERATION BEFORE THE BENCH REMAININ G SAME KEEPING IN VIEW PRINCIPLE OF CONSISTENCY , THE AFORESAID ORDER OF TRIBUNAL FOR AY 2011 - 12 SHOULD BE FOLLOWED BY THE I.T.A. NO.874/MUM/2017 6 BENCH. F URTHER RELIANCE WAS PLACE D BY LD. COUNSEL FOR THE ASSESSEE IN THE CASE OF MUMBAI TRIBUNAL ORDERS IN ITA NO. 6267/MUM/2016 FOR AY 2012 - 13 VIDE ORDERS DATED 19.12.2017 IN THE CASE OF DCIT V . RKW DEVELOPERS PRIVATE LTD. WHEREI N ACCOUNTANT MEMBER IS PART OF DIVISION B ENCH WHO PASS ED THE SAID ORDER GRANTING RELIEF TO THE ASSESSEE BASED ON THE SAME PROPOSITION THAT IF NO EXEMPT INCOME WAS RECEIVED OR REC EIVABLE DURING THE RELEVANT PREVIOUS YEAR UNDER CONSIDERATION , NO DISALLOWANCE OF EXPENDITURE CAN BE MADE U/S. 14A OF THE 1961 ACT. W HILE PASSING THE AFORESAID ORDER DATED 19.12.2017 IN RKW DEVELOPERS PRIVATE LIMITED , THE MUMBAI - T RIBUNAL MAINLY RELIED UPO N DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LIMITED V. CIT IN ITA NO. 749/2014 AND ALSO DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF BALLARPUR INDUSTRIES LTD. IN ITA NO. 5 1 OF 2016 REPORTED IN ( 2016 ) ( 10 ) TMI 1039 ( BOMBAY HIGH COURT ) . THE DECISION OF TRIBUNAL IN THE CASE OF RKW DEVELOPERS P. LTD.(SUPRA) IS REPRODUCED HERE UNDER: - 6. WE HAVE HEARD LD. DR AND WE HAVE PERUSED THE MATERIAL ON RECORD INCLUDING RELEVANT CASE LAWS AS WELL WRITTEN SUBMISSIONS MADE BY LEARNED DR. WE HAVE OBSERVED THE ASSESSEE IS IN THE BUSINESS OF PROPERTY DEVELOPMENT. THE ASSESSEE HAS MADE INVESTMENTS IN EQUITY SHARES WHICH ARE CAPABLE OF YIELDING EXEMPT INCOME , HOWEVER DURING THE YEAR NO EXEMPT INCOME HAS BEEN RECEIVED BY THE ASSESSEE BY WA Y OF DIVIDEND ETC. . THE A.O HAS DISALLOWED RS.97,90,947/ - BY INVOKING SECTION 14A READ WITH RULE 8D AS UNDER: - DISALLOWANCE U/S. 14A OF THE IT. ACT, 1961 AGGREGATE OF THE FOLLOWING I) EXPENSE'S DIRECTLY ATTRIBUTABLE TO EXEMPT INCOME RS. NIL II) AMOUNT OF EXPENDITURE BY WAY OF INTEREST RS. 15,963/ - III) 0.5% OF AVERAGE VALUE OF INVESTMENT RS.96,93,984/ - TOTAL RS.97,09,947/ - WE HAVE OBSERVED THAT HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LIMITED(SUPRA) HAD HE LD THAT NO DISALLOWANCE CAN BE MADE U/S. 14A . IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE YEAR. THE DECISION OF THE HONBLE DELHI HIGH COURT IS APPROVED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF PRINCIPAL CIT V. BALLARPUR INDUSTRIES LTD. IN ITA NO. 51 OF 2016 REPORTED IN {2016 (10) TMI 1039 BOMBAY HIGH COURT}. THUS KEEPING IN VIEW RATIO OF DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LIMITED (SUPRA) AND HONBLE BOMBAY HIGH COURT IN THE CASE OF BALLARPUR INDUSTRIES LTD.