TaxTMI 
TaxTMI 
2015 (5) TMI 420
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....p companies of Weizmann Limited viz. Kama Energy Limited was amalgamated with Weizmann Ltd w.e.f. merger appointed dated 01.04.2009 as per scheme of arrangement sanctioned by the Hon'ble Bombay High Court on 29.10.2010. As per the scheme of amalgamation, all the assets and liabilities of the two amalgamating company were transferred to Weizmann Limited. Since the appeals to ITAT, by the assessee and the department, were filed in 2012, which is after the appointed date, they were filed in the name of the amalgamated company viz. Weizmann Limited (in respect of M/s Karma Energy Ltd. Amalgamated with Weizmann Ltd.). ITA No. 7551/Mum/2012 : by the assessee : 4. The solitary ground taken by the assessee pertains of disallowance of Rs. 19,76,095/- under section 14A of the Income Tax Act, 1961. 5. The facts are that the assessee received dividend income of Rs. 3,060/- from M/s Malad Shakari Bank Ltd. Since the bank is not a scheduled bank, it was not covered u/s 115O and therefore, the dividend received from this bank became taxable. The assessee did not claim the income to be exempt and included the same in the tax computation. 6. The AO noticed the figure of dividend and called for ....
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....the income determined under normal provisions is less then MAT, in such a circumstances MAT will supercede the normal provisions. Here in the case before us we do not find any reference of MAT provision. In such a circumstance, the second limb become otiose. In any case, tax payable under normal provisions was much more then MAT provisions. 15. As a result, the appeal of the assessee is allowed. ITA No. 7622/Mum/ 2012 : Department Appeal : 16. The following grounds have been taken: "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the depreciation claimed on the inflated cost of windmills. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance made as per sub clause (ii) of Rule 8D(2) r.w.s. 14A of the Income Tax Act. 3. On the facts and in the circumstances of the case, the impugned order of the Ld. CIT(A) is contrary to law to be set aside and that of the Assessing Officer be restored. 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary". 17. The facts are, "The facts of the case are that the assessee had purchase....
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....f Rs. 25.57 lacs which it has claimed as exempt u/s. 10(34). The appellant had not allocated any specific expenditure towards the earning of the above exempt income in the Profit and Loss account. During the assessment proceedings, the Assessing Officer asked the appellant to explain as to why disallowance u/s. 14A read with rule 81) of the I.T. Rules should not be made. The appellant vide its letters dated 3/11/2011 and 30/11/2011 has submitted before the A.O. that it had already disallowed an amount of Rs. 98.86 lacs u/s. 14D in its computation of income against the said exempt income. The A.O. observed that the appellant in principle accepted the fact that the provisions of section 14A read with rule 8D are applicable to it. It has, therefore, suo moto disallowed an amount of Rs. 98.86 lacs u/s. 14 A read with rule 8D. 2.3 However, the assessing officer has not agreed with the correctness of the computation of disallowance made by the A.O. While computing the disallowance u/s. 14A in its computation of income, the appellant had excluded certain interest expenditure which has a direct nexus with loans from IREDA, IDBI, loans from banks for purchase of foreign bills packing credit....
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.... whether the investment made in from interest free funds or interest bearing funds and finally whether the investments made were dividend income yielding or non dividend income yielding. 31. At the outset, the AR submitted that the assessee had been making the investments in the companies to gain control on the management, by using its own free funds. As mentioned by the CIT(A) in para 2.4 & 2.5, the order, that the assessee had interest free own funds of Rs. 8248.44 lacs and investments of Rs. 5162.95 lacs. This would clearly show that there would be no diversion of interest bearing funds. In such a case, the decision of Reliance Utilities and Power Ltd reported in 313 ITR 340 would squarely cover the conduct of the assessee. The AR also placed reliance on the decision of Shoppers Stop Ltd vs ACIT in ITA No. 144 & 4475/Mum/2010. 32. Coming to the next aspect, i.e. whether the investments were made for dividend yielding or non dividend yielding. It has been argued by the AR that the assessee made investments in companies to gain control and not to earn the dividend. The factum of dividend income as declared at Rs. 25.57 lacs and disallowance computed by the assessee at Rs. 98.86 ....
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..../Mum/2006. 39. Adverting our attention towards the decision of Special Bench in the case of Chemivest Ltd reported in 121 ITD 318 as referred to by the department in its GOA, it must be noted that the Special Bench was seized with an issue whether the disallowance u/s 14A could be computed in case of exempt income yielding investments, though no income had been earned. The Special Bench decided the case in favour of the department. But the case is distinguishable because, in the instant case, there was no exempt income, hence no disallowance would be made. We are fortified in the decision, placing reliance on the decision of ACIT vs M. Baskaran, ITA No. 1717/Mds/2013, wherein the Coordinate Bench at Chennai, held, "Heard both sides. Perused orders of lower authorities and submissions made by the assessee and the decisions in relied on. No doubt in the decision of the Special Bench of Delhi Tribunal in the case of Cheminvest Ltd. Vs. ITO (supra), the Special Bench held that disallowance under section 14A can be made even in the year in which no exempt income has been earned or received by the assessee. The decision of Special Bench of the Tribunal has been impliedly overruled by th....
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....ground Nos 1 to 12 raised by the assessee in its cross objection are allowed". 4. Counsel for the Revenue submitted that the Assessing Officer as well as CIT(Appeals) had applied formula of rule 80 of the Income Tax Rules since this case arose after the assessment year 20092010 Since in the present case, we are concerned with the assessment year 2009-2010 such formula was correctly applied by the Revenue. We however, notice that subsection (1) of section 14A provides that for the purpose of computing total income under chapter IV of the Act no deduction shall be allowed n respect of expenditure incurred by the assessee n relate on to income which does not form part of the total income under the Act. In the present case the tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of Commissioner of Income Tax v Winsome Textile Industries Ltd reported in (2009) 319 ITR 204 (Pun] & Har) in which als....