TaxTMI 
TaxTMI 
TaxTMI 
2006 (3) TMI 226
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....se infrastructure projects is covered under s. 10(23G) of the IT Act. It is prayed that the addition of Rs. 6,86,81.751 may be deleted; 3. That the learned CIT(A) was not justified in disallowing the amount of Rs. 4,64,338 towards provision made in earlier years now reversed; 4. That the learned CIT(A) was not justified in estimating the expenditure attributable to exempt income @ 1 per cent of the total exempt income." 2. Ground No. 1 raised by the assessee in this appeal is general, seeking no specific decision from us. 3. At the time of hearing before us, the learned counsel for the assessee has not pressed ground Nos. 2 and 3 stating that the C.O.D. has not given its approval to agitate these grounds. Accordingly, these grounds ar....
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....that only the administrative cost of the investment could be attributable to the tax-free income on proportionate basis was unacceptable. He, therefore, apportioned the total expenditure incurred by the assessee to the tax-free income on proportionate basis and accordingly the expenses attributable to the tax-free income worked out at Rs. 99,89,59,218 were disallowed by him under s. 14A. This disallowance, inter alia, was challenged by the assessee in the appeal filed before the learned CIT(A) and the submissions made before the AO were reiterated on its behalf before the learned CIT(A). The learned CIT(A) found some merit in the submissions so made on behalf of the assessee before him and restricted the disallowance of Rs. 99,89,59,218 mad....
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.... estimate the expenses attributable to the exempt income @ 1 per cent of the total exempt income. As a result, an addition of Rs. 1,07,94,115 is confirmed. Thus, the appellant-company gets a relief of Rs. 98,81,65,103 on this account." Still aggrieved by the aforesaid decision of the learned CIT(A), the assessee is in appeal before the Tribunal. 5. The learned counsel for the assessee submitted before us that the assessee being a bank is governed by the Banking Regulation Act and as per s. 24 of the said Act, it is required to maintain a minimum statutory liquidity ratio (SLR). He submitted that in order to comply with the statutory requirement, investments are required to be made in the approved securities and accordingly investment was ....
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.... 6. Without prejudice to the aforesaid contentions, the learned counsel for the assessee also submitted that even if some disallowance under s. 14A is required to be made, the same should be made in respect of expenditure incurred by the assessee on investment being on proportionate basis and the other expenses incurred mainly on the running of various branches could not be considered for making the said disallowance. 7. The learned Departmental Representative, on the other hand, contended that the language of s. 14A is very clear and the disallowance of expenses attributable to the income which is exempt from tax is liable to be made irrespective of the relevant head of income and the other aspects such as real intention, head of income, ....
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....rm part of its total income and there being no dispute about the same, the expenditure incurred in relation to the said income was liable to be disallowed under s. 14A. The contention of the learned counsel for the assessee before us, however, is that the said tax-free investments were primarily made by the assessee for the purpose of its banking business to maintain the SLR and, therefore, the expenditure incurred in relation to the making of the said investment was entirely allowable as deduction in computing the business income being wholly and exclusively incurred for the purpose of the business. In this regard it is observed that a similar contention was raised on behalf of the assessee before the Calcutta Bench of the Tribunal in the ....
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....s under s. 36(1)(iii). It is common knowledge that no dividend could be earned without making investments as the dividend could have been earned only after investments are made. When it is found that investment in shares are made out of borrowed capital, it is then not understood as to why the interest paid on such borrowings should not be regarded as expenditure incurred in relation to earning of dividend. The amount of such interest is, therefore, required to be deducted from dividend income before computing the amount of the dividend on which exemption under s. 10(33) is to be allowed. Relief by way of exemption is to be given only on the net amount of the dividend, i.e., after deducting from the gross dividend, the expenditure incurred ....