(SUPR A) , WE ORDER DELETION OF THE ADDITION OF RS. 97,90,947/ - AS MADE BY THE A.O U/S. 14A BY APPLYING RULE 8D AS THE ASSESSEE HAS NOT I.T.A. NO.874/MUM/2017 7 RECEIVED ANY EXEMPT INCOME DURING THE PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR . WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LD. CIT(A) WHICH WE AFFIRM/CONFIRM .THUS , THE APPEAL OF THE REVENUE STANDS DISMISSED. WE ORDER ACCORDINGLY. IT IS ALSO SUBMITTED THAT THE HONBLE SUP REME COURT IN THE CASE OF CIT V . CHETTINAD LOGISTICS P. LTD. VIDE DECISION IN SLP (CIVIL) DIARY NO. 15631 OF 2018 REPORTED IN (2018) 95 TAXMANN.COM 250(SC), VIDE ORDERS DATED 02.07.2 018 HAS DISMISSED SLP FILED BY R EVENUE ON THE GROUND OF DELAY AS WELL ON MERITS . THE SAID SLP AROSE FROM THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. CHETTINAD LOGISTICS P LTD. REPORTED IN ( 2017 ) 80 TAXMANN.COM 221(MAD). 5 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING CASE LAWS RELIED UPON . W E HAVE OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING, INVESTING, OPERATING AND MAINTAINING POWER GENERATION PROJECTS. THE ASSESSEE HAS MADE INVESTMENTS IN SHARES OF COMPANIES AND AVERAGE INVESTMENT OF RS. 13,74,72,86,430/ - WAS HELD BY THE ASSESSEE DURING THE YEAR . IT IS UNDISPUTED FACT BETWEEN RIVAL PARTIES THAT THE ASSESSEE DID NOT RECEIVE ANY DIVIDEND INCOME OR EVEN OTHERWISE NO EXEMPT INCOME WAS RECEIVED DURING THE RELEVANT PREVIOUS YEAR UNDER CONSIDERATION BEFORE US. THE ASSESSEE FILED BEFORE THE TRIBUNAL AUD ITED FINANCIAL STATEMENTS AS WELL COMPUTATION OF INCOME TO MAKE ITS POINT THAT NO DIVIDEND OR AS A MATTER NO EXEMPT INCOME WAS RECEIVED DURING THE YEAR UNDER CONSIDERATION AS ALSO TO MAKE ITS POINT THAT ALL INVESTMENTS ARE IN SHARES OF COMPANIES AND NO INV ESTMENTS WERE MADE IN MUTUAL FUNDS. THE SAID AUDITED FINANCIAL STATEMENTS AS WELL COMPUTATION OF INCOME ARE PLACED IN FILE. THE FINDING OF THE AO THAT THE ASSESSEE HAD MADE INVESTMENTS IN MUTUAL FUNDS IS ALREADY DISCARDED BY LEARNED CIT(A) WHILE IT IS CONC URRENT FINDING BY BOTH THE AUTHORITIES NAMELY THE AO AND LEARNED CIT(A) THAT THE ASSESSEE DID NO T RECEIVE ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. THE AO HAS DISALLOWED EXPENDITURE OF RS. 6,87,36,432/ - PURPORTED TO BE INCURRED IN RELATION TO EARNING OF AN EXEMPT INCOME BY INVOKING PROVISIONS OF SECTION 14A I.T.A. NO.874/MUM/2017 8 OF THE 1961 ACT R.W.R. 8D ( 2 ) (III) OF THE 1962 RULES . T HE LEARNED CIT (A) HAS GIVEN