2015 (8) TMI 1027

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....the same was disallowed in the computation of income attached with the return of income filed by the assessee company. During the assessment proceedings, the Assessing Officer confronted the assessee company about further disallowance to be made under section 14A of the Act r/w Rule 8D of the I.T. Rules, 1962. The assessee company gave its reply to the Assessing Officer. Being dissatisfied, the Assessing Officer made further disallowance under Rule 8D of the Rules, as per the details given hereunder:- As per rule 8D(2) - The expenditure directly relating to exempt income Nil Proportionate disallowance of interest paid Rs. 7,87,70,940 Proportionate expenditure (being ½% of average value of investment) Rs. 51,82,635 Total:- Rs. 8,39,53,575 The Assessing Officer also added back the amount disallowed in the book profit under section 115JB of the Act. 3. The learned CIT(A), after hearing the assessee, deleted the disallowance under section 14A on account of interest made by the Assessing Officer of Rs. 7,87,70,940. With regard to the proportionate expenditure, the disallowance was upheld by the learned CIT(A). Against this order of the learned ....

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....hould have adjusted above expenses against prior period income and only net income should have been taxed; 12. without prejudice to the above, excess advisory fees should be allowed as deduction from the respective assessment year for which it pertains to (i.e. A Y 2007-08); 13. without prejudice to the above, reversal of advisory fees should be allowed as deduction from the assessment year for which it pertains to (i.e. AY 2007-08); b) Municipal taxes of Rs. 57.52 lacs 14. erred in not allowing prior period expenses of Rs. 57.52 lacs though the same were crystallized during the year and incurred for the purpose of business; 15. should have appreciated that the additional municipal taxes were crystallized during the year, as there was ongoing litigation between landlord and municipal authority on the basis of which demand was raised by landlord subsequently; 16. without prejudice to the above, should have adjusted prior period expenses against prior period income and only net income should have been taxed; 17. without prejudice to the above, municipal taxes should be allowed as deduction from the assessment year for which it pertains to (i.e. A Y 2007-08); L....

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....disallowance made under section 14A, be restored. 6. The learned Counsel for the assessee, on the other hand, submitted that the amount of interest disallowed by the Assessing Officer was legally and factually incorrect and the learned CIT(A) was justified in deleting the same. He further submitted that the disallowance of proportionate expenditure sustained by the learned CIT(A) is unfair and illegal. 7. We have heard the rival contentions on the issue of disallowance of interest made by the Assessing Officer and deleted by the learned CIT(A) and have perused the material available on record. The learned Counsel for the assessee submitted that the assessee company has used its own funds for acquisition of shares meant for investment purposes and as part of stock-in-trade. In support of this contention, the following case laws were relied by the learned Counsel:- 1. Hindustan Paper Corporation Ltd. (ITA No. 47/Ko1/2012) dated 28 September 2012 (Kol) (Page No.355-362); 2. P N Writer (ITA No. 4388/M/10) dated 14 October 2011 (Page No.363-369); 3. Shopper's Stop Ltd. (ITA No. 1448 & 4475/M/2010) dated 30 August 2011 (Mum. Trib) (Page No.371-378); 4. K. Raheja Cor....

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.... learned Departmental Representative. Therefore, in view of the aforesaid decision of the Hon'ble Jurisdictional High Court in Reliance Utilities Pvt. Ltd. (supra) and other case laws relied upon by the learned Counsel and the facts and evidences placed before us, we are of the view that no interference is called for in the order of the learned CIT(A) in deleting the disallowance of interest of Rs. 7,87,70,940, made by the Assessing Officer in the assessment order. Thus, the grounds raised by the Revenue are dismissed. 10. In the result, Revenue's appeal stands dismissed. We now take up the assessee's appeal. 11. With regard to Ground nos.1 to 6 raised by the assessee, wherein, the assessee has contested the disallowance of proportionate expenses of Rs. 51,29,704, sustained by the learned CIT(A), it was alternatively argued by the learned Counsel that in any case, the disallowance was excessive, keeping in view the facts of the case. It has been argued by the learned Counsel that the disallowance needs to be worked out again, for the reason that no disallowance under section 14A can be made on the strategic investments made in the subsidiaries. The second contention of....