TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 259
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....ranted partial relief to the Assessee. Aggrieved by the order of CIT(A), Revenue and Assessee both are now in appeal before us. 4. The concise grounds of appeal filed by the Assessee reads as under:- 1. The ld. CIT(A) erred in law and on facts in upholding disallowance of Rs. 6,13,27,758/- comprising of proportionate interest of Rs. 5,68,55,819/- and proportionate administrative expenses of Rs. 44,71,939/- u/s. 14A of the Act by applying Rule 8D of the Income Tax Rules 1962. 1.1 The ld. CIT(A) erred in applying Section 14A to the appellant's case even though the investments in tax free securities were less than appellant's own funds and no expenses were incurred to earn exempt income. 1.2 The ld CIT(A) erred in applying Rule 8D for A.Y. 07-08 for worksing out above disallowance which is against the ratio of the Hon'ble High Court decision in the case of Godrej and Boyce Manufacturing Company Ltd. 328 ITR 81. 2.0 The ld. CIT(A) erred in upholding tha....
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....s itself was of investment and most of the investments were made in tax free instruments. According to A.O there are some handling and processing charges for management of investment portfolio. He also noted that Assessee had not produced day to day movement of fund and therefore not established that only tax free funds have been utilized for making investments. He therefore proceeded to disallow the expenses under section 14A as per the methodlogy prescribed under Rule 8D of the Income tax Rules and accordingly worked out the disallowance at Rs. 6,13,27,758/-. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) confirmed the action of A.O by holding as under:- "8.2 I have considered the facts and submissions of the ld. AR carefully. It is observed that the A.O. has computed the disallowance u/s 14A in accordance with Rule 8D. The appellant has invested huge amount in tax free investments from which the appellant is deriving tax free income in the form of dividend and income which is exempt u/s u/s 10(15)(iv)/10(23G). The identical issue has already been decided by my ld. Predeces....
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.... out the expenditure in relation to the exempt income and 'not to examine whether the expenditure incurred by the assessee has resulted into exempt income or taxable income-Expression 'in relation to in sub-s(1) of s. 14A has been explained-in sub-so (2) itself as the amount determined by AO in accordance with such method as may be prescribed. The method has been, prescribed in r. 8D to mean both direct and indirect expenses - There is not even an iota of doubt that the intention behind using the expression 'in relation to' in s. 14A is to encompass not only the direct but also the indirect expenditure which has any relation to the exempt income - interest on capital borrowed for investment in shares has dominant and immediate connection with dividend income-even though the shares may be held as stock-in-trade, dividend as also profits if any on sale of shares are the "direct result of such investment-Same is therefore, disallowable as per provisions of s. 14A. In order to escape the applicability of s, 14A, onus is on the assessee to prove that expenditure was incurred for earning taxable income. However, in view of r. 8D , the question of onus and apportionment of....
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....tter to the file of A.O. With respect to disallowance of administrative expense he placed reliance on the decision of Hon'ble Kerala High Court in the case of Catholic Syrian Bank Ltd. 9 Taxman. com. 148 wherein it has been held that no disallowance on administrative expenses should be made in the assessment year prior to 08-09. He also submitted that in assessee's own case for A.Y. 05-06 & 06-07, the Hon'ble ITAT confirmed disallowance to the extent of 10% of the total administrative expenses. He therefore submitted that in view of the submissions the matter may be restored to the file of A.O. The ld. D.R. on the other hand relied on the order of A.O and CIT(A). 10. We have heard the rival submissions and perused the material on record. It is undisputed fact that Assessee has earned tax free income of Rs. 8.36 crores during the year and the A.O has worked out disallowance under section 14A following the method prescribed under Rule 8D of the Rules. The Hon'ble Bombay High Court in the case of Godrej & Boyce Ltd. (supra) had held that Rule 8D is applicable from A.Y. 08-09. It has further stated that prior to assessment 08-09, the A.O has to work out the disallowance on a reasonabl....