RELIEF TO THE ASSESSEE BASED UPON THE PROPOSITION THAT IF NO EXEMPT INCOME HAS BEEN RECEIVED DURING THE R ELEVANT YEAR, NO DISALLOWANCE CAN BE MADE U/S. 14A OF THE ACT. THE FINDING OF LEARNED CIT(A) IS EXTRACTED BY US IN PRECEDING PARAS OF THIS ORDER. WE HAVE ALSO OBSERVED THAT THE SAME ISSUE CAME UP FOR ADJUDICATION BEFORE MUMBAI - T RIBUNAL FOR AY 2010 - 11 AND 2011 - 12 IN ASSESSEES OWN CASE. THE MUMBAI - TRIBUNAL DECIDED THE ISSUE UNDER SIMILAR FACTUAL MATRIX IN FAVOUR OF ASSESSEE WHEREIN IT WAS HELD BY TRIBUNAL THAT NO DISALLOWANCE CAN BE MADE U/S 14A OF THE 1961 ACT WHEN NO EXEMPT INCOME IS EARNED BY THE ASSESSEE. THE AFORESAID DECISION OF MUMBAI - TRIBUNAL IN REVENUES APPEAL IN ITA NO. 5333/MUM/2015 FOR AY 2011 - 12 DATED 21.03.2018 , IS REPRODUCED HEREUNDER WHEREIN TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER: - 3. IN THIS APPEAL, THE SOLITARY DISPUTE RAISED BY THE ASSESSEE ARISES FROM THE ACTION OF CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER U/S 14A OF THE ACT AMOUNTING TO RS.3,16,59,443/ - . NOTABLY, THE CIT(A) HAS DELETED THE ADDITION FINDING THAT DURING THE YEAR UNDER CONSIDERATION THERE WAS NO EXEMPT INCOME CLAIMED BY THE ASSESSEE AND THUS, THERE WAS NO NECESSITY OF INVOKING SEC. 14A OF THE ACT. 4. BEFORE US, THE LD. DR HAS NOT ASSAILED THE FINDING OF THE CIT(A) TO THE EFFECT THAT THERE WAS NO E XEMPT INCOME EARNED DURING THE YEAR UNDER CONSIDERATION. AS A CONSEQUENCE, WE FIND THAT THE CIT(A) MADE NO MISTAKE IN DELETING THE ADDITION INASMUCH AS THE SAME IS IN CONFORMITY WITH THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LT D. V. CIT [2015] 61 TAXMANN.COM 118 (DELHI). 5. BEFORE PARTING, WE MAY ALSO MAKE AN OBSERVATION THAT RIGHT FROM THE STAGE OF ASSESSMENT, ASSESSEE HAS, INTER - ALIA, CANVASSED AGAINST INVOKING OF SEC. 14A OF THE ACT BY POINTING OUT THAT IN THIS YEAR IT HAS NOT EARNED ANY INCOME WHICH IS EXEMPT FROM TAX. AT THE TIME OF HEARING, THE LEARNED REPRESENTATIVE SUPPORTED THE SAID ASSERTION BY REFERRING TO THE PROFIT & LOSS ACCOUNT, WHEREIN ALSO NO SUCH INCOME HAS BEEN REPORTED. IN FACT, IN THE COURSE OF HEARING, THE LEARNED REPRESENTATIVE RELIED UPON THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR OF 2010 - 11 IN ITA NO. 3829/MUM/2015 DATED 25.05.2017, WHICH HAS ALSO BEEN RENDERED ON SIMILAR LINES. 