Auto Shell Cast Pvt Ltd., Coimbatore v. DCIT, Coimbatore

ITA 931/CHNY/2017 | 2013-2014
Pronouncement Date: 28-11-2017 | Result: Allowed

Appeal Details

RSA Number 93121714 RSA 2017
Assessee PAN AABCA6619F
Bench Chennai
Appeal Number ITA 931/CHNY/2017
Duration Of Justice 7 month(s) 10 day(s)
Appellant Auto Shell Cast Pvt Ltd., Coimbatore
Respondent DCIT, Coimbatore
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Allowed
Bench Allotted B
Tribunal Order Date 28-11-2017
Assessment Year 2013-2014
Appeal Filed On 17-04-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . BEFORE SHRI ABRAHAM P.GEORGE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER ./I.T.A. NO.931/MDS/2017 / ASSESSMENT YEAR : 2013-2014 M/S. AUTO SHELL CAST PRIVATE LIMITED 10 SIDCO INDL. ESTATE KURICHI COIMBATORE 641 021. [PAN AABCA 6619F] VS. THE DEPUTY COMMISSIONER OF INCOME TAX CORPORATE CIRCLE 1 COIMBATORE ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : SMT. J. SREEVIDYA AND SMT. G. VARDINI KARTHIK ADV $%! ' # /RESPONDENT BY : SHRI M. PALANICHAMY JCIT. & ' ' () /DATE OF HEARING : 27-11-2017 *+ ' () /DATE OF PRONOUNCEMENT : 28-11-2017 / O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER: ASSESSEE IN THIS APPEAL FILED AGAINST AN ORDER DAT ED 30.12.2016 OF THE LD. COMMISSIONER OF INCOME TAX (A PPEALS)-1 ITA NO. 931/MDS/2017 :- 2 -: COIMBATORE HAS TAKEN ALTOGETHER FOUR GROUNDS OF W HICH GROUND NO.1 & 4 ARE GENERAL IN NATURE NEEDING NO SPECIFIC ADJUD ICATION. 2. ASSESSEE HAS FILED THIS APPEAL WITH A DELAY OF FOR TY EIGHT DAYS. CONDONATION PETITION HAS BEEN FILED. REASON SHOWN FOR THE DELAY SEEMS TO BE JUSTIFIED. LD. DEPARTMENTAL REPRE SENTATIVE DID NOT RAISE ANY SERIOUS OBJECTION. DELAY IS CONDONED. A PPEAL IS ADMITTED . 3. VIDE ITS GROUNDS NO.2 GRIEVANCE RAISED BY THE ASS ESSEE IS ON A DISALLOWANCE OF RS.2 43 182/- BEING BELATED RE MITTANCES OF EMPLOYEES CONTRIBUTION TOWARDS ESI AND PF. 4. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT BY VIRT UE OF JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. M/S. INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT. LTD TAX CASE (APPEAL) NOS.585 AND 586 OF 2015 DATED 24.07.2015 EMPLOYEES CONTRIBUTION TO ESI & PF REMITTED PRIOR TO DUE DAT E OF FILING OF THE RETURN HAD TO BE ALLOWED. 5. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON CIRCULAR NO.22/2015 DATED 17.12.2015 OF CENTRAL BOARD OF DIRECT TAXES. ITA NO. 931/MDS/2017 :- 3 -: 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT BEEN DIS PUTED BY THE LD. DEPARTMENTAL REPRESENTATIVE THAT ASSESSEE HAD EFFEC TED PAYMENT OF RS.2 43 182/- BEING EMPLOYEES CONTRIBUTION OF PF DU ES BEFORE DUE DATE OF FILING OF RETURN. THEIR LORDSHIPS IN THE C ASE OF M/S. INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT. LTD (SUPRA) HAD HELD AS UNDER AT PARAS 5 & 6 OF ITS JUDGMENT. 