TaxTMI 
TaxTMI 
2016 (4) TMI 1135
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....11 and 2011-012 respectively. Against this, the assessee went in appeal before the CIT(Appeals), who confirmed the finding of the AO. Aggrieved, the assessee is in appeal before us. 4. The ld. AR submitted that in these asst. years, the exempt income is as follows : 2009-10 Rs. 41,042/- 2010-11 Nil 2011-12 Rs. 74,000/- He placed reliance on the order of the Tribunal in the case of ACIT vs. M/s. The Nungambakkam Saswatha Dhana Rakshaka Nidhi Ltd. in ITA No.1138/Mds/2013 dated 5.8.2013, wherein it was held that unless the Assessing Officer established that specific expenditure has been incurred by the assessee for earning the exempt income, there can be no disallowance u/s.14A of the Act. Further, according to the ld. AR, disallowance cannot be more than the exempted income. He, further submitted that the Madras High Court in the case of M/s. EID Perry (India) Limited v. JCIT in IC A No.2287 of 2006 dated 8.8.2012 held that 2% would be the exempted income. The ld. AR also relied on the decision of the Jurisdictional High Court in the case of Simpson & Co. Ltd. v. DCIT in TCA No.2261 of 2006 dated 15.10.2012 to support his argument. The ld. AR further placed reliance on the judgm....
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..../s. Daga Global Chemicals Pvt. Ltd. vs. ACIT(Mumbai) in ITA No.5592/MUM/2012 dated 01.01.2015. 5. On the other hand, the ld. DR submitted that the judgment is delivered without taking notice of CBDT Circular No.5/2014 dated 11.2.2014, wherein it was clarified that Rule 8D read with sec.14A of the Act provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income. According to the ld. DR, the above Circular is binding on the Department and it should be followed. 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/- Investment in sister concerns Rs. 1,59,39,000/- 6.1 For the assessment year 2010-11, the total investment is as follows : Subsidiaries Rs. 4,35,42,53,360/- UTI Infrastructure Advantage Fund Series Rs. 10,00,000/- Investment in sister concerns Rs. 1,59,39,000/- 6.2 For the assessment year 2011-12, the total investment is as follows : Subsidiaries Rs. 5,17,41,16,895/- UTI Infrastructure Advantage Fund Series Rs. 8,53,000/- ....
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....e 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 Rule 8D. As the statutory presumption substitutes the requirement of factual evidence, the question of enquiry does not arise. Therefore, we are unable to agree with the argument of the learned CA. 7. In result, this appeal filed by the assessee is dismissed." 6.5 This view of ours is also fortified by the judgment of the Karnataka High Court in the case of Pradeep Kar v. ACIT (319 ITR 416), wherein it was observed as under : "The claim of the assessee for deduction of interest on the amounts borrowed by him for purchase of shares is disallowed by the Assessing Officer. In the appeal filed by ....
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....rged, 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 interest paid is claimed, the dividend earned cannot be excluded from income. Computation of income has to be made taking the amount of dividend income earned by the appellant. The assessing authority considered the decision in Rajendra Prasad Moody's case [1978] 115 ITR 519 (SC) relied upon by the learned counsel and held that it is not applicable to the fact situation. The reasons assigned for such a conclusion in the assessment order are extracted hereunder: "The decision is with reference to deduction allowable under section 57(iii) of the Income-tax Act. The decision relates to an assessment year where dividend income was taxable in the hands of th....
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....s 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 business purpose entitling the assessee to deduction of interest under section 36(1)(iii) of the Income-tax Act, 1961. The Assessing Officer held that the assessee made investments by utilising the borrowed funds ill the form of acquisition of shares in the company and the only benefit the assessee got was dividend income of Rs. 3 lakhs. Since section 14A of the Act bars any deduction pertaining to any expenditure incurred by the assessee for earning any income which did not form part of the total income, the Assessing Officer disallowed the claim to deduction of interest. The Commissioner (Appeals) confirmed the assessment. The Tribunal allowed the claim but made a disallowance of Rs. 2 lakhs being the interest stated ....
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....ccount of forex loss during the asst. year 2009-10. The loss arose as the value of rupee has gone down at the time of repayment of loan. The AO has held that the above loss is capital in nature and therefore disallowed the loss. According to the ld. AR, if the above loss is treated as capital in nature, then depreciation @ 20% has to be provided for the same. The AO has not grant that. Further, the short term capital gain computed in the next asst. year i.e. 2010-11 on account of sale of this asset will get reduced to that extent. However, the above adjustments are not made by the AO in his assessment order for both these years. If this loss is to be treated as capital loss, then directions must be issued to grant depreciation at 20% and rework the short term capital gain in the next year because the cost of acquisition would change. According to the ld. AR, on an overall basis, there will not be any loss to the revenue on account of the above disallowance. 8.1 On appeal, the CIT(Appeals) observed that in view of the provisions of sec.43A of the Act, at the time of making payments in foreign exchange towards any business asset - after the acquisition of the asset - if there is an....