TaxTMI 
TaxTMI 
2011 (9) TMI 58
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....49 (Kol) of 2002 for the Assessment Year 1998-99 by which the Tribunal allowed the appeal preferred by the Revenue and set aside the order passed by the CIT (Appeals). Being dissatisfied, the assessee has come up with the present appeal. The facts giving rise to filing of this appeal may be summed up thus: a) The appellant is a public limited liability company within the meaning of the Companies Act, 1956 and is assessed to tax under the Act. The present appeal arises out of the assessment of the appellant under the Act for the Assessment Year 1998-99 for which the relevant previous year was the financial year ending on March 31, 1998. b) The appellant is an investment company and carries on business of purchase and ....
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....ure of Rs.3,69,36,637/- incurred by it under Section 36(1)(iii) of the Act should be deducted. f) In course of assessment proceedings, the Assessing Officer required the appellant to furnish the breakup of the cost relating to earning of the dividend when it was explained by the appellant that no cost could be apportioned to the dividend income. The Assessing Officer, however, sought to work out pro-rata interest expenditure as relatable to earning of dividend. Such dividend constituted 5.27 percent of the total turnover of the assessee and as such, the Assessing officer assumed 5.27 percent of the interest expenditure amounting to Rs.19,14,940/- as relatable to earning of exempt dividend income and consequently, disallowed the said....
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....961 and/or the Circular dated July 23, 2001, issued by the Central Board of Direct Taxes the appellant is entitled to deduction or interest amounting to Rs.19,14,940?" Mr. Khaitan, the learned Senior Advocate appearing on behalf of the appellant, strenuously contended before us that the entire interest expenditure was incurred by the assessee for the purpose of its one and indivisible business of purchasing and selling of shares, securities, papers etc. and was allowable as deduction under Section 36 (1)(iii) of the Act in its entirety. According to Mr. Khaitan, simply because some dividend income accrued in favour of the assessee in respect of the shares held by it for the purpose of the business, no part of the interest expenditur....
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....e total income under this Act: Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under Section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under Section 154, for any assessment year beginning on or before the 1st day of April, 2001. The explanatory note on provision of Section 14A as amended by Finance Act, 2002 has been given in Circular 8 of 2002 dated 27th August, 2002 stating as follows [(2002) 258 ITR (St.) 13 at 30, 31]: "23. Amendment of Section 14A "23.1 Through the Finance Act, 2001, a new section namely 14A was inserted in the Income-tax Act retrospectively with effect from....
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....ness giving rise to taxable income as well as exempt income, the entire expenditure in relation to that business would have to be allowed even if a part of the income earned from the business is exempt from tax and thus, the Assessing officer erroneously disallowed a part of the expenditure by acting contrary to those decisions. Section 14A was, however, enacted to overcome those judicial pronouncements with retrospective effect from April 1, 1962 subject to the restrictions indicated in the proviso thereto. In the case before us, the original proceedings being taken in appeal before the Tribunal and the Section 14A having been given retrospective operation in case of pending assessment proceedings, the same would be applicable to the appea....