5. WE FIND THAT THE TRIBUNAL HAS RIGHTLY RELIED O N THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V. ALOM EXTRUSIONS LTD. REPORTED IN 319 ITR 306 WHEREBY THE SUPREME COURT HELD THAT OMISSION OF SECOND PROVISO TO SECTION 43B AND AMENDMENT TO FIRST PROVISO BY FINANCE ACT 2003 ARE CURATIVE IN NATURE AND ARE EFFECTIVE RETROSPECTIVELY I.E. WIT H EFFECT FROM 1.4.1988 I.E. THE DATE OF INSERTION OF FIRST PROVISO. THE DELHI HIGH COURT IN THE CASE OF CIT V. AMIL LTD. REPORTED IN 321 ITR 508 HELD THAT IF THE ASSESSEE HAD DEPOSITED EMPLOYEE'S CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI AFTER DUE DATE AS PRESCRIBED UNDER THE RELEVANT ACT BUT BEFORE THE DUE DATE OF FILING OF RETURN UNDER THE INCOME TAX ACT NO DISALLOWANCE COULD BE MADE IN VIEW OF THE PROVISIONS OF SECTION 43B AS AMENDED BY FINANCE ACT 2003. 6. IN THE PRESENT CASE THE ASSESSEE HAD REMITTED THE EMPLOYEES CONTRIBUTION BEYOND THE DUE DATE FOR PAYMENT BUT WITHIN THE DUE DATE FOR FILING THE RETURN OF INCOME. HENCE FOLLOWING THE ABOVE-SAID DECISIONS WE FIND NO REASON TO DIFFER WITH THE FINDINGS OF THE TRIBUNAL. ACCORDINGLY WE FIND NO QUESTION OF LAW MUCH LESS ANY SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION IN THESE APPEALS. ACCORDINGLY BOTH THE TAX CASE (APPEALS) STAND ITA NO. 931/MDS/2017 :- 4 -: DISMISSED. NO COSTS. CONSEQUENTLY M.P.NO.1 OF 2015 IS ALSO DISMISSED. ACCORDINGLY FOLLOWING THE ABOVE JUDGMENT WE ALLOW THE CLAIM OF THE ASSESSEE. GROUND NO.2 OF THE ASSESSEE IS ALLOWED. 7. VIDE ITS GROUND 3 TO 5 ASSESSEE ASSAILS ADDITION O F RS.14 22 288/- MADE U/S.14A OF THE INCOME TAX ACT 1961 R.W.R.8D OF THE INCOME TAX RULES 1962. 8. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSE E HAD NOT CLAIMED ANY EXEMPT INCOME DURING THE RELEVANT P REVIOUS YEAR AND BY VIRTUE OF JUDGMENT OF HONBLE JURISDICTIONAL HI GH COURT IN THE CASE OF REDINGTON INDIA LTD VS. ADDL. CIT (2016) 97 CCH 021 9 THERE COULD BE NO DISALLOWANCE U/S.14A OF THE ACT WHEN THERE W AS NO CLAIM FOR EXEMPT INCOME. 9. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE IN CIRCULAR NO.5/2014 DATED 11.02.2014. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT DISPUTED BY THE REVENUE THAT ASSESSEE HAD NOT CLAIMED ANY EXEMPT INCOME IN THE IMPUGNED ASSESSMENT YEAR. THEIR LORDSHIPS IN THE CASE OF REDINGTON INDIA LTD (SUPRA) HELD IN PARAS 5 TO 16 OF ITS JUDGMENT IS REPRODUC ED HEREUNDER: - ITA NO. 931/MDS/2017 :- 5 -: 5. WHETHER THE TRIBUNAL ERRED IN NOT APPRECIATING THAT THE RULE 8 D WAS INSERTED BY INCOME TAX (FIFTH AMENDMENT) RULE S 2008 WITH EFFECT FROM 24TH MARCH 2008 AND ACCORDINGLY CAN HAV E PROSPECTIVE APPLICATION? THOUGH SEVERAL QUESTIONS HAVE BEEN RAI SED IN THE APPEAL ONLY SUBSTANTIAL QUESTIONS 1 AND 2 HAVE BEE N PURSUED AT THE TIME OF HEARING AND