6. AT THE TIME OF HEARING, THE LD. DR RELIED UPON THE CBDT CIRCULAR NO. 5/2014 DATED 11.02.2014 TO PUT FORTH THAT INVOCATION OF SEC. 14A OF THE ACT IS PERMISSIBLE EVEN IN THE ABSENCE OF EXEMPT INCOME DURING A PARTICULAR YEAR. IN OUR CONSIDERED OPINION, THE SAID CIRCULAR OF CBDT DOES NOT DISTRACT FROM THE LEGAL POSITION LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. (SUPRA), AND WE FURTHER NOTICED THAT OUR CO - ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 - I.T.A. NO.874/MUM/2017 9 11 (SUPRA) HAS C ONSIDERED THE SAID CIRCULAR AND THEREAFTER, APPLIED THE RATIO OF HON'BLE DELHI HIGH COURT AND DELETED THE ADDITION. 7. IN VIEW OF THE AFORESAID DISCUSSION, WE HEREBY AFFIRM THE ORDER OF CIT(A) AND APPEAL OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, A PPEAL OF THE REVENUE IS DISMISSED. WE HAVE ALSO OBSERVED THAT MUMBAI TRIBUNAL IN THE CASE OF DCIT V. RKW DEVELOPERS PRIVATE LTD. WHEREIN ACCOUNTANT MEMBER IS PART OF DIVISION BENCH WHO PASSED THE SAID ORDER GRANTING RELIEF TO THE ASSESSEE BASED ON THE S AME PROPOSITION THAT IF NO EXEMPT INCOME WAS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR UNDER CONSIDERATION , NO DISALLOWANCE OF EXPENDITURE CAN BE MADE U/S. 14A OF THE 1961 ACT. WHILE PASSING THE AFORESAID ORDER DATED 19.12.2017 IN ITA NO. 6267/MUM/2016 FOR AY 2012 - 13 , THE MUMBAI - TRIBUNAL MAINLY RELIED UPON DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LIMITED V. CIT IN ITA NO. 749/2014 AND ALSO DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF BALLARPUR INDUSTRIES LTD. IN ITA NO. 51 OF 2016 REPORTED IN (2016) (10) TMI 1039( BOMBAY HIGH COURT) . THE RELEVANT EXTRACT OF DECISION OF MUMBAI - TRIBUNAL IN THE CASE DCIT V. RKW DEVELOPERS P. LTD. IS REPRODUCED IN PRECEDING PARAS OF THIS ORDER . WE HAVE ALSO OBSERVED THAT HONBLE SUPREME COURT IN THE CASE OF CIT V. CHETTINAD LOGISTICS P. LTD. VIDE DECISION IN SLP (CIVIL) DIARY NO. 15631 OF 2018 REPORTED IN (2018) 95 TAXMANN.COM 250(SC), VIDE ORDERS DATED 02.07.2018 HAS DISMISSED SLP FILED BY REVENUE ON THE GROUND OF DELAY AS WELL O N MERITS . THE SAID SLP FILED BY REVENUE AROSE FROM THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. CHETTINAD LOGISTICS P LTD. REPORTED IN (2017) 80 TAXMANN.COM 221(MAD). THE RELEVANT EXTRACT OF THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. CHETTINAD LOGISTICS PRIVATE LIMITED REPORTED IN (2017) 80 TAXMANN.COM 221(MAD. HC) FROM WHICH AFORESAID SLP FILED BY REVENUE AROSE, IS REPRODUCED HEREUNDER: - 7. IT IS, IN THIS BACKGROUND, THAT THE TRIBUNAL REMANDED THE MATTER TO THE ASSESSING OFFICER, SO AS TO REACH A CONCLUSION AS TO WHETHER INVESTMENTS HAD BEEN ACTUALLY MADE, IN SISTER CONCERNS OF THE ASSESSEE, OUT OF INTEREST FREE FUNDS, ALBEIT, FOR STRATEGIC PURPOSES. I.T.A. NO.874/MUM/2017 10 8. ACCORDING TO US, THIS EXERCISE, IN THE GIVEN FACTS WHICH EMERGE FROM THE RECORD, WAS CLEARLY UNNECESSARY, AS THE CIT(A) HAD RETURNED THE FINDING OF FACT THAT NO DIVIDEND HAD BEEN EARNED IN THE RELEVANT ASSESSMENT YEAR, WITH WHICH, WE ARE CONCE RNED, IN THE PRESENT APPEAL. 