2014 (12) TMI 207

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... (AR), the assessee's counsel, that the assessee is a non-banking financial company (NBFC), engaged in the promotion of new businesses and, consequently, invests in group companies, both within and outside India. This is the second round before the Tribunal, the matter having been restored back by it in the first instance for re-adjudication keeping in view the decision by the hon'ble high court in Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT [2010] 328 ITR 81 (Bom), besides any other by a high court or the apex court that may be relevant. Reference was made by him to the relevant part of the tribunal's order, combined for A.Ys. 2004-05 and 2005-06 (in ITA Nos. 4266 & 4267/Del/2010 dated 11.03.2011/PB pgs.12-15). He further continued that in Godrej & Boyce Mfg. Co. Ltd. (supra) it has been clarified that Rule 8D is prospective, so that it shall not apply for the years prior to A.Y. 2008-09 and, accordingly, a reasonable method, taking the facts and circumstances of the case into account, is to be applied. He would then take us through the assessee's paper-book, to exhibit the suo motu disallowance as well as the manner of its working (PB pgs. 10 - 11). The assessee had i....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....d any dissatisfaction with the assessee's working of the disallowance u/s.14A, or the basis thereof. Taking us through para 7 of the assessment order, she would draw our attention to the A.O. observing that the entire income flowing to the assessee as being from investments, so that, in his view, the expenditure would require being apportioned proportionately, i.e., between the interest and the dividend incomes, being the two sources of income arising to the assessee. No infirmity therein, i.e., the said observation by the A.O., based on the facts, has been shown by the assessee. 4. We have heard the parties, and perused the material on record. 4.1 The first thing that strikes us is the essential and the underlying unity between the method adopted by the assessee and that by the A.O. in allocating the operating expenditure toward the income not forming part of the total income, i.e., in principle. So much so that, aberrations apart, we do not see the two methods as yielding results which are any different. Both seek to apportion the expenditure in the ratio of exempt income to the total income. What, then, is the controversy about? The method followed by the assessee, whi....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

...., in that sense, the figures adopted by the assessee, being based on the computation of income (PB pg.10), represent a refinement over those adopted by the A.O., which are taken from the assessee's final accounts. This is as only the expenditure, to the extent claimed, even where not reflected in the income (or the operating) statement for the year, in computing the business income u/s. 28, that would stand to be allocated. This also explains the duplication, so that the expenditure disallowed in reckoning the business income stands included in the expenditure subject to allocation, which inflicts the A.O.'s working. The expenditure having been disallowed, so that it is not claimed, there is no question of it being included in the expenditure liable for apportionment between the two income streams - taxable and non taxable. 4.2 At this stage, the ld. AR was required by the Bench to justify the exclusion of some expenditure forming part of its operating expenses, per its allocation method; there being admittedly a difference between the expenditure allocated (Rs.201.09 lacs) and that claimed by the assessee per its computation of business income. He would, with reference ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....h does not fall under any head of income, which is required to satisfy the test of 'in relation to', specified in section 14A(1), including both direct and indirect expenditure, is eminently satisfied in the present case; rather, in the same manner and to the same extent as it is for the other income, being dividend (from non-domestic companies) and interest income, toward which it seeks to set off the entire operating expense, either wholly (Rs.106.26 lacs) or proportionately (Rs.201.09 lacs). Reference in this context may be made to the decision by the tribunal in the case of D. H. Securities (P.) Ltd. vs. Dy. CIT [2014] 146 ITD 1 (Mum) (TM); and Dy. CIT vs. Damani Estates and Finance P. Ltd. [2013] 25 ITR (Trib) 683 (Mum.), whereat this issue stands discussed at length in its different facets, relying principally on the decision in the case of Godrej & Boyce Mfg. Co. Ltd. (supra). 4.3 Next, and finally, we may discuss the assessee's reliance on decisions, as in the case of Maxopp Investment Ltd. (supra). The said reliance, as would be apparent from the foregoing, is mis-conceived. On facts, even as clarified during the course of hearing itself (refer para 3.2 abov....