CONSEQUENTLY ANSWERED BY US. 2. THE ASSESSMENT YEAR INVOLVED IS 2007-2008. THE ASSESSEE HAD INVESTMENTS IN INDIAN COMPANIES TO THE TUNE OF RS.177.56 CRORES THAT HAD NOT YIELDED ANY RETURNS IN THE PREVIOUS YEAR RELEVANT TO THE PRESENT ASSESSMENT YEAR. AN ORDER OF DRAFT ASSESSMENT IN TERMS OF S.143(3) R.W.S.144C OF THE INCOME TAX ACT 1960 (HEREINAFTER REFERRED TO AS 'ACT') WAS ISSUED BY THE ASSESSING OFFICER INTERAL IA PROPOSING A DISALLOWANCE IN TERMS OF S. 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES OF AN AMOUNT OF RS.1 88 245/-. THE PROPOSAL WAS CONFIRMED DESPITE OBJECTIONS THAT THE PROVISIONS OF S.14A AND RULE 8D WOULD NOT BE ATTRACTED IN A CASE WHERE NO EXEMPT INCOME HAD IN FACT BEEN EARNED. THE MATTER WAS CARRIED BEFORE THE DISPUTE RESOLUTION PANEL WHICH CONFIRMED THE DISALLOWANCE. IN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL (IN SHORT 'TRIBUNAL') THE DIRECTIONS OF THE DRP WERE CONFIRMED RELYING ON A DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF CHEMINVEST LIMITED VS COMMISSIONER OF INCOME TAX. THE ORDER OF THE TRIBUNAL DATED 26.6.2015 IS ASSAILED IN APPEAL BEFORE US. 3. WE HAVE HEARD THE SUBMISSIONS OF SRI.VIJAYARAGHAVAN LEARNED COUNSEL APPEARING FOR THE ASSESSEE AND SRI.T.RAVIKUMAR LEARNED SENIOR STANDING COUNSEL APPEARING FOR THE INCOME TAX DEPARTMENT. 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 TH AT EFFECT. THE ISSUE TO BE DECIDED THUS LIES WITHIN TH E SHORT COMPASS OF WHETHER A DISALLOWANCE IN TERMS OF S. 14A OF THE ACT READ WITH RULE 8D OF THE RULES ITA NO. 931/MDS/2017 :- 6 -: CAN BE CONTEMPLATED EVEN IN A SITUATION WHERE NO EXEMPT INCOME HAS ADMITTEDLY BEEN EARNED BY THE ASSESSEE IN THE RELEVANT FINANCIAL YEAR. 5. THE SUBMISSIONS ON BEHALF OF THE ASSESSEE ARE AS FOLLOWS; S.14A HAS BEEN INSERTED BY FINANCE ACT 2001 WITH RETROSPECTIVE EFFECT FROM 1.4.1962 TO PROVIDE THAT NO DEDUCTION OF EXPENDITURE SHALL BE ALLOWED IN RESPECT OF INCOME EARNED BY AN ASSESSEE NOT FORMING PART OF TOTAL INCOME UNDER THE ACT. THUS ANY ASSESSMENT WHERE THE COMPUTATION OF TOTAL INCOME IN RESPECT OF A RELEVANT FINANCIAL YEAR DOES NOT INCLUDE INCOME FALLING UNDER CHAPTER III OF THE ACT VIZ. INCOMES NOT FORMING PART OF TOTAL INCOME WOULD STAND EXCLUDED FROM THE APPLICATION OF S. 14 A OF THE ACT. 6. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: COMMISSIONER OF INCOME TAX VS. CORRTECH ENERGY PRIV ATE LIMITED (372 ITR 97) (GUJARATH HIGH COURT) CIT (IV) HOLCIM INDIA LTD. VS. COMMISSIONER OF TAX (DELHI HIGH COU RT) ( 90 CCH 81) COMMISSIONER OF INCOME TAX VS. SHIVAM MOTO RS PRIVATE LIMITED (ALLAHABAD HIGH COURT) (230 TAXMANN 63) PRINCIPAL COMMISSIONER OF INCOME TAX VS. GUJARATH S TATE PETRONET LIMITED (GUJARATH HIGH COURT) AND COMMISSI ONER OF INCOME TAX VS. LAKHANI MARKETINNG INCL (272 CTR 26 5); CHEM