Income Tax Appellate Tribunal - Nagpur
A.C.I.T.. Cir.-4, Nagpur vs M/S Sarda Energy & Minerals Ltd, Nagpur on 20 June, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
NAGPUR BENCH, NAGPUR
BEFORE SHRI SHAMIM YAHYA (AM) AND SHRI RAM LAL NEGI (JM)
ITA No. 174/NAG/2015
Assessment Year: 2009-10
&
ITA No. 175/NAG/2015
Assessment Year: 2010-11
The Asstt. Commissioner of Income M/s Sarda Energy & Minerals
Tax, Circle -4, Ltd.,
Room No. 301, Saraf Chambers, 73-A, Central Avenue,
Nagpur - 01 Vs. Nagpur -18
PAN : AAACR6149L
(Appellant) (Respondent)
Assessee by : Shri R.K. Baral (Sr. DR)
Revenue by : Shri Rajesh Loya (AR)
Date of Hearing: 10/05/2018
Date of Pronouncement: 20/06/2018
ORDER
PER RAM LAL NEGI, JM
These appeals have been preferred by the revenue against the two orders dated 25.03.2015 passed by the Commissioner of Income Tax (Appeals)-4, Nagpur, pertaining to the assessment years 2009-10 and 2010-11, whereby the Ld. CIT (A) has partly allowed the appeals filed by the assessee against the assessment orders passed under section 143 (3) of the Income Tax Act, 1961 (for short 'the Act'). Since, both the appeals pertain to the same assessee, the same were clubbed, heard together and are being disposed of by this common and consolidated order for the sake of convenience.
ITA No. 174/NAG/2015 (Assessment Year: 2009-10)2. The brief facts of the case are that the assessee engaged in the business of manufacturing of sponge iron, steel ingots, steel billets etc., filed its return 2 ITA Nos. 174 & 175/NAG/2015 Assessment Years: 2009-10 & 2010-11 of income for the assessment year under consideration declaring the total income of Rs. 19,73,05,043/-. It was noticed that the assessee had claimed deduction u/s 80IA amounting to Rs. 1,03,23,62,186/-. The assessee was asked to submit details to verify the claim. Accordingly, the assessee submitted the details and contended that the company is owning a captive power plant for generating electricity for captive consumption in other manufacturing units and to sale the excess electricity to Chhatisgarh State Electricity Board, private parties and through Indian Energy Exchange. The Books of account vouchers etc for the captive power plant unit has been maintained separately. Therefore, the unit is entitled for the claim of deduction u/s 80IA(8). However, the AO after going through the details in the light of the contention of the assessee, restricted the claim of deduction u/s 80IA(8) of the Act holding that the captive power plant unit has shown more profit to claim more deduction u/s 80IA. Accordingly, the AO determined the total income of the assessee at Rs. 97,41,42,677/-.
3. The assessee aggrieved by the assessment order challenged the same before the Ld. CIT (A). The Ld.CIT (A) after hearing the assessee following the decision rendered by the ITAT, Nagpur in the assessee's own appeal for the A.Y. 2003-04, 2004-05 and 2005-06 order dated 28.10.2009 and for the A.Y. 2007-08 and 2008-09 vide order dated 03.02.2014 deleted the disallowance of Rs. 77,68,37,634/- in respect of deduction u/s 80IA (8). The revenue is in appeal against the aforesaid findings of the Ld. CIT (A).
4. The revenue has challenged the impugned order passed by the Ld.CIT (A) on the following effective ground:-
1. "Whether on the facts and circumstances of the, the Ld. CIT (A) was correct in law by following the decision of Hon'ble ITAT, Mumbai E-Bench and holding that the "Market Value"
as stated in section 80IA(8) of the I.T. Act 1961 will be the same as the "Sale Price" of the State Electricity Board when 3 ITA Nos. 174 & 175/NAG/2015 Assessment Years: 2009-10 & 2010-11 the assessee is not incurring any transmission/line losses or administrative or any other charge which the State Electricity Board has to incur necessarily?
5. At the outset, the Ld. counsel for the assessee submitted that since the Ld. CIT (A) has decided the sole ground of appeal in favour of the assessee by following the order of the ITAT, Nagpur rendered in the assessee's own case for the A.Y. 2008-09 and the orders pertaining to the assessment years 2003-04, 2004-05, 2005-06 and 2007-08 in the assessee's own case, there is no merit in the appeal of the revenue. Therefore, the same is liable to be dismissed.
