Dated 12[Th] February, 2018 In The Case Of Maxoppinvestment Ltd v. Commissioner Of Income Tax, Newdelhi & Others

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 209 of 2020 ==========================================================THE PRINCIPAL COMMISSIONER OF INCOME TAX VersusM/S WINSOME DIAMONDS AND JEWELLERY LTD ========================================================== Appearance:MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE THE CHIEF JUSTICE MR. VIKRAM NATH andHONOURABLE MR. JUSTICE J.B.PARDIWALA Date : 17/09/2020 ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1. This Tax Appeal under Section 260A of the Income TaxAct, 1961[for short, 'the Act, 1961'] is at the instance of theRevenue and is directed against the order passed by theIncome Tax Appellate Tribunal, Ahmedabad Bench 'B',Ahmedabad dated 20[th]August, 2019 in the ITANo.3982/Mum/2018 for the A.Y. 201415. 2. The Revenue has proposed the following solitarysubstantial question of law for the consideration of thisCourt: “Whether on the facts and circumstances of the caseand in law, the Appellate Tribunal is correct inupholding the order of the CIT(A) that nodisallowance u/s 14A can be made if there is no taxfree income earned during the year ignoring CBDT’sCircular No.5/2014 dated February 11, 2014 whichstates that disallowance of expenses for earningexempt income u/s 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962,would be attracted even if corresponding income hasnot been earned during the year ?” 3.It appears from the materials on record that in thecourse of the assessment proceedings, the Assessing Officernoticed that the assessee had made investment to the tuneof Rs.1,44,25,14,851/- on 1[st] April, 2013. The AssessingOfficer noticed that the assessee had not made anydisallowance under Section 14A read with Rule 8D of theIncome Tax Rules in respect of any expenditure incurred forthe aforesaid investment. The case of the assessee beforethe Assessing Officer was that the interest free funds wereused for investing in equity shares and in suchcircumstances, no disallowance was required to be madeunder Section 14A read with Rule 8D of the Income TaxRules. The assessee also declared that no exempt incomehad been claimed and therefore the disallowance underSection 14A should not be made. The Assessing Officerrejected the case put up by the assessee and after referringto the CBDT circular No.5/2014 held that the disallowancecan be made by invoking Section 14A of the Act, 1961though no income had been earned by the assessee claimedas exempt during the year under consideration. 4.In such circumstances referred to above, the AssessingOfficer computed disallowance under Section 14A read withRule 8D of the Income Tax Rules to the amount of Rs.9,44,61,777/- and added to the total income of theassessee. 5. The assessee being dissatisfied with the assessmentorder went in appeal before the CIT(A). The CIT(A) deletedthe addition relying upon the decision of the Supreme Court dated 12[th] February, 2018 in the case of MaxoppInvestment Ltd. Vs. Commissioner of Income Tax, NewDelhi & Others. 6. The Revenue being dissatisfied with the order passedby the CIT(A) went in appeal before the Tribunal. 7. The Tribunal dismissed the appeal thereby affirmingthe order passed by the CIT(A). 8.In such circumstances, the Revenue is here before thisCourt with the present appeal. 9.We take notice of the following findings recorded by theTribunal in its impugned order: Rs.9,44,61,777/- and added to the total income of theassessee. 5. The assessee being dissatisfied with the assessmentorder went in appeal before the CIT(A). The CIT(A) deletedthe addition relying upon the decision of the Supreme Court dated 12[th] February, 2018 in the case of MaxoppInvestment Ltd. Vs. Commissioner of Income Tax, NewDelhi & Others. 6. The Revenue being dissatisfied with the order passedby the CIT(A) went in appeal before the Tribunal. 7. The Tribunal dismissed the appeal thereby affirmingthe order passed by the CIT(A). 8.In such circumstances, the Revenue is here before thisCourt with the present appeal. 9.We take notice of the following findings recorded by theTribunal in its impugned order: “5. Before us, it is controverted fact that the assesseehas not earned any exempt income during the yearunder consideration. Nothing contrary has been broughton record by the revenue. The stand of learned firstappellate authority was in line with the decisions ofbinding judicial precedents as cited in the impugnedorder. Therefore, the conclusion drawn in the impugnedorder could not be faulted with.” ” 10. In our opinion, the CIT(A) as well as the AppellateTribunal rightly applied the dictum as laid by the SupremeCourt in the case of Maxopp Investment Ltd.(supra). InMaxopp Investment Ltd.(supra), the Supreme Court heldthat as the assessee had not made any claim for theexemption of any income from payment of tax, thedisallowance under Section 14A of the Act cannot be made.To attract the provisions of Section 14A of the Act, 1961, itis necessary that the assessee should have earned anyexempt income. If the assessee has not earned an exemptincome and has not claimed so in his return of income, thenthe provisions of Section 14A would not be applicable. 11. The concurring finding of fact recorded by the twoauthorities is that in the year under consideration, theassessee company had not earned any exempt income andhad not claimed any such exempt income in his return ofincome. 12. In view of the aforesaid, this Tax Appeal fails and ishereby dismissed. (VIKRAM NATH, CJ) (J. B. PARDIWALA, J)