TaxTMI 
TaxTMI 
TaxTMI 
2016 (8) TMI 411
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....lised the assessment, u/s. 143(3)of the Act, on 26. 03. 2013, determining the income of the assessee at Rs. 16. 97 crores. ITA/7102/Mum/2014 : 2. Effective ground of appeal, raised by the assessee is about addition made by the AO, u/s. 14 A of the Act, r. w. r. 8D of the Rules, (Rules). During the assessment proceedings, the AO found that the assessee itself had made a disallowance of Rs. 1. 25 Crores[Rs. 99. 65 lakhs indirect expenses under Rule 8D(2)(ii)and Rs. 25. 62 lakhs as per rule 8D(iii)] as per the provisions of section 14A. He made a further disallowance of Rs. 2. 59 Crores. 3. Aggrieved by the order of the AO, assessee preferred an appeal before the First Appellate Authority (FAA). Before him, it was argued that suo motu disal....
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....ad sufficient own fund for making investment and the Tribunal had dismissed the appeal filed by the AO in that regard. Therefore, in our opinion, there was no justification on part of the FAA not to accepting the plea raised by it for the first time before him. We would like to reproduce the relevant portion of the order of the order of the Tribunal (/ITA No. 6008/Mum/2012, AY. - 2008-09, dt. 12. 02. 14), wherein the Tribunal has referred to the order for the AY 2006-07 and 2007-08 and same reads as under :- 2. During the assessment proceedings, AO found the assessee had received dividend income of Rs. 12, 17, 147/- which was exempt u/s 10(34) of the Act, that in its computation of total income, assessee had disallowed expenditure of Rs. ....
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....was incurred by the assessee for earning tax free income, that in its computation of income, a sum of Rs. 7, 89, 633/- was already disallowed by the assessee-company, that the investments were made by the assessee entirely out of its own interest free funds, that no further disallowance out of the interest expenses was called for, that as per the balance sheet of the assessee as on 31. 03. 2008 the shareholder's fund, in the form of share capital, was Rs. 1286. 11 lacs, that the Reserve and Surplus amounting to Rs. 6, 675. 94 lacs were also available with the assessee during the year, that the investment made by the assessee in shares and securities was only Rs. 6774. 33 lacs, that the company had enough own funds to cover up the investment....
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....e form of share capital and reserve and surplus aggregating to Rs. 71. 16 crores were available with the assessee company as on 31st, March, 2006. Out of the reserves and surplus, revaluation reserves was to the extent of Rs. 10. 41 crores whereas remaining reserves available to the assessee to the extent of Rs. 47. 89 crores were free reserves. Thus own funds to the extent of Rs. 60. 75 crores were available with the assessee company at the relevant time which were more than the investment of Rs, 57. 64 crores made in the shares and securities in the corresponding period. It is no doubt true that no separate account was maintained by the assessee in respect of investment made in shares and securities and it was a case of mixed funds availa....
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....der dated 20-12-2007 holding that the assessee having sufficient shareholders' fund including internal accruals to make investments in shares and securities, no disallowance u/s 14A was called for. We, therefore, hold that the disallowance made by the AO and confirmed by the learned CIT(Appeals) on account of interest expenditure u/s. 14A is not sustainable and delete the same. 8. As regards the disallowance of Rs. 27, 93, 160/- made by the AO and confirmed by the learned CIT(Appeals)on account of administrative expenses u/s. 14A, we find ourselves in agreement with the learned counsel for the assessee that the same is highly excessive and unreasonable considering the amount of dividend income earned by the assessee to the extent of Rs. ....
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....est expenditure. 5. The assessee argued that while deciding the appeal for AY 2008-09(supra), the Tribunal had restricted the disallowance, under the head administrative expenses to 5% of dividend income. We are reproducing the last para of order of the Tribunal for AY 2008-09 (supra). We find that facts of the case under appeal are similar to the facts of earlier two AYs. From the order of the FAA, it is clear that the assessee had more funds at its disposal, in form of share capital and reserves, than the investment made during the year. Therefore, respectfully, following the orders of the Tribuanl, for the earlier years, we confirm the order of the FAA for the interest expenses. As far as administrative expenses are concerned; followi....