6. On the other hand, the Ld. Departmental Representative (DR) did not controvert the contention of the Ld. counsel for the assessee that the Ld. CIT (A) has decided the issue in favour of the assessee by following the decision of the ITAT, Nagpur rendered in the assessee's own case for the A.Ys. mentioned above. However, the Ld. DR relying on the assessment order submitted that the Ld. CIT (A) has wrongly deleted the addition holding that the market value as stated in section 80IA (8) of the Act will be the same as the sale price of the State Electricity Board when the assessee is not incurring any expenditure on transmission, line losses, administrative expenses any other charges which the electricity board has to incur.
7. We have heard the rival submissions and also gone through the orders passed by the authorities below. The Ld. CIT (A) has decided the sole issue raised by the revenue in this appeal by following the decision of the Nagpur Bench of the ITAT rendered in the assessee's own case for the A.Ys. referred above. The relevant paras of the order of the Ld. CIT (A) read as under:-
"5.3 In any case, as stated by the appellant in its submission, the matter stands covered in favour of the appellant in its own case decided by the Hon'ble ITAT, Mumbai E Bench for 2003-04, 2004-05 & 2005-06 4 ITA Nos. 174 & 175/NAG/2015 Assessment Years: 2009-10 & 2010-11 vide order dated 28-10-2009 and by the Hon'ble ITAT Nagpur Bench, Nagpur for AY 2007-08 & AY 2008-09 vide order dated 03-02-2014. The relevant portion of the order of Hon'ble ITAT, Nagpur Bench dated 03-02- 2014 is reproduced hereunder for ready reference:-
"2.3. We have heard the rival submissions and perused the material before us. We find that it was the order passed by the CIT, Raipur u/s 263 of the Act that has triggered the controversy before us. He had, while revising the order for the AY 2003-04 passed by the AO, held that electricity was sold at higher rate by the assessee to its own Ferro Alloys Division & Captive Division with the purpose of reducing the tax liability. AO had followed the CIT Raipur, while framing assesswment for the year under appeal. We find that order passed by the CIT-Raipur u/s 263 has been reversed by the Tribunal for all the three AYs. In these circumstances in our opinion FAA was justified in allowing the appeal filed by the assessee. We find that while dealing with the identical issue in the case of Godavari Power and Ispat Ltd. (supra) Hon'ble High Court Chhattisgarh had framed the following question of law.
'Whether on the facts and in the circumstances of the case, the "market value" as specified in Section [ 80-IA (8) of the Act would be the same as the "sale price" of the State Electricity Board when the assessee did not incur any transmission loss or administrative or any other charges which the State Electricity Board has to incur for the same? While deciding the matter Hon'ble Court dismissed the appeals filed by the department. 2.3.a. We find that in the case of Jindal Steel and Power Ltd. (supra) identical issue had arisen and the FAA had confirmed the order of the AO holding that if there was difference in princes of units of power supplied to the Electricity board and to the assessee's own manufacturing establishment AO could take market value i.e. the rate at which power was supplied to the State Electricity Board. In that matter the assessee had sold power @ 3.72 and Rs. 2.32 per unit to his own captive division and the State Electricity Board respectively. Deciding the appeal in favour of the assessee. The Tribunal held as under:-
""We have carefully considered the submissions of both the parties on this aspect. The crux of the dispute before us relates to the manner of computing profits of the undertakings of the assessee engaged in 5 ITA Nos. 174 & 175/NAG/2015 Assessment Years: 2009-10 & 2010-11 generation of power for the purpose of relief under section 80IA of the Act. The difference between the assessee and the Revenue with regard to the determination of the market value of Power so as to record the income accrued to the assessee on supplies made to its own manufacturing units As noted earlier, in this case, the assessee has utilized the power generated for its captive consumption by way of supplies to its other manufacturing units and also for the State Electricity Board. The dispute essentially relates to the mechanism of section 80IA(8) of the Act. Section 80-IA(5) provides that where an assessee, which is eligible for section 80IA benefits, transfers its goods or services to a business other than the eligible business the consideration if any, recorded or such transfer in the accounts of the eligible business should correspond to the market value of such goods or services. The said section authorizes the Assessing Officer that where the transfer as recorded in the accounts of the eligible business does not correspond to the market value, the profits declared of the eligible business can be adjusted by the Assessing Officer on such basis ensure that goods or services transferred to its own unit is done at the market blue of such goods or services. Ostensibly, in this case the Assessing Officer was of the opinion that the consideration for transfer of power for captive consumption to other units has been recorded at a consideration which does not correspond to its market value. According to the Assessing Officer the consideration has been recorded at a price higher than the market value in other words, the Assessing Officer does not perceive Rs. 3.72 per unit as the market value of the power generated by the assessee and instead adopts Rs. 2.32 per unit as the market value, being the price at which the assessee sells power to the Board.