INVESTMENTS LIMITED VS COMMISSIONER OF INCOME TAX (94CCH (2)) DELHI HIGH COURT (REVERSING THE DECISION OF TH E SPECIAL BENCH OF INCOME TAX APPELLATE TRIBUNAL RELIED ON BY THE ASSESSING OFFICER IN THIS CASE) 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 ONL Y WHERE EXEMPTED INCOME IS INCLUDED IN THE TOTAL INCOME BU T 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 11.2.2 014 TO THE EFFECT THAT S. 14A WAS INTENDED TO COVER EVEN THOSE SITUATIONS WHETHER THERE IS A POSSIBILITY OF EXEMPT INCOME BEI NG EARNED IN FUTURE. THE CIRCULAR AT PARAGRAPH 4 STATES THAT I T IS NOT NECESSARY FOR EXEMPT INCOME TO HAVE BEEN INCLUDED I N THE INCOME OF A PARTICULAR YEAR FOR THE DISALLOWANCE TO BE TRIGGERED. ACCORDING TO THE LEARNED STANDING COUNSEL THE PROV ISIONS OF ITA NO. 931/MDS/2017 :- 7 -: S.14A 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 EF FECTED EVEN IN A SITUATION WHERE A TAX PAYER HAS NOT EARNED ANY TAXABLE INCOME IN A PARTICULAR YEAR. 9. WE ARE UNABLE TO SUBSCRIBE TO THE AFORESAID VIEW . THE PROVISIONS OF SECTION 14A WERE INSERTED AS A RESPON SE TO THE JUDGMENTS OF THE SUPREME COURT IN COMMISSIONER OF I NCOME TAX VS. MAHARASHTRA SUGAR MILLS LIMITED (1971) (82 ITR 452) AND RAJASTHAN STATE WARE HOUSING CORPORATION VS. COMMISSIONER OF INCOME TAX ((2002) 242 ITR 450) IN TERMS OF WHICH EXPENDITURE INCURRED BY AN ASSESEE CARRYING ON A COMPOSITE BUSINESS GIVING RISE TO BOTH TAXABLE AS W ELL AS NON- TAXABLE INCOME WAS ALLOWABLE IN ENTIRETY WITHOUT APPORTIONMENT. IT WAS THUS THAT S. 14A WAS INSERTED PROVIDING THAT NO DEDUCTION SHALL BE ALLOWABLE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO THE EARNING OF INCOME EXEMP T FROM TAXATION. AS OBSERVED BY THE SUPREME COURT IN THE J UDGMENT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. WALFORT SHARE AND STOCK BROKERS (P) LTD (2010) 326 ITR 1 '....THE MAN DATE OF S.14A IS CLEAR. IT DESIRES TO CURB THE PRACTICE TO CLAIM DEDUCTION OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME AGAI NST TAXABLE INCOME AND AT THE SAME TIME AVAIL OF THE TAX INCENT IVE BY WAY OF AN EXEMPTION OF EXEMPT INCOME WITHOUT MAKING ANY APPORTIONMENT OF EXPENSES INCURRED IN RELATION TO E XEMPT INCOME.' 10. THE PROVISION THUS IS CLEARLY RELATABLE TO THE EARNING OF ACTUAL INCOME AND NOT NOTIONAL OR ANTICIPATED INCOM E. THE SUBMISSION OF THE DEPARTMENT TO THE EFFECT THAT S.1 4A WOULD BE ATTRACTED EVEN TO EXEMPT INCOME IN CLUDABLE IN TOTAL INCOME WOULD ENTAIL THE ASSESSMENT OF NOTIONAL INCOME ASS UMED TO BE EXEMPT IN THE FUTURE IN THE PRESENT ASSESSMENT YEA R. THE COMPUTATION OF TOTAL INCOME IN TERMS OF S.5 OF THE ACT IS ON REAL INCOME AND THERE IS NO SANCTION IN LAW FOR THE ASSE SSMENT OF ADMITTEDLY NOTIONAL INCOME PARTICULARLY IN THE CON TEXT OF EFFECTING A DISALLOWANCE IN CONNECTION THEREWITH. 