TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 511
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..... 19,59,692/- by applying Rule 8D being o.5% of the average investment. The assessee filed the appeal and the CIT (A) granted the relief by holding as under :- "5. I have carefully considered the submissions made by the ld. AR and have gone through the assessment order. It is an admitted fact that the appellant company during the relevant assessment year has not earned either any exempt income or claimed any expenditure for earning any exempt income. It is seen that during the relevant assessment year the appellant company has shown investment of Rs. 2 crore which were actually invested in the assessment year 2008-09. For convenience the details of investment of Rs. 2 crore as reflected in Schedule V of the audited balance sheet are given ....
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....the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. Further, the Central Board of Direct Taxes (CBOT) vide Notification No. 45/200S, dated March 24th, 2008 prescribed the method for determining the expenditure to be disallowed under section 14A in relation to income not forming part of the total income ~y inserting Rule-8D in the Income-tax Rules. However, Rule-8D is not applicable in an automatic manner. Rule 8D would be applied to determine the amount of disallowance under section 14A, where the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with- (a) the correctness of the claim of disallowance of....
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.... claim of the assessee, then on the basis of objective criteria and after giving the assessee a reasonable opportunity, he shall have to reject the claim and state the reasons for doing so. Having doing so, the assessing officer will have to determine the amount of expenditure incurred in relation to income which does not form part of the total income under the said Act. He is required to do so on the basis of a reasonable and acceptable method of apportionment. Now adverting to the present case it is seen that the AO has applied rule 80 read with section 14A without establishing any nexus between the borrowed funds and the investment made. The AO has further relied upon the decisions of the Hon'ble Spl. Bench ITAT Delhi in the case o....
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....eal at any time before appeal." 4. While pleading on behalf of the revenue, ld. DR submitted that the assessee has incurred interest expenses and no bifurcation was provided during the assessment proceedings. In view of this fact, the Assessing Officer rightly applied the Rule 8D by making the disallowance as the Assessing Officer was not satisfied with the correctness of the claim of expenditure made by the assessee. He further submitted that CIT (A) was not justified in observing that disallowance u/s 14A of the Act cannot be made when there is no exempted income. He submitted that when there is expenditure which has incurred to earn the exempted income there may be an income or may not be an income for the year under consideration then ....
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....inst hypothecation of the current assets and as such were directly utilized for that purpose. Since there was no change in the investment and also there was no income received which is exempted from income. All these facts show that no disallowance was deserved to be made as per Rule 8D. There was no dividend income. There was no long term capital gain. No bank/financial institutions have levied any charge or dues as recorded by Assessing Officer. The observations of Assessing Officer that assessee has earned huge amount of dividend is also not correct. The CIT (A) has correctly appreciated the fact and granted the relief to the assessee. He also relied on the following decisions of Hon'ble High Courts :- (i) CIT vs. Suzlon Energy Limi....
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.... in ITA No.305/Mds/2013 - wherein the disallowance made u/s 14A was deleted for the reasons that the assessee did not make any fresh investment during the year which could generate income in forthcoming years. The assessee incurred interest expenditure under five major heads and none of which is directly related to earning of exemption income and the Assessing Officer has not pointed out any direct nexus between the interest expenditure and exempt income; (ix) Hon'ble Gujarat High Court decision in the case of CIT vs. Corrtech Energy (P.) Ltd. - [2014] 45 taxmann.com 116 (Gujarat); and (x) Hon'ble Allahabad High Court decision in the case of CIT vs. Shivam Motors judgment dated 05.05.2014. 6. We have heard both the sides on the i....