C/TAXAP/209/2020 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 209 of 2020 PRINCIPAL COMMISSIONER OF INCOME TAX Versus M/S WINSOME DIAMONDS AND JEWELLERY LTD Appearance: MRS MAUNA M BHATT(174) for Appellant(s) No. 1 for Opponent(s) No. 1 CORAM:HONOURABLE CHIEF JUSTICE MR. VIKRAM NATH and HONOURABLE 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 Income Tax Act, 1961[for short, 'the Act, 1961'] is at instance of Revenue and is directed against order passed by Income Tax Appellate Tribunal, Ahmedabad Bench 'B', Ahmedabad dated 20th August, 2019 in ITA No.3982/Mum/2018 for A.Y. 201415. 2. Revenue has proposed following solitary substantial question of law for consideration of this Court: Whether on facts and circumstances of case and in law, Appellate Tribunal is correct in upholding order of CIT(A) that no disallowance u/s 14A can be made if there is no tax free income earned during year ignoring CBDT s Circular No.5/2014 dated February 11, 2014 which states that disallowance of expenses for earning exempt income u/s 14A of Income Tax Act, 1961 Page 1 of 4 Downloaded on : Tue Sep 22 11:51:45 IST 2020 C/TAXAP/209/2020 ORDER read with Rule 8D of Income Tax Rules, 1962, would be attracted even if corresponding income has not been earned during year ? 3. It appears from materials on record that in course of assessment proceedings, Assessing Officer noticed that assessee had made investment to tune of Rs.1,44,25,14,851/- on 1 st April, 2013. Assessing Officer noticed that assessee had not made any disallowance under Section 14A read with Rule 8D of Income Tax Rules in respect of any expenditure incurred for aforesaid investment. case of assessee before Assessing Officer was that interest free funds were used for investing in equity shares and in such circumstances, no disallowance was required to be made under Section 14A read with Rule 8D of Income Tax Rules. assessee also declared that no exempt income had been claimed and therefore disallowance under Section 14A should not be made. Assessing Officer rejected case put up by assessee and after referring to CBDT circular No.5/2014 held that disallowance can be made by invoking Section 14A of Act, 1961 though no income had been earned by assessee claimed as exempt during year under consideration. 4. In such circumstances referred to above, Assessing Officer computed disallowance under Section 14A read with Rule 8D of Income Tax Rules to amount of Page 2 of 4 Downloaded on : Tue Sep 22 11:51:45 IST 2020 C/TAXAP/209/2020 ORDER Rs.9,44,61,777/- and added to total income of assessee. 5. assessee being dissatisfied with assessment order went in appeal before CIT(A). CIT(A) deleted addition relying upon decision of Supreme Court dated 12th February, 2018 in case of Maxopp Investment Ltd. Vs. Commissioner of Income Tax, New Delhi & Others. 6. Revenue being dissatisfied with order passed by CIT(A) went in appeal before Tribunal. 7. Tribunal dismissed appeal thereby affirming order passed by CIT(A). 8. In such circumstances, Revenue is here before this Court with present appeal. 9. We take notice of following findings recorded by Tribunal in its impugned order: 5. Before us, it is controverted fact that assessee has not earned any exempt income during year under consideration. Nothing contrary has been brought on record by revenue. stand of learned first appellate authority was in line with decisions of binding judicial precedents as cited in impugned order. Therefore, conclusion drawn in impugned order could not be faulted with. Page 3 of 4 Downloaded on : Tue Sep 22 11:51:45 IST 2020 C/TAXAP/209/2020 ORDER 10. In our opinion, CIT(A) as well as Appellate Tribunal rightly applied dictum as laid by Supreme Court in case of Maxopp Investment Ltd.(supra). In Maxopp Investment Ltd.(supra), Supreme Court held that as assessee had not made any claim for exemption of any income from payment of tax, disallowance under Section 14A of Act cannot be made. To attract provisions of Section 14A of Act, 1961, it is necessary that assessee should have earned any exempt income. If assessee has not earned exempt income and has not claimed so in his return of income, then provisions of Section 14A would not be applicable. 11. concurring finding of fact recorded by two authorities is that in year under consideration, assessee company had not earned any exempt income and had not claimed any such exempt income in his return of income. 12. In view of aforesaid, this Tax Appeal fails and is hereby dismissed. (VIKRAM NATH, CJ) (J. B. PARDIWALA, J) NAIR SMITA V./Radhan Page 4 of 4 Downloaded on : Tue Sep 22 11:51:45 IST 2020 Principal Commissioner of Income-tax v. Winsome Diamonds and Jewellery Ltd