11. THE COMPUTATION OF DISALLOWANCE IN TERMS OF RUL E 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 MET HOD OF COMPUTATION ON NOTIONAL AND ASSUMED INCOME. WE BELI EVE THIS WOULD BE CARRYING THE ARTIFICE TOO FAR. ITA NO. 931/MDS/2017 :- 8 -: 12. THE LEARNED STANDING COUNSEL RELIES ON THE DECI SIONS OF THE DIVISION BENCH OF THE KERALA HIGH COURT IN SOUTH IN DIAN BANK LIMITED VS. COMMISSIONER OF INCOME TAX (2014) (49 TAXMANN.COM 100) AND COMMISSIONER OF INCOME TAX VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS (2012) (344 ITR 0259) AS WELL AS THE DECISION OF THE DIVISION BENCH OF TH E CALCUTTA HIGH COURT IN DHANUKA AND SONS VS. COMMISSIONER OF INCOM E TAX (2011) (12 TAXMANN.COM 227) IN ALL OF WHICH THE ASS ESSEE DID AS A MATTER OF FACT EARN DIVIDEND INCOME. THE AFORESA ID DECISIONS ARE THUS FACTUALLY DISTINGUISHABLE AND DO NOT ADVAN CE THIS PROPOSITION OF THE REVENUE. 13. RELIANCE IS ALSO PLACED ON A DECISION OF THE JU RISDICTIONAL HIGH COURT IN THE CASE OF BEACH MINERALS COMPANY PV T. LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX IN TCA NO.681 OF 2013 DATED 2.12.2013. IN THAT CASE PAYMENTS OF INTEREST BY THE ASSESSEE WERE SOUGHT TO BE DISALLOWED INVOKING THE PROVISIONS OF S.14A ON THE PREMISE THAT THE SAME RELATED TO BORRO WINGS THAT HAD BEEN INVESTED AND WOULD YIELD EXEMPT RETURNS. T HE ASSESSEE CONTESTED THE DISALLOWANCE U/S 14A ON MULTIPLE GROU NDS. IT WAS CONTENDED THAT THERE WERE SUFFICIENT RESERVES AND S URPLUSES AVAILABLE FOR THE PURPOSE OF INVESTMENTS AND BORRO WED FUNDS FOR WHICH THE PAYMENT OF INTEREST HAD BEEN INCURRED HAD NOT BEEN INVESTED. THE ASSESSEE SOUGHT TO DRAW A NEXUS BETWEEN THE BORROWED FUNDS AND THE INTEREST PAYMENTS HIGHLIGHT ING THE POSITION THAT THE QUANTUM OF AVAILABLE FREE FUNDS W AS FAR IN EXCESS OF THE INVESTMENTS MADE. THE BENCH IN THE L IGHT OF THE ABOVE SUBMISSIONS REMANDED THE ISSUE TO THE FILE O F THE ASSESSING OFFICER TO BE CONSIDERED DE NOVO AND AFTE R CONDUCTING A PROPER ENQUIRY. INTER ALIA A DIRECTION WAS ISSUED TO THE ASSESSEE TO TENDER A PROPER EXPLANATION FOR THE INT EREST PAYMENTS. THE OPEN REMAND WAS MADE IN THE FACTS AND CIRCUMSTANCES OF THAT CASE AND NO CONCLUSION WAS DR AWN BY THE BENCH ON THE POSITION OF LAW INVOLVED. IN FACT THE SUBSTANTIAL QUESTION OF LAW RAISED IN THAT CASE FOR THE CONSIDE RATION OF THE COURT WAS COUCHED IN GENERAL TERMS AS FOLLOWS WHETH ER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE INCOME TAX APPELLATE TRIBUNAL IS RIGHT IN LAW IN CONFIRMING TH E DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX AC T OF AN AMOUNT OF RS.55 00 000/- IN RELATION TO ASSESSMENT YEAR 2007- 2008? 