13. Before we proceed further, it is also relevant to understand the implications of the expression 'market value' as appearing in section 80IA(8) of the Act. In the Explanation below section 80 IA (8), it is provided that the expression 'market value for the purposes of the sub-section means the price that such goods or services would ordinarily fetch in the open market. In the above context, it therefore becomes important for us to consider as to whether the price charged by the assessee for power supplied to its own manufacturing units at the rate of 3.12 per unit can be said to be constituting a market value of its goods, namely, power.6
ITA Nos. 174 & 175/NAG/2015 Assessment Years: 2009-10 & 2010-11
14. In the Advanced Law Lexicon by P Ramanatha Aiya, 3rd Edition, 2005 the market price or market value has been defined as below:- "Market price or value- The price fixed by buyer and seller in an open market in the usual and ordinary course of lawful trade and competition, the price or value of the article established or shown by sales, public or private, in the ordinary way of business, the fair value of the property as between one who desires to purchase and one who desires to sell, the current price."
Similarly, in the case of Orchard v Simpson (1857) 2 CBNS 299, the phrase "market value" in contract for the sale of goods has been understood to mean the price in the market to an ordinary consumer, irrespective of the particular contract. Similarly, in Law Lexicon by P Ramanatha Aiyar, with reference to U.S. vs Certain: Property in Borough of Manhattan, City County and State of New York, ACANY, 403 F.d800, 802, it has been explained that the market value of an article or piece of property is the price which it might be expected to bring if offered for sale in a fair market, not the price which might be obtained on a sale at public auction or a sale forced by the necessities of the owner but such a price as would be fixed by negotiation and mutual agreement, after ample time to find a purchaser, as between a vendor who is will (but not compelled) to sell and a purchaser who desires to buy but is not compelled to take the particular article or piece property.
15. Therefore from the aforesaid, it can deduced that market value is an expression which denotes a price arrived at between the buyers and the seller in the open market wherein the transactions take place in the normal course of trading and competition in contrast to a situation where the price is fixed between a buyer and a seller in a negotiation done under the shadow of <legislatively mandated compulsion. In case of the former, the price fixed between the buyer and seller can be understood as denoting 'market price' since the elements of trading and competition exist. Whereas in the case of the latter situation, on, the price fixed between the buyer and seller cannot be understood as denoting the market price since the elements of trade and competition are conspicuous by the absence.
16. To understand the contrasting situations, let us analyze the situation on hand. In this case, the assessee received consent under section 44A of 7 ITA Nos. 174 & 175/NAG/2015 Assessment Years: 2009-10 & 2010-11 the Electricity(supply)Act,1948 to establish and operate the captive power plant in terms of a Power Purchase-cum-wheeling of Power Agreement dated 15.7.1999 entered between the State Electricity Board and the assessee. A copy of the said agreement has been placed in the paper book. Now, in terms of the Electricity (supply) Act, 1948, the Legislature has put restrictions on establishment of power generating unit and their functioning. The power generating units are allowed to use power for captive consumption and the surplus available, if any, is to be sold transferred to the State Electricity Boards. Section 43 of the Electricity (Supply) Act, 1948 only authorizes, the State Electricity Board to enter into arrangements for purchase and sale of electricity under certain conditions, Section 43A of the Electricity (Supply) Act, 1948 also lays down rules and conditions for determining the tariff for the sale of electricity by a generating company to the State Electricity Boards. A perusal of the same reveals that the tariff is determined on the basis of various parameters contained therein. From the aforesaid, it i5 evident that on one hand it is only upon granting of specific consent that a private person can set up a power generating unit having restrictions on the use of power generated and at the same time the tariff at which a power generating unit can supply power to Electricity Board is also liable to be determined in accordance with the statutory requirements. In this context it can be safely deduced that determination of tariff between the assessee and the Board can be said to be an exercise between a buyer and seller neither in a competitive environment and nor in the ordinary course of trade and business. It is an environment where one of the players has the compulsive legislative mandate not only in the realm of enforcing buying but also to set the buying tariff in terms of preset statutory guidelines. Therefore, the price determined in such a scenario cannot be equated with a situation where the price is determined in the normal course of trade and competition. Therefore, the price determined as per the Power Purchase Agreement cannot be equated with market value as understood in common parlance. We see no reason for not holding so for the purposes of section 80IA (8) also.
