AI Drafter 
TaxTMI 
TaxTMI 
2016 (9) TMI 259
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....Income as "Income from other sources" - Rs. 1,40,600/- 1) The learned Commissioner of Income Tax (Appeals) - 24, Mumbai [CIT(A)] erred on facts and in law in confirming the order passed by the Deputy Commissioner of Income Tax, Circle - 13(3), Mumbai (AO) taxing the agricultural income earned by the appellant amounting to Rs. 1,40,600/- under the head "Income from other sources". 2) The appellant prays that the addition of Rs. 1,40,600/- made by the AO on account of agricultural income under the head "Income from other sources" and confirmed by the CIT(A) may be deleted. B) Disallowance u/s. 14A - Rs. 3,13,336/- 3) The learned CIT(A) erred on facts and in law in confirming the order of the AO making a disallowance of Rs. 3,13,336/- u/s. 14A. 4) The learned CIT(A) and the AO failed to appreciate that the appellant had not incurred any expenditure for earning exempt income and hence no disallowance could be made u/s.14A. 5) The appellant prays that the disallowance of Rs. 3,13,336/- made by the AO u/s. 14A and confirmed by the CIT(A) u/s. 14A may be deleted. C) General 6) The above grounds of appeal are without prejudice to one another and the appellant craves....
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....84 Investments in shares/RBI Bonds/Agricultural 36,32,905 land as on 31-03-2009 C-1 Average investment 38,81,145 C-2 One half % of average investments 19,406 D Total asset as on 31-03-2008 0 Total asset as on 31-03-2009 3,04,37,026 D-1 Average assets 1,52,18,513 E Interest proportionate to average investment and the average assets (B* C-1/D-1) 2,93,929 F Disallowance = A+E+C-2 3,13,334 4.Aggrieved by the assessment order dated 19.10.2011 passed by the A.O. u/s 143(3) of the Act, the assessee filed his first appeal before the ld. CIT(A). 5. Before the learned CIT(A), the assessee submitted that the assessee owns 119.02 gunthas equivalent to 3 acres of agricultural land. The assessee submitted that he has been consistently showing agricultural income every year , which has been accepted by the Revenue. However, during the year under consideration the Revenue asked the details of agricultural income and proof of the same. The assessee submitted that he had filed copies of 7/12 extracts of land records to show that the assessee is owning agricultural land. The assessee submitted....
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.... learned CIT(A) confirmed the additions of Rs. 3,13,535/- made by the AO u/s 14A of the Act read with Rule 8D of Income Tax Rules, 1962 on the grounds that the funds were borrowed by the assessee from time to time from private parties and banks to supplement his financial resources and these borrowed funds along with the assessee's own funds being mixed funds were utilized by the assessee for making investment in shares and securities which generated tax free as well taxable income for the assessee. The learned CIT(A) distinguished the decision of Hon'ble Bombay High Court in the case of Reliance Utilities and Power Limited reported in (2009) 313 ITR 340(Bom. HC) as in the instant case it is fully established that borrowed funds were utilized for investments in shares and securities which generated tax-free income for the assessee. The learned CIT(A) passed appellate orders dated 03-01-2014 confirming/sustaining the additions made by the AO in his assessment order dated 19-10-2011 passed u/s. 143(3) of the Act. 6. Aggrieved by the appellate order dated 03-01-2014 passed by the ld. CIT(A), the assessee filed second appeal before the Tribunal. 7. The ld. Counsel for the assesse....
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....9263/- on 8% tax free RBI bond during the year under consideration which are exempt income and the assessee had not incurred any expenditure for earning the exempt income and no disallowance u/s 14A of the Act can be made. It is submitted that the assessee has incurred interest expenses amounting to Rs. 11,52,535/- and interest on secured loans amounting to Rs. 48,707/-. It is submitted that the interest on secured loan was for the purposes of the business and with respect to interest on unsecured loans, it is submitted that the assessee is in the business of financing and assessee has earned interest of Rs. 25,37,817/- on the amount financed by him and paid interest of 11,52,535/- on unsecured borrowings , whereby an net interest amount of Rs. 13,85,282/- was earned by the assessee and hence no disallowance can be made out of interest expenses of Rs. 25,37,817/- incurred by the assessee. The assessee drew our attention to paper book page1-10 where financial statement of the assessee for financial year 2008-09 are placed It was submitted that the total investments made by the assessee yielding taxable and exempt income amounted to Rs. 40,32,648.08 as at 31-03-2009. The assessee has....
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....n 14A(2) of the Act , no expense has been incurred for the purposes of earning exempt income, hence, no disallowance can be made. Without prejudice to the above the assessee submitted that if any disallowance has to be made, the same has to be in the proportion of exempt income to total income which can be applied to balance expenses of Rs. 22,446/- which comes to Rs. 164/- and hence the disallowance should be restricted to Rs. 164/- and hence disallowance of 0.5% of the average value of investment as contemplated under Section 14A of the Act read with Rule 8D(2)(iii) of Income Tax Rules, 1962 is not warranted as was done by authorities below. 8. The ld. D.R. submitted that the assessee was holding 3 acres of land as per the records. The assessee has produced land record vide 7/12 extracts for the year 2006-07 which is placed in paper book page 11-14 whereby it cannot be said that agriculture was carried on by the assessee in the relevant previous year 2008-09 which is presently under appeal. He submitted that the Revenue has accepted the agricultural income in the past but the assessee has to show with cogent evidences that agricultural activity was actually carried on by the a....
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....l activities are actually carried out on the said land by the assessee during the assessment year as stipulated and mandated under Section 2(1A) of the Act to enable earning of agricultural income to fall within exemption as provided u/s 10(1) of the Act. One of the objects for exemption from income-tax is to encourage cultivation or actual utilization of land for agricultural purposes and hence if there is neither anything in its condition, nor anything in the evidence to indicate the intention of its owners or possessors so as to connect it with an agricultural purpose, the land could not be ''agricultural land''. We are also fully aware that principles of res-judicata is not applicable to the income tax proceedings but principle of consistency is to be followed. In our considered view keeping in view the facts and circumstances of the case, this issue needs to be set aside and restored back to the file of the A.O. for denovo determination of the issue on merits after considering the contentions, explanations and evidences of the assessee in his defense whereby the assessee will be entitled to produce the relevant evidences and explanations in his defense which sh....
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....2)(iii) of Income Tax Rules, 1962 being @0.5% of the average investment held by the assessee is also not sustainable in totality as the assessee has keeping in view regards of the accounts of the assessee has explained that the additions to the tune of Rs. 19,406/- is not sustainable keeping in view the mandate of Section 14A(2) of the Act of the expenses incurred by the assessee in order to earn exempt income having regards to the accounts of the assessee . The explanation of the assessee with respect to each of the expenses debited to the Profit and Loss Accounts is that with respect to other expenses claimed by the assessee as deduction while computing income , that the assessee has himself disallowed an amount of Rs. 1,51,630/- towards Godown Repair expenses and Rs. 12,870/- out of Rent, Rates and Taxes. It is submitted by the assessee that these are the amounts of expenditure which are attributable to earning of income from house property and the assessee voluntarily disallowed the same while computing income chargeable to tax. If the interest expenses, godown repair expenses, rent, rates and taxes were removed from the total expenses of Rs. 16,21,585.41, there remains balance....