TaxTMI 
TaxTMI 
2013 (8) TMI 630
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....its that the assessee has claimed fair market value of the land situated at Ambattur Industrial Estate at Rs.108/- sq.ft. as on 1.4.1981 but the Assessing Officer adopted the value at Rs.5/- per sq.ft. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to adopt the value at Rs. 50/- per sq.ft. and this valuation of Rs. 50/- per sq.ft was held to be reasonable by the co-ordinate Bench of this Tribunal in the assessee's own case for the earlier assessment year. 4. The Departmental Representative relied on the order of the Assessing Officer. 5. We have gone through the order of the co-ordinate Bench of this Tribunal in assessee's own case in ITA No.803/Mds/2012 dated 9.8.2012 and find that this issue has been decided in favour of the assessee by upholding the order of the Commissioner of Income Tax (Appeals) in fixing the fair market value of the land situated at Ambattur Industrial Estate at Rs. 50 per sq. ft. as on 1.4.1981 for the purpose of computing capital gains. While upholding the order of the Commissioner of Income Tax (Appeals), the coordinate Bench of this Tribunal in ITA No.803/Mds/2012 dated 9.8.2012 observed as under:- "4. The s....
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....with section 14A of the Act. 8. The Departmental Representative submits that the Commissioner of Income Tax (Appeals) is not justified in excluding the interest on bank loan and term loans out of computation of disallowance to be made under Rule 8D(2)(ii). The Departmental Representative submits that the Assessing Officer rightly applied Rule 8D(2)(ii) while computing the disallowance under section 14A read with Rule 8D of the Act. 9. The counsel for the assessee relied on the order of the Commissioner of Income Tax (Appeals) in excluding the interest on bank loan and term loans from the purview of computation of disallowance under section 8D(2)(ii). The counsel for the assessee also placed reliance on the decision of the Calcutta Bench of this Tribunal in the case of ACIT Vs. Champion Commercial Company Ltd. in ITA No.644/Kol/2012 dated 21.09.2012 in support of the contention that interest on bank loan and term loans have to be excluded from the purview of computation of disallowance under Rule 8D(2)(ii). When such loans were not utilized for the purpose of making investments for earning tax free income. 10. Heard both sides. Perused the orders of lower authorities and th....
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....ame has been directly utilized for investments, then the first and second limb of rule 80 attributing the interest payments to the investments will not be applicable. Accordingly, interest on bank loan and term loan amounting to Rs. 67,92,000/- and Rs. 3,82, 11,000/- respectively are to be excluded from the calculation to determine the disallowance under rule 8D(2)(ii). The AO is, therefore, directed to take into account only the remaining interest on other accounts amounting to Rs.1,29,43,000/- for computing the proportionate disallowance under rule 80 (2)(ii)." 11. On going through the order of the Commissioner of Income Tax (Appeals), we find that the Commissioner of Income Tax (Appeals) excluded the interest on bank loan and term loans from the calculation of disallowance under Rule 8D(2)(ii) as the assessee has utilized the bank loan and term loan for the purpose of purchase of machineries and for expansion of projects and these loans were specifically sanctioned for specific project and such loans were also used for the purpose for which they were sanctioned. In the circumstances, we find that the Commissioner of Income Tax (Appeals) has rightly excluded such interest from....
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....yunderlining supplied by us). This incongruity will be more glaring with the help of following simple example: In the case of A & Co Ltd, total interest expenditure is Rs 1,00,000, out of which interest expenditure in respect of acquiring shares from which tax free dividend earned is Rs 10,000. Out of the balance Rs 90,000, the assessee has paid interest of Rs 80,000 for factory building construction which clearly relates to the taxable income. The interest expenditure which is "not directly attributable to any particular receipt or income" is thus only Rs 10,000. However, in terms of the formula in rule 8 D (2)(ii), allocation of interest which is not directly attributable to any particular income or receipt will be for Rs 90,000 because, as per formula the value of A (i.e. such interest expenses to be allocated between tax exempt and taxable income) will be " A = amount of expenditure by way of interest other than the amount of interest included in clause (i) [ i.e. direct interest expenses for tax exempt income] incurred during the previous year". Let us say the assets relating to taxable income and tax exempt income are in the ratio of 4:1. In such a case, the interest disallow....
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.... funds that would be apportioned and the amount of expenditure by way of interest that will be taken (as 'A' in the formula) will exclude any expenditure by way of interest which is directly attributable to any particular income or receipt (for example-any aspect of the assessee's business such as plant/machinery etc.)............... The justification that has been offered in support of the rationale for r. 8D cannot be regarded as being capricious, perverse or arbitrary. Applying the tests formulated by the Supreme Court it is not possible for this Court to hold that there is writ on the statute or on the subordinate legislation perversity, caprice or irrationality. There is certainly no 'madness in the method'. 16. Once the revenue authorities have taken a particular stand about the applicability of formula set out in rule 8 D(2)(ii), and based on such a stand constitutional validity is upheld by Hon'ble High Court, it cannot be open to revenue authorities to take any other stand on the issue with regard to the actual implementation of the formula in the case of any assessee. Viewed thus, the correct application of the formula set out in rule 8D(2)(ii) is that, as....
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....unsel for the assessee submits that the issue in appeal had arisen in the assessment year 2004-05 also and on identical facts, the co-ordinate Bench of this Tribunal decided the issue in favour of the assessee in ITA No.1673 & 1674/Mds/2008 dated 03.5.2012. Copy of the order is placed on record. 17. The Assessing Officer while completing the assessment disallowed the claim of the assessee for write off of advances to its subsidiary companies on the ground that the assessee failed to substantiate that the advances have been made in the course of normal business. The Commissioner of Income Tax (Appeals) deleted the disallowance following the order of his predecessor in assessee's own case for the assessment year 2004-05 where similar claim for write off of bad advances made to subsidiary companies written off has been allowed. We find that the co-ordinate Bench of this Tribunal sustained the order of the Commissioner of Income Tax (Appeals) for the assessment year 2004-05 on the issue of write off of advances to subsidiary companies holding as under:- " 6. We have heard the parties and have perused the orders passed by the CIT(A) as well as the Assessing Officer. W....