9. IN OUR OPINION SECTION 14 A OF THE ACT, CAN ONLY BE TRIGGERED, IF, THE ASSESSEE SEEKS TO SQUARE OFF EXPENDITURE AGAINST INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. 9.1 THE LEGISLATURE, IN ORDER TO DO A WAY WITH THE PERNICIOUS PRACTICE ADOPTED BY THE ASSESSEES', TO CLAIM EXPENDITURE, AGAINST INCOME EXEMPT FROM TAX, INTRODUCED THE SAID PROVISION. 10. IN THE INSTANT CASE, THERE IS NO DISPUTE THAT NO INCOME I.E., DIVIDEND, WHICH DID NOT FORM PART OF TOTAL IN COME OF THE ASSESSEE WAS EARNED IN THE RELEVANT ASSESSMENT YEAR. 10.1 THEREFORE, TO OUR MINDS, THE ADDITION MADE BY THE ASSESSING OFFICER BY RELYING UPON SECTION 14 A OF THE ACT, WAS COMPLETELY CONTRARY TO THE PROVISIONS OF THE SAID SECTION. 10.2 MR.SENTHI L KUMAR, WHO APPEARS FOR THE REVENUE, SUBMITTED THAT THE REVENUE COULD DISALLOW THE EXPENDITURE EVEN IN SUCH A CIRCUMSTANCE BY TAKING RECOURSE TO RULE 8D. 10.3 ACCORDING TO US, RULE 8D, ONLY PROVIDES FOR A METHOD TO DETERMINE THE AMOUNT OF EXPENDITURE INCU RRED IN RELATION TO INCOME, WHICH DOES NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE. 10.4 RULE 8 D, IN OUR VIEW, CANNOT GO BEYOND WHAT IS PROVIDED IN SECTION 14 A OF THE ACT. 11. FURTHERMORE, WE MAY NOTE THAT A SIMILAR ARGUMENT WAS SOUGHT TO BE ADVANCED BY THE REVENUE IN THE MATTER CONCERNING, REDINGTON (INDIA) LTD. V . ADDL. CIT [2017] 77 TAXMANN.COM 257 (MAD.) WHICH WAS, SUBJECT MATTER OF T.C.A.NO.520 OF 2016. 1 1.1 A CO - ORDINATE BENCH OF THIS COURT, VIDE JUDGMENT DATED 23.12.2016, REJECTED THE PLEA OF THE REVENUE ADVANCED IN THAT BEHALF. 11.2 AS A MATTER OF FACT, A PERUSAL OF THE JUDGMENT WOULD SHOW THAT THE REVENUE HAD SOUGHT TO ARGUE THAT BECAUSE EXEMPT INCOME COULD BE EARNED IN FUTURE YEARS, THEREFORE, RECOURSE COULD BE TAKEN TO THE PROVISIONS OF SECTION 14A OF THE ACT, TO DISALLOW EXPENDITURE. IN OTHER WORDS THE STAND TAKEN BY THE REVENUE WAS IRRESPECTIVE OF THE FACT WHETHER OR NOT INCOME WAS EARNED IN THE CON CERNED ASSESSMENT YEAR EXPENDITURE UNDER SECTION 14A COULD BE DISALLOWED AGAINST ANTICIPATED INCOME. 11.3 PERTINENTLY, THE DIVISION BENCH IN REDINGTON (INDIA)LTD . ( SUPRA ) CASE HAS REPELLED THIS PRECISE ARGUMENT. 12. THE DIVISION BENCH, IN OUR VIEW, QUIET CORRECTLY HELD THAT, THE COMPUTATION OF TOTAL INCOME, IN TERMS OF SECTION 5 OF THE ACT, IS MADE QUA REAL INCOME AND NOT, VIS - A - VIS, NOTIONAL INCOME. 