14. NOTHING MUCH TURNS ON THE USE OF THE WORD INCLU DABLE AND THE PHRASE UNDER THE ACT INS. 14A AND WE ARE NO T PERSUADED TO ACCEPT THE EMPHASIS LAID OR THE INTERP RETATION OF THE SAME BY THE REVENUE. AN ASSESSMENT IN TERMS OF THE INCOME TAX ACT IS SPECIFIC TO AN ASSESSMENT YEAR AND THE R ELATED ITA NO. 931/MDS/2017 :- 9 -: PREVIOUS YEAR. S.4 OF THE ACT WHICH IMPOSES THE CH ARGE TO TAX READS THUS : CHARGE OF INCOME-TAX 4. (1) WHERE ANY CENTRAL ACT ENACTS THAT INCOME TAX SHALL BE CHARGED FOR ANY ASSESSMENT YEAR AT ANY RATE OR RATES INCOME-TAX AT THAT RATE OR THOSE RATES SHALL BE CHARGED FOR THAT YEAR IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS (INCLUDING PROVISIONS FOR THE LEVY OF ADDITIONAL INCOME-TAX) OF THIS ACT IN RESPECT OF THE TOTAL INCOME OF THE PREVIOUS YEAR OF EVERY PERSON: PROVIDED THAT WHERE BY VIRTUE OF ANY PROVISION OF THIS ACT INCOME-TAX IS TO BE CHARGED IN RESPECT OF THE INCOME OF A PERIOD OTHER THAN THE PREVIOUS YEAR INCOME TAX SHALL BE CHARGED ACCORDINGLY. THUS WHERE THE STATUTE INDENTED THAT INCOME SHALL BE RECOGNIZED FOR TAXATION IN RESPECT OF ANY PREVIOUS OTHER THAN THAT IMMEDIATELY PRECEDING THE RELEVANT ASSESSMENT YEAR THE PROVISION SHALL EXPRESSLY STATE SO. THE PROVISIONS OF S.10 IN CHAPTER III OF THE ACT DEALING WITH INCOMES NOT INCLUDED IN TOTAL INCOME COMMENCES WITH THE PHRASE IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE INCLUDED .....' 15. THE EXEMPTION EXTENDED TO DIVIDEND INCOME WOULD RELATE ONLY TO THE PREVIOUS YEAR WHEN THE INCOME WAS EARNED AND NONE OTHER AND CONSEQUENTLY THE EXPENDITURE INCURRED IN CONNECTION THEREWITH SHOULD ALSO BE DEALT WITH IN THE SAME PREVIOUS YEAR. THUS BY APPLICATION OF THE MATCHING CONCEPT IN A YEAR WHERE THERE IS NO EXEMPT INCOME THERE CANNOT BE A DISALLOWANCE OF EXPENDITURE IN RELATION TO SUCH ASSUMED INCOME. (MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD VS. CIT (225 ITR 802)). THE LANGUAGE OF S.14A (1) SHOULD BE READ IN THAT CONTEXT AND SUCH THAT IT ADVANCES THE SCHEME OF THE ACT RATHER THAN DISTORT IT. 16. IN CONCLUSION WE ARE OF THE VIEW THAT THE PROV ISIONS OF S. 14A READ WITH RULE 8D OF THE RULES CANNOT BE MADE APPL ICABLE IN A ITA NO. 931/MDS/2017 :- 10 -: VACUUM I.E. IN THE ABSENCE OF EXEMPT INCOME. THE QU ESTIONS OF LAW ARE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT AND THE APPEAL ALLOWED. NO COSTS. ACCORDINGLY WE ARE OF THE OPINION THAT THERE COULD BE NO DISALLOWANCE WHEN THERE IS NO EXEMPT INCOME. AS SUCH DISALLOWANC E STANDS DISMISSED. GROUNDS 3 TO 5 ARE ALLOWED. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOW ED ORDER PRONOUNCED ON TUESDAY THE 28TH DAY OF NOVEM BER 2017 AT CHENNAI. SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER SD/- ( . ! ' ) (ABRAHAM P. GEORGE) $ %& / ACCOUNTANT MEMBER - ' / CHENNAI . / DATED: 28TH NOVEMBER 2017. KV / ' $(0 1 2 1 ( / COPY TO: 1 . ! / APPELLANT 3. & 3( ( ) / CIT(A) 5. 167 $(8 / DR 2. $%! / RESPONDENT 4. & 3( / CIT 6. 79 :' / GF