TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 156
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....anagement and administrative expenses are required to be deducted while computing exempt income or dealing with investment matter and in that view, in sustaining the disallowance of Rs. 26,09,386/- under Rule 8D(2)(iii) of the Income Tax Rules. 3. On the facts and in the circumstances of the case, the learned CIT(A) erred in sustaining disallowance of Rs. 26,09,386/- u/s 14A of the Income tax Act, 1961, by applying the provisions of Rule 8D(2)(iii) of the Income Tax Rules against meager Dividend income of Rs. 1,32,638/- only. 4. The appellant craves leave to amend, alter, modify, add to, abridge and/or rescind any or all the above grounds in future." 3.1 In the Revenue's appeal, the Revenue has raised the following grounds: "1. That in the facts and circumstances of the case and in law, the Learned CIT(A) has erred in law in deleting the disallowance of Rs. 37727610/- in respect of interest made u/s.14A of the Act read with Rule 8D of IT rules by holding that the investment of shares was made out of own funds of the assessee without considering that the linkage between the funds borrowed and the investments, the income of which is exempt, was not established by the assessee. 2....
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....s, the submission by the ld. D.R. that the investment in the shares was out of interest bearing funds. It was a submission that the ld. CIT(A) had in his order in para 4.1 held that the assessee was having a common pool in respect of its own fund as also its loan fund. It was a submission that as the assessee had used interest-bearing fund for purchasing shares and the assessee had paid interest on the same, the disallowance as made by the AO by invoking the provisions of section 14A read with Rule 8D was liable to be upheld. It was a further submission that though the AO has in his assessment order specifically held that there is no disallowance liable to be made under rule 8D(i), disallowance under rule 8D(ii) had been made on the basis of the computation provided thereunder, as also under Rule 8D(iii). It was a submission that in view of the decision of the Hon'ble Jurisdictional High Court in the case of Danukha & Sons -Vs- CIT (Central)-I, Kolkata reported in 201 Taxman 105 (Kol), it was for the assessee to show the source of acquisition of the shares by production of the materials that those were acquired from funds available in the hands of the assessee at the relevant point....
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....at the loan funds were used for the acquisition of assets as also towards working capital and in fact the fixed assets net block increased by Rs. 116 crores, after considering a depreciation of 57 crores. It was, thus, a submission that the actual increase in the fixed assets when compared to the net block for the year ended on 31.03.2007 was 174 crores. It was a submission that the profits available to the assessee before taxation for the assessment year 2008-09 was Rs. 130 crores and the profit, after taxation, was Rs. 109 crores. The amount available for appropriation for the assessment year 2008-09 was Rs. 128 crores. He further drew our attention to the investments during the year, which is shown at page 84, being the investment in Varrsana Ispat Limited at Rs. 103 crores. It was a submission that the other investments, which were there as on the beginning of the assessment year was to an extent of Rs. 58,27,282/-. It was a submission that it is out of the shares of this investment of Rs. 58,27,282/-, the assessee had received the dividend income and not on the investment of Rs. 103 crores. The ld. A.R. further drew our attention to page 362 of the paper book, which was the co....
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....on (2), shows that if the AO is not satisfied with the correctness of the claim of the assessee, then the AO shall determine the amount of expenditure incurred in relation to such income, which does not form part of total income under the Act. For this the method is prescribed in rule 8D. The provision of section 14A, sub-section (3) specifies the provision of 14A(2) would also apply where the assessee makes a claim that there is no expenditure incurred. This is because if the assessee does not make a disallowance under section 14A in its computation of total income, when filing the return, then if subsection (3) was not available, the AO might not be able to make a disallowance under section 14A. Thus, where the assessee makes a claim that only a particular amount is to be disallowed under section 14A or where the assessee does not make a disallowance under section 14A, if the AO proposes to invoke the section 14A, he is to record a satisfaction on that issue. This satisfaction cannot be a plain satisfaction or a simple note. It is to be done with regard to accounts of the assessee. In the present case, there is no satisfaction by the AO and consequently, in view of the decision o....
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....eceipt. Why we say here that it is to be shown by the AO is on account of the words in Rule 8D(1) being "where the Assessing Officer, ...... is not satisfied with. (a) ........ (b) ........ in relation to income......., he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2). In the assessee's case, admittedly, the assessee has substantial capital. The increase in the capital itself is to an extent of Rs. 4 crores and in respect of reserves and surplus, the increase is Rs. 112 crores. The loans taken during the year admittedly are for the letters of credit and the assessee is bound to provide the bank stock statement and other details to show the utilization of the loans. No bank would permit the loan given for one purpose to be used for making any investment in shares. The ld. CIT(A), it is noticed that after considering these facts that the assessee had not used any of its borrowings for purchasing the shares, has deleted the disallowance. On this ground itself, the deletion as made by the ld. CIT(A) is liable to be confirmed and we do so. 7.1 In any case, the working of the disallowance under sub-part (ii) of....