12.1 THE DIVISION BENCH WENT ON TO HOLD THAT SECTION 4 OF THE ACT B RINGS TO TAX, THAT INCOME, WHICH IS RELATABLE TO THE ASSESSMENT YEAR IN ISSUE. THE DIVISION BENCH, THUS, HELD THAT WHERE NO EXEMPT INCOME IS EARNED IN THE I.T.A. NO.874/MUM/2017 11 PREVIOUS YEAR, RELEVANT TO THE ASSESSMENT YEAR IN ISSUE, PROVISIONS OF SECTION 14 A OF THE ACT, READ WITH RULE 8 D COULD NOT BE INVOKED. 12.2 WHILE COMING TO THIS CONCLUSION, THE DIVISION BENCH ALSO TOOK NOTE OF THE AFOREMENTIONED CIRCULAR, ISSUED BY THE BOARD. 12.3 THE REASONING OF THE DIVISION BENCH IS CONTAINED IN THE FOLLOWING PART OF THE JUDGMENT: '4 . THE ADMITTED POSITION IS THAT NO EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR IN ISSUE. THE ORDER OF ASSESSMENT RECORDS A FINDING OF FACT TO THAT EFFECT. THE ISSUE TO BE DECIDED THUS LIES WITHIN THE SHORT COMPASS OF WHETHER A DISALLOWANCE IN TERMS OF S.14A OF THE ACT READ WITH RULE 8D OF THE RULES CAN BE CONTEMPLATED EVEN IN A SITUATION WHERE NO EXEMPT INCOME HAS ADMITTEDLY BEEN EARNED BY THE ASSESSEE IN THE RELEVANT FINANCIAL YEAR. 7. PER CONTRA, SRI . T. RAVIKUMAR APPEARING ON BEHALF OF THE REVENUE DREW OUR ATTENTION TO THE MARGINAL NOTES OF S.14 A POINTING OUT THAT THE PROVISION WOULD APPLY NOT ONLY WHERE EXEMPTED INCOME IS 'INCLUDED' IN THE TOTAL INCOME, BUT ALSO WHERE EXEMPT INCOME IS 'INCLUDABLE' IN TOTAL INCOME. 8. HE RELIED UPON A CIRCULAR ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES IN CIRCULAR NO.5 OF 2014 DATED 11.2.2014 TO THE EFFECT THAT S.14A WAS INTENDED TO COVER EVEN THOSE SITUATIONS WHETHER THERE IS A POSSIBILITY OF EXEMPT INCOME BEING EA RNED IN FUTURE. THE CIRCULAR, AT PARAGRAPH 4, STATES THAT IT IS NOT NECESSARY FOR EXEMPT INCOME TO HAVE BEEN INCLUDED IN THE INCOME OF A PARTICULAR YEAR FOR THE DISALLOWANCE TO BE TRIGGERED. ACCORDING TO THE LEARNED STANDING COUNSEL, THE PROVISIONS OF S.14 A ARE MADE APPLICABLE, IN TERMS OF SUB SECTION (1) THEREOF TO INCOME ' UNDER THE ACT ' AND NOT ' OF THE YEAR ' AND A DISALLOWANCE UNDER S.14A R.W.RULE 8D CAN THUS BE EFFECTED EVEN IN A SITUATION WHERE A TAX PAYER HAS NOT EARNED ANY TAXABLE INCOME IN A PARTICUL AR YEAR. 9. WE ARE UNABLE TO SUBSCRIBE TO THE AFORESAID VIEW. THE PROVISIONS OF SECTION 14A WERE INSERTED AS A RESPONSE TO THE JUDGMENTS OF THE SUPREME COURT IN COMMISSIONER OF INCOME TAX V . MAHARASHTRA SUGAR MILLS LIMITED [1971] 82 ITR 452 AND RAJASTHAN STATE WARE HOUSING CORPORATION V . COMMISSIONER OF INCOME - TAX [2002] 242 ITR 450 IN TE RMS OF WHICH, EXPENDITURE INCURRED BY AN ASSESSEE CARRYING ON A COMPOSITE BUSINESS GIVING RISE TO BOTH TAXABLE AS WELL AS NON - TAXABLE INCOME, WAS ALLOWABLE IN ENTIRETY WITHOUT APPORTIONMENT. IT WAS THUS THAT S.14A WAS INSERTED PROVIDING THAT NO DEDUCTION S HALL BE ALLOWABLE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO THE EARNING OF INCOME EXEMPT FROM TAXATION. AS OBSERVED BY THE SUPREME COURT IN THE JUDGMENT IN THE CASE OF COMMISSIONER OF INCOME - TAX V. WALFORT SHARE AND STOCK BROKERS (P) LTD. [2010] 326 ITR 1 '.... THE MANDATE OF S.14A IS CLEAR. IT DESIRES TO CURB THE PRACTICE TO CLAIM DEDUCTION OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME AGAINST TAXABLE INCOME A ND AT THE SAME TIME AVAIL OF THE TAX INCENTIVE BY WAY OF AN EXEMPTION OF EXEMPT INCOME WITHOUT MAKING ANY APPORTIONMENT OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME.' 10. THE PROVISION THIS IS CLEARLY RELATABLE TO THE EARNING OF ACTUAL INCOME AND NOT NOTIONAL OR ANTICIPATED INCOME. THE SUBMISSION OF THE DEPARTMENT TO THE EFFECT THAT S.14A WOULD BE ATTRACTED EVEN TO EXEMPT INCOME 'INCLUDABLE' IN TOTAL INCOME WOULD ENTAIL THE ASSESSMENT OF NOTIONAL INCOME, ASSUMED TO BE EXEMPT IN THE FUTURE, IN THE PRESE NT ASSESSMENT YEAR. THE COMPUTATION OF TOTAL INCOME I.T.A. NO.874/MUM/2017 12 IN TERMS OF S.5 OF THE ACT IS ON REAL INCOME AND THERE IS NO SANCTION IN LAW FOR THE ASSESSMENT OF ADMITTEDLY NOTIONAL INCOME, PARTICULARLY IN THE CONTEXT OF EFFECTING A DISALLOWANCE IN CONNECTION THEREWI TH. 11. THE COMPUTATION OF DISALLOWANCE IN TERMS OF RULE 8D IS BY WAY OF A DETERMINATION INVOLVING DIRECT AS WELL AS INDIRECT ATTRIBUTION. THUS, ACCEPTING THE SUBMISSION OF THE REVENUE WOULD RESULT IN THE IMPOSITION OF AN ARTIFICIAL METHOD OF COMPUTATION ON NOTIONAL AND ASSUMED INCOME. WE BELIEVE THIS WOULD BE CARRYING THE ARTIFICE TOO FAR. (EMPHASIS IS OURS)' 13. MR.SENTHIL KUMAR, SEEKS TO DISTINGUISH THE JUDGMENT IN REDINGTON (INDIA) LTD. CASE ( SUPRA ) BASED ON THE FACT THAT RULE 8D HAD NOT KICKED - IN BY A Y 2007 - 08, WHICH WAS THE AY BEING CONSIDERED IN THE SAID CASE. 14. ACCORDING TO US, THIS WAS NOT THE ARGUMENT, PUT FORTH, BEFORE THE DIVISION BENCH. AS A MATTER OF FACT, THE REVENUE RELIED HEAVILY ON RULE 8D. 14.1 MR.RAVIKUMAR, WHO APPEARED FOR THE REVENUE , IN THAT MATTER AND WHO IS PRESENT IN THIS COURT, INFORMS US THAT HE HAD IN FACT ARGUED THAT THE RULE WAS CLARIFACTORY IN NATURE AND WOULD APPLY RETROSPECTIVELY, AND THAT, THE DIVISION BENCH, THEREFORE, DISCUSSED THE IMPACT OF RULE 8D OF THE RULES. 