TaxTMI 
TaxTMI 
2015 (8) TMI 1151
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.....2006. Since the entire dividend has been claimed as exempt and no expenditure was attributed towards the same, the Assessing Officer has applied provisions of Rule 8D and disallowed Rs. 25,36,790/- u/s.14A. The Assessing Officer also observed that funds for a company come in a common kitty. They compromise of borrowed funds, share capital and retained earnings (reserves and surplus). Therefore, relying on the decision of the ITAT, Special bench in the cases of CIT v. Daga Capital Management P. Ltd. (ITA No.1372/Delhi/2005), Maxopp Investments Ltd. v. ACIT(ITA No.183/Delhi/2005) and Cheminrest Ltd. v. DCIT (ITA No.2048/Del/2005), the Assessing Officer applied Rule 8D and disallowed a sum of Rs. 25,36,790/-. Against this, the assessee went in appeal before the Commissioner of Income-tax(Appeals). 4. On appeal, the Commissioner of Income-tax(Appeals) observed that the Assessing Officer applied Rule 8D for the above disallowance because the funds for the assessee came in a common kitty and he could show incurrence of excess interest after identifying the interest. However, the Id.AR, has stated that the assessee had made investment in equity shares of various companies including its ....
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.... with sec 14A(1) r.w.Rule 8D cannot exceed the amount of exempt income earned during the year is not acceptable, in view of the decision of the Delhi Tribunal Special Bench in Cheminvest Ltd v. ITO (2009) 121 ITD 318/124 TTJ 577 (SB) wherein it was held: "Disallowance under section 14A can be made even in a year in which no exempt income has been earned or received by assessee; thus proportionate interest pertaining to investment for earning of dividend was disallowable even though exempt income (dividend) was not earned during the year." Reference may also be made to Sanchayita Mercantile (P) Ltd v. ACIT (2008) 25 SOT 57 (Mum.-Trib.) wherein it was held as below: 'There is nothing in provisions of section 14A to effect that expenditure disallowed should not exceed income which is not chargeable to tax; therefore, as long as there is identification of income which does not form part of total income, amount so identified has to be disallowed." The interest expenses of the assessee during the year are Rs. 25,28,91,275/- .Increase in the value of investments yielding exempt income is about Rs. 2 crores. Keeping in view the facts and circumstances of the case and legal positi....
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....he AO asked the assessee to show cause as to why such commission paid to M/s. Weizmann Ltd. be not disallowed u/s 40A(2)(b). The assessee filed submissions in response to the show cause notice. The AO proceeded to disallow the said payment of Rs. 58,49,022/- u/s. 40A(2)(b). The AO held that since M/s. Weizmann Ltd. was the promoter of the assessee, it should have provided the services free of cost to the assessee. The AO also observed that other leading banks and financial institutions were shareholders of the assessee and since the assessee itself was a banking company, it could have raised the loans directly from banks. Considering the capacity of the assessee company in raising finance directly through loans from financial institutions and for the detailed reasons mentioned in the scrutiny assessment order passed for assessment year 2005-06, the AO disallowed a sum of Rs. 58,49,022/- u/s 40A(2)(b) being syndication charges paid to the holding company. Against this, the assessee went in appeal before the CIT(Appeals). 6.3. On appeal, the CIT(Appeals) observed that the issue in this case is whether the payments made to a related party, viz., the erstwhile promoter, M/s. Weizmann ....
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....nn Ltd. by the assessee is not excessive or unreasonable but is well within the range as paid by the assessee to third parties and much lower than the percentage fixed by National Housing Board, which itself is an undertaking promoted by Reserve Bank of India. Therefore, we are of the view that the findings of the ld. CIT(Appeals) on this issue in deleting the disallowance is on right footing. Hence, the same is upheld. Thus, ground Nos.2 to 2.4 are dismissed." Respectfully following the same, we are inclined to uphold the order of the CIT(Appeals) and this ground of appeal of the Revenue is dismissed. 8. The next ground in ITA No.313/Mds/2013 is that the CIT(Appeals) erred in deleting the disallowance of a sum of Rs. 9,14,264/- made under sec.36(1)(viii) of the Act. 8.1. The facts of this issue are that the assessee is engaged in the business of providing long term housing finance and is accordingly eligible for deduction u/s.36(1)(viii). As per sec.36(1)(viii), deduction upto 40% of the profits from long term housing finance business is allowable subject to transfer of the said profits to a special reserve account. The assessee had credited an amount of Rs. 41,00,000/- (being....