17. In this background, we may make a gainful reference to the decision of the Hon'ble Calcutta High Court in the case of CTT vs Manmathanath Mukherjee [ 1958] 341 ITR 567, which has been relied on by the assessee before us. The issue before the Hon'ble Calcutta High Court was in the 8 ITA Nos. 174 & 175/NAG/2015 Assessment Years: 2009-10 & 2010-11 context of the Bengal Agricultural Income-tax Act, 1944. Shorn of other details, the question considered by the Hon'ble High Court, relevant for the present, was the procurement rate of paddy offered by the State could be considered to be the market value of paddy. In this background, the following observations of the Hon'ble High Court are worthy of notice:-
"A market connotes freedom of bargain. There may be a market, completely circumscribed as regards the rates by price control, but within the limit set by the relevant rule or order, the area of operation would still be a commercially free area. Even where a control price is fixed, it is generally the ceiling which is fixed and not an in variable price. Be that it may, to say that when agents of the State seize paddy grown by subjects under the authority of some law or regulation and pay for it at some rate fixed by themselves and much below the rate in the open market, they create a regulated or any kind of market at all, is if I may be permitted to use the strong expression, a misuse of language. The Tribunal even speak of the persons whose paddy is seized as "operating" in the regulated market. How any person who is seized by the neck and compelled to deliver' his paddy and then dismissed with a trivial sum as its price can be said to operate in the market is beyond my comprehension.
From the aforesaid, an analogy that can be safely deduced is that the market value cannot be the result of a transaction which has been entered into between a buyer and a seller in a situation where one of the parties is carrying the compulsive mandate of the Legislature. The situation before us is such where the aforesaid analogy can be usefully applied. As we have seen earlier, the price at which the power is supplied by the assessee to the Board is determined entirely by the Board in terms of the statutory regulations. Such a price cannot be equated with the market value as understood for the purposes of section 80IA(8) of the Act. The stand of the Revenue to the aforesaid effect cannot be approved.
18. Having held so, the natural corollary is to ascertain whether the price recorded by the assessee at Ps 3.72 per unit can be considered to be the market value for the purposes of section 801 A(8) of the Act. The answer, to our mind, is in the affirmative. This is for the reason that the assessee as an industrial consumer is also buying power from the Board and the Board supplies such power at the rate of Ps 3.72 per unit to its consumers.
9ITA Nos. 174 & 175/NAG/2015 Assessment Years: 2009-10 & 2010-11 This is the price at which the consumers are able to procure the power. We may consider hypothetical situation as well. Had the assessee not been saddled with restrictions of supplying surplus power to the State Electricity Board, it would have supplied power to the State Electricity Board, it would have supplied power to the ultimate consumers at rates similar to those of the Board or such other competitive rates, meaning thereby that price received by the assessee would be in the vicinity of Ps 3.72 per unit i.e. charged by the Board from its industrial consumers/users, Thus, under the given circumstances, it would be in the fitness of things to hold that the consideration recorded by the asse5sees undertaking generating eclectic power for captive consumption at the rate of Ps 3.72 per unit corresponds to the market value of power. Therefore, on this aspect, we uphold the stand of the assessee and power. Therefore, on this aspect, we uphold the stand of the assessee and set aside order of the CIT (A) and direct the Assessing Officer to allow relief to the assessee under section 80IA as claimed. Assessee succeeds on this ground."