15. HO WEVER, IT IS, OUR VIEW, AS INDICATED ABOVE, INDEPENDENT OF THE REASONING GIVEN IN REDINGTON (INDIA) LTD. CASE ( SUPRA ) THAT RULE 8D CANNOT BE READ IN A MANNER, WHICH TAKES IT BEYOND THE SCOPE AND CONTENT OF THE MAIN PROVISION, WHICH IS, SECTION 14 A OF THE ACT. 15.1 THEREFORE, AS ADVERTED TO ABOVE, RULE 8D, CANNOT COME TO THE RESCUE OF THE REVENUE. 15.2 IN ANY EVENT, THE TRIBUNAL, VIA, THE IMPUGNED JUDGMENT HAS REMITTED THE MATTER TO THE ASSESSING OFFICER. 15.3 THEREFORE, FOR THE FOREGOING REASONS, WE ARE OF THE VIEW, THAT NO INTERFERENCE IS CALLED FOR QUA THE IMPUGNED JUDGMENT. 16. TO OUR MINDS, QUESTIONS OF LAW, WHICH COULD HAVE ARISEN ARE ALREADY COVERED BY THE JUDGMENT OF A CO - ORDINATE BENCH OF THIS COURT RENDERED IN REDINGTON (INDIA) LTD. CASE ( SUPRA ). 17. THE APPEAL IS ACCORDINGLY, DISMISSED. HOWEVER, THERE SHALL BE NO ORDER AS TO COSTS. THE HONBLE MADARS HIGH COURT FOLLOWED THE DECISION OF THE SAME C OURT IN THE CASE OF REDINGTON (INDIA) LTD. V . ADDL. CIT [2017] 77 TAXMANN.COM 257 (MAD.) WHILE ADJUDICATING CHETTINAD LOGISTICS PRIVATE LIMITED(SUPRA) , WHEREIN CBDT CIRCULAR NO. 5/2014 DATED 11.02.2014 CAME UP FOR DISCUSSION BE FORE HONBLE MADRAS HIGH COURT IN THE CASE OF REDINGTON (INDIA) LIMITED AND AFTER CONSIDERING THE SAID CIRCULAR, HONBLE MADRAS HIGH COURT AFFIRMED THE PROPOSITION IN REDINGTON (INDIA ) LIMITED (SUPRA) THAT IF NO EXEMPT INCOME IS RECEIVED DURING THE PREVIO US YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR, NO I.T.A. NO.874/MUM/2017 13 DISALLOWANCE OF EXPENDITURE U/S 14A OF THE ACT OF 1961 IS WARRANTED. RESPECTFULLY FOLLOWING THE RATIO OF AFORESAID DECISION OF HONBLE HIGH COURTS INCLUDING DECISION OF HONBLE JURISDICTIONAL HIGH COURT AND ALSO TAKING NOTE OF DISMISSAL OF REVENUE SLP BY HONBLE SUPREME COURT IN THE CASE OF CIT V. CHETTINAD LOGISTICS PRIVATE LIMITED(SUPRA) ON GROUNDS OF DELAY AS ALSO ON MERITS, WE UPHOLD THE WELL REASONED ORDER OF LD. CIT(A) ON THE PROPOSITION THAT IF NO EXEMPT INCOME IS EARNED BY THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR , NO DISALLOWANCE U/S 14A OF THE 1961 ACT IS CALLED FOR AND WE DISMISS THE APPEAL OF REVENUE ON THIS SHORT GROUND ONLY. THUS, REVENUE FAILS ON THIS GROUND. WE ORDER ACCORDINGLY. 6 . IN THE RESULT, T HE APPEAL OF THE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN TH E OPEN COURT ON 09 .08.2018 09 .08.2018 S D / - S D / - (JOGINDER SI NGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 09 .08.2018 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI