2016 (5) TMI 863

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....e 8D(2)(iii) of Income Tax Rules, 1962 without considering the precedents set by the Jurisdictional High Court & Tribunal in the following cases a. CIT Vs. Tube Investments of India Ltd in TCA No.524 of 2007 (Mad HC) b. EID Parry India Vs. ACIT in TCA No.2287 of 2006 (Mad HC) c. Simpson & Co Ltd Vs. DCIT in TCA No.2621 of 2006 (Mad HC) d. ACIT Vs. The Nungambakkam Saswatha Ohana Rakshaka Nidhi Ltd in ITA No.1138/Mds/2013 (Chennai ITAT) 4. The Learned Commissioner of Income Tax (Appeals) erred in confirming disallowance u/s.14A of Income Tax Act, 1961 read with rule 8D(2)(iii) of Income Tax Rules, 1962 ignoring various other pleas raised by the appellant during the appeals and dealing with only one of the plea, i.e., '14A disallowance cannot be made when investments are made out of own fund' in the appellate order. 5. The Learned Commissioner of Income Tax (Appeals) erred in confirming disallowance u/s. 14A of Income Tax Act, 1961 read with rule 8D(2)(iii) of Income Tax Rules, 1962 by wrongly interpreting Rule 8D (2)(iii) to hold that 0.5% of the entire investments as expenditure in relation to exempt income whereas the rule clea....

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.... should not be considered for the purpose of calculation of disallowance u/r. 8D(2)(iii) 5) ITAT has not considered whether CIT(A) has applied in mind in answering various /contentions raised by the appellant during the appellate proceedings before CIT(A) Accordingly the ld.A.R pleaded that the Tribunal has to re-consider the issue in dispute as the order relied by Tribunal in earlier years have no application to the assessee's case. 5. On the other hand, the ld.D.R submitted that the issue is squarely covered by the earlier order of the Tribunal in assessee's own case cited supra. 6. We have heard both the parties and perused the material on record. Admittedly, the same issue has been come for consideration before this Tribunal in assessee's own case for assessment years 2009- 10 to 2011-12 in ITA Nos.344 to 346/Mds./2016 vide order dated 06.04.2016 wherein held as follows:- "6. We have heard both the parties and perused the material on record. The assessee made total investment in the assessment year 2009-10 as follows : Subsidiaries Rs. 2,38,89,48,500/- UTI Infrastructure Advantage Fund Series Rs. 10,00,000/- Investme....

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....on, it has been provided that if the Assessing Officer is not satisfied with the correctness of the computations made by an assessee, he shall compute the quantum in accordance with the method that may be prescribed. For this matter, Rule 8D has already been prescribed. Sub-sec.(3) further provides that even in a case where an assessee claims that no expenditure was incurred, the assessing authority has to presume the incurring of such expenditure as provided under sub-sec.(2) read with Rule prescribed. Therefore, it becomes clear that even in a case where the assessee claims that no expenditure was so incurred, the statute has provided for a presumptive expenditure which has to be disallowed by force of the statute. In a distant manner, literally speaking, it may even be considered for the purpose of convenience as a deeming provision. When such deeming provision is made on the basis of statutory presumption, the requirement of factual evidence is replaced by statutory presumption and the Assessing Officer has to follow the consequences stated in the statute. It means that even in a case where no expenditure is stated to have been incurred, the assessing authority has to apply Rul....

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....Tribunal was right in reversing the findings of the Commissioner of Income-tax (Appeals), which was based on a Supreme Court's decision by relying on the decision of other Tribunals? (iii) Whether or not the Tribunal was justified in not affording an opportunity of hearing to the assessee before deciding the issue on hand by placing reliance on judgments, which were not cited by either side? (iv) Whether or not the Tribunal was right in relying on the decisions inapplicable to the facts on hand by distinguishing the decision of the Hon'ble Supreme Court, which is squarely applicable?" With reference to the contentions urged, we have perused the orders passed by the assessing authority, the first appellate authority and the Tribunal with a view to find out as to whether the substantial questions of law framed in this appeal would arise for consideration of this court. It is not in dispute that the assessee had borrowed loans and invested the same in shares. Deduction is claimed by him of the interest amount paid on the borrowed loans. The amounts borrowed by the appellant were invested in shares and dividend is earned. When deduction for the intere....

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....rned counsel on behalf of the appellant are not applicable to the fact situation. We are in agreement with the orders passed by the assessing authority and the Tribunal and differ from the view taken by the first appellate authority. For the reasons stated supra, interference with the impugned order of the Tribunal is not warranted in this case. No substantial questions of law much less the questions of law framed by the appellant will arise for consideration of this court. The appeal is devoid of merit and liable to be dismissed. Accordingly, the appeal is dismissed." 7. Similarly, in the case of CIT v. Smt. Leena Ramachandran 7339 ITR 296, the Hon'ble Kerala High Court has held as under: "During the previous year relevant to the assessment year 2001-02, the assessee paid interest at 24 per cent. per annum on funds borrowed for purchase of shares in a company. Her claim was that the acquisition of shares with the borrowed funds was for the purpose of controlling the company and since the borrowed funds were utilised for the acquisition of shares of the company under the control of the assessee, the utilisation of the borrowed funds was for busin....