2.3.b. Here we would also like to mention that the revisionary proceedings initiated by the CIT u/s. 263 of the Act, for the earlier three AYs, were challenged before the Tribunal where similar issue was involved. CIT was of the opinion that AO should have taken price of the power unit at which assessee had supplied power to the State Electricity Board. Tribunal, while allowing the appeal filed by the assessee held that the Commissioner did not dispute that the stand of the assessee i.e. the price at which electricity sale was to be taken into account was the price at which State Electricity Board was selling electricity to it's consumers, was supported by a decision of the coordinate bench in the case of Jindal Steel & Power Ltd ('supra),that the Commissioner did not agree with the view so taken by the co-ordinate bench, hat the view adopted by the assessee, which was sought to be disturbed by the impugned revision order, was not only a possible view of the matter but it was a View which had been approved by a co-ordinate bench of the Tribunal. Referring to the decision of the Hon 'ble Supreme Court delivered in the case of Malabar Industrial Co. Ltd.(243 ITR83),Tribunal held that where two views were possible and the ITO 'i.e. AO)had taken one view with which CIT did not agree, it could not be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the ITO was unsustain - able in law, Tribunal further relied upon the order of Max India Ltd (295 10 ITA Nos. 174 & 175/NAG/2015 Assessment Years: 2009-10 & 2010-11 ITR 282) delivered by the Hon'ble Supreme Court where the same proposition was reiterated again. It was further held that facts of the present case did not indicate that view taken by the AO was not one of the possible views, that the stand so taken was legally correct. that the very foundation of exercise conducted by the CIT was devoid of legally sustainable basis, that the assessee had invited his attentions to various other decisions of co-ordinate benches holding the same propositions was laid down by the co-ordinate bench in the case of Jindal Steel & Power Ltd. (supra), but he simply brushed them aside and held that these cases were "distinguishable on facts", that there was not whisper of a reason as to what are the distinguishing factors, but yet CIT refused to be guided by the same. Tribunal discussed the matter on merits also and held that even on merits the CIT was incorrect in doing so. that in the case of West Coast Paper Mills Ltd vs. ACT (103 ITD 19 @ 37), the co-ordinate bench has observed that the CIT(A) had come to a reasonable conclusion that the transfer price (of electricity) should be taken on the basis of average price paid by the assessee during the whole year to KSEB minus certain extraneous charges like electricity, duty etc. which was not connected with the business of the assessee, that the Bench was unable to understand how that proposition was distinguishable on (acts. In para 9 (pg. 7) of the order Tribunal has held as under:
9. Learned DR has addressed length on correctness of approach adopted by learned CIT, on merits. He submits that the learned CIT may not share perception of the co-ordinate benches but the exercise SO conducted by him constitutes logical thinking and is fully justifiable on merits. That aspect of the matter, however, is not relevant at this stage. Once we come to the conclusion that the stand of the assessee, which is sought to be disturbed by the impugned revision order, is a possible view of the matter and it is not sustainable in law, we have to conclude that learned Commissioner indeed erred in assuming jurisdiction u/s 263 on the facts of this case. That apart, even on merits, respectfully following co-ordinate benches, we have to hold that learned Commissioner erred in concluding that the transfer price of electricity is to be taken at the price at which electricity is sold to the state electricity board Sells the same to it's consumers. In our considered view, the price at which State Electricity Board Sells electricity to it's consumers is 11 ITA Nos. 174 & 175/NAG/2015 Assessment Years: 2009-10 & 2010-11 true indicator of it's market price as required to be taken into account in terms of the provisions of section 80IA(8)."
From above it is clear that matter was decided in favour of the assessee on merits by the Tribunal. As stated earlier, order of the FAA in the case of Jindal Steel & Power Ltd (supra) has been reversed by the Tribunal wherein identical issue was involved. Besides, similar issue had been decided against the department by the Hon'ble Chhattisgarh High Court in the matter of Godavari Power and Ispat Ltd. Other cases relied upon by the assessee also support the stand taken by the FAA. Therefore, if she had followed the orders of the Tribunal for the earlier assessment year in respect of proceedings initiated u/s.263 of the Act, in our opinion she has chosen a legal just and reasonable path. Confirming the orders of the FAA, we decide effective ground of appeal against the AO. Appeal filed by the AO stands dismissed."
6. Respectfully following the clear finding of the Hon'ble ITAT, Nagpur Bench in the appellants own case, the disallowance made by Ld. AO in respect of deduction u/s 80IA(8) amounting to Rs. 77,68,37,634/- is hereby deleted. These grounds are therefore allowed.
7. Ground no. 7:-
7.1 In this ground the assessee has challenged the levy of interest u/s 234B& 234C of the Act. Since this ground is a consequential ground, the AO is directed to give consequential relief to the assessee while giving effect to this appellate order. This ground is therefore dismissed."
8. As pointed out by the Ld. counsel for the assessee, the issue involved in this appeal is covered by the orders rendered by the Nagpur Bench of the Tribunal in the assessee's own appeal for the A.Y. 2003-04, 2004-05, 2005-06, 2007-08 and 2008-09. Since, the Ld. CIT (A) has decided the issue in accordance with the view taken by the coordinate Bench, we do not find any reason to interfere with the findings of the Ld. CIT (A). We therefore uphold the findings of the Ld.CIT (A) and dismiss the sole ground of the appeal filed by the revenue. The AO is directed to delete the addition in terms of the order passed by the Ld. CIT (A).12
ITA Nos. 174 & 175/NAG/2015 Assessment Years: 2009-10 & 2010-11 ITA No. 175/NAG/2015 (Assessment Year: 2010-11) The facts of the case and the issue involved in this appeal is identical to the facts and issue involved in the assessee's case for the A.Y. 2009-10 discussed above, except the amount of deduction claimed by the assessee u/s 80IA (8) of the Act. Hence, we do not consider it necessary to mention the facts of the case. In this case, the assessee has claimed deduction u/s 80IA amounting to Rs. 38,17,65,394/-. The AO disallowed Rs. 17,79,52,681/- for the same reasons mentioned in assessment order for the assessment year 2009-10 discussed above. In appeal, the Ld. CIT (A) deleted the disallowance made by the AO. The revenue has challenged the impugned order passed by the Ld. CIT (A) on the following grounds:-
1. "Whether on the facts and circumstances of the, the Ld. CIT (A) was correct in law by following the decision of Hon'ble ITAT, Mumbai E-Bench and holding that the "Market Value"
as stated in section 80IA(8) of the I.T. Act 1961 will be the same as the "Sale Price" of the State Electricity Board when the assessee is not incurring any transmission/line losses or administrative or any other charge which the State Electricity Board has to incur necessarily?
2. Whether on the facts and circumstances of the case, the assessee has incurred expenditure for earning income which is claimed as exempt u/s 14A r.w. Rule 8D of the Act, 1961?
2. So far as the first ground is concerned, since we have upheld the findings of the Ld.CIT (A) and directed the AO to delete the disallowance made by the assessee u/s 80IA(8) in the assessee's appeal for the A.Y. 2009-10 aforesaid, consistent with our findings, we uphold the findings of the Ld. CIT (A) on this ground of appeal and dismiss this ground of appeal of the revenue.13
ITA Nos. 174 & 175/NAG/2015 Assessment Years: 2009-10 & 2010-11
3. The second ground pertains to disallowance u/s 14A read with Rule 8D made by the AO amounting to Rs. 19,88,901/- The Ld. DR relying on the assessment order submitted that since the assessee had claimed exempt income of Rs. 33,46,711/-u/s 10(34) of the Act, the AO has rightly made disallowance of Rs19,88,901/-under section 14A read with Rule 8D.
4. We have perused the orders passed by the authorities below in the light of the rival submissions of the parties. We notice that AO has made the addition in question u/s 14A read with Rule 8D(iii) of the Income Tax Rules. Section 14A (2) of the Act says that AO shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act, if the AO having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income. Sub-section 3 of section 14A further says that the provisions of sub-section 2 shall also apply to the case where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the Act.
5. We notice that in the present case the assessee has claimed that no expenditure has been incurred in relation to income which does not form part of the total income. The Ld. counsel pointed out that the assessee does not have any investment division managed by separate administrative staff. Under these circumstances it was necessary for the AO to establish that the assessee had incurred expenditure for earning exempt income. In other words disallowance u/s 14A requires finding of incurring of expenditure and where it is found that for earning exempt income no expenditure has been incurred disallowance u/s 14A cannot stand. In the present case since the AO has not given any finding that the assessee has incurred expenditure for earning exempt income, we do not find any reason to interfere with the findings of the 14 ITA Nos. 174 & 175/NAG/2015 Assessment Years: 2009-10 & 2010-11 Ld. CIT(A). We therefore uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal of the assessee.
In the result, appeals filed by the revenue for assessment year 2009-10 and 2010-11 are dismissed.
Order pronounced in the open court on 20th June, 2018.
Sd/- Sd/-
(SHAMIM YAHYA) (RAM LAL NEGI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Nagpur, Dated: 20/06/2018
Alindra, PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A)
4. CIT
5. DR, ITAT, Nagpur
6. Guard file.
BY ORDER,
//True Copy//
(Sr. PS/PS)
ITAT, Nagpur