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....crore (after taking into account investment in Gross Block) accordingly. The disallowance to that extent is, therefore confirmed." For A.Y. 06-07, he relied upon the order of Special Bench ITO vs. Daga Capital Management Pvt. Ltd. 312 ITR (AT) 01 and A.O. was directed to apply Rule 8D for disallowance u/s.14A. 6. Now the assessee is before us. ld. Counsel for the appellant contended that there was no direct nexus between borrowings and investments in tax free securities. As per assessee, the Section 14A is not applicable. He also placed reliance on following decisions: (i) Gujarat Industrial Investment Corporation Limited in ITA No. 4378/Ahd/2007 (ITAT Ahmadabad) (ii) CIT v. Hero Cycles Ltd. (2010) 323 ITR 518 (P & H) (iii) Metalman Auto (P.) Ltd. (2011) 11 taxmann.com 51 (P & H) (iv) Gujarat Power Corporation Limited in Tax Appeal No. 1587 of 2009 He further argued that own funds should have been compared directly with the investments without reducing the value of gro....
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.... This ground of the assessee is rejected." Rule 8D is applicable from the A.Y. 08-09 as held by Hon'ble Bombay High Court in case of Godrej & Boyce Manufacturing Co. Ltd. v. CIT (2010) 234 CTR 001. 8. We find that in the present year, the facts are not available, accordingly, this issue is being set aside to the file of the Assessing Officer to follow the decision taken in assessee's own case in ITAT No. 403/Ahd/2005 for assessment year 2001-02 dated 10.07.2009 after providing reasonable opportunity of being heard to the assessee. This issue of the assessee's, appeal in both assessment years, is allowed for statistical purposes. 11. In view of the aforesaid facts and since the facts of the case are identical to that of earlier year, following the decision of Co-ordinate Bench of Tribunal cited hereinabove, we remit the issue to the file of A.O to verify the submissions of the Assessee more so about the availability of the tax free funds in the year of investments and in the light of the decisions cited before us and thereafter decide the issue as per law. In the result, this ground of Assessee is allowed for statistical purposes.....
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....ain distinguishing features between the words "hire" and "lease". However, it is argued on behalf of the assessee that for the purposes of the above entry, the word "hire" and the word "lease" should be read as equivalent. We do not find any merit in this argument. The entry, read as a whole, states that the assessee must run the vehicle on hire or that the assessee must carry on the business of running the vehicles on hire. In this case, the assessee is a leasing and financing company. Its income is from lease rent, bill discounting and service charges. Therefore, merely because the assessee lets out motor buses, motor trucks and motor cans to its customers, it cannot be stated that the assessee is using the said vehicles in the business of running them on hire. In the circumstances, we see no reason to interfere with the order passed by the Tribunal. Before concluding, we may clarify that in this case, the assessee is given the benefit of normal depreciation. That, in this case normal depreciation has not been denied by the Department. That, the department has not impugned the genuineness of the lease. That, the only argument advanced before the department was....
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....No.1927/Ahd/2007 for A.Y. 02-03 and held that sale and lease back is a continuing transaction addition admitted by both the sides. Respectfully, following the Tribunal's decision, we dismiss this issue of Revenue's appeal. The revenue had not distinguished the findings of Coordinate Bench given for earlier year when transactions are same and depreciation claimed on written down the value of the same assets on sale and lease back transaction, then, we have to follow the earlier decision otherwise material facts are different. Thus, we are of considered view that by following the Co-ordinate Bench decision in earlier year, we allow the appeal of the assessee in his favour and dismiss the revenue's appeal on these grounds. 16. Before us the ld. A.R. has submitted that the facts of the case in the year under appeal are identical to that of earlier year to which the ld. D.R. could not controvert. We therefore following the decision of the Coordinate Bench in the assessee's own case and for similar reasons decide the issue in favour of the Assessee. Thus this ground of Assessee is allowed. 17. In the result the appeal of Assessee is allowed for statistical purposes &....
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....hand did not object to the submission of the Assessee. 21. We have heard the rival submissions and perused the material on record. Before us since ld. A.R. has fairly conceded that the issue needs to be decided against the Assessee since it has already got relief in earlier years, we therefore uphold the addition made by A.O. In the result this ground of Revenue is allowed. Ground no. 2 is with respect to deleting the disallowance made on reversal of provision for diminution in the value of investment. 22. During the course of assessment proceedings, A.O noticed that the Assessee had reversed provision for diminution in the value of investment of Rs. 25,73,785/- and the same was excluded from the total income. The Assessee's justification for excluding it from the total income was that the same was not claimed/allowed as deduction in the year in which the provision was made and therefore the reversal of the same was rightly excluded from the total income. The submission of the Assessee was not found acceptable to the A.O for the reason that against the disallowance made in earlier years Assessee had preferred appeals and the same was pending. A.O further noted that in A.Y. 06-07,....