TaxTMI 
TaxTMI 
2017 (6) TMI 62
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....e fact that such disallowance u/s 14A had been computed correctly by the AO in accordance with the method prescribed under rule 8D of the Income Tax Rules, 1962. 2) On the facts and in the circumstances of the case and in law, the CIT (A) erred in considering the additional evidence filed by the appellant in regard to disallowance u/s 14A without giving the AO reasonable opportunity to examine the evidence in accordance with the mandatory requirements of Rules 46A of the Income Tax Rules, 1962. 3) Appellant prays that the order of CIT(A) on the above round be set aside and that of the AO be restored. ITA No.6452/Mum/2011 3. Grounds of appeal taken by the assessee are as under: 1(a) The learned CIT(A) erred in confirming the action of Assessing Officer in disallowing expenses of Rs. 26,45,331/- applying Rule 8D(iii). The appellant submits that the above disallowance is wrongly made and the same ought to be deleted. b) Without prejudice to the above, the appellant submits that the disallowance u/s.14A is excessive and the same ought to be reduced substantially. 2. a) The learned CIT(A) erred in confirming the action of the Assessing Officer in treating the ren....
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....dicated upon. The ld. DR strongly objected to the admission of the additional ground. 6. We find from perusal of the additional grounds and the order of ld.CIT(A) that the issue raised by the assessee is purely of legal and technical nature which has arisen out of after judicial pronouncements subsequent to the adjudication by the ld.CIT(A). In our opinion the issue raised is purely of legal nature and deserved to be admitted. We, therefore, admit the same for adjudication hereinafter below. 7. The issue raised by the assessee in the additional ground is qua the fact that since the assessee has tax free income of Rs. 17,50,000/- during the year and therefore the amount of disallowance u/s 14A cannot be exceeded the exempt income. 8. Brief facts of the case are that the assessee filed return of income on 27.9.2008 declaring a total loss of Rs. 4,57,21,456/-, which was processed u/s 143(1) of the Act. The case of the assessee was selected for scrutiny. Thereafter the case of the assessee was selected for scrutiny and the statutory notices u/s 143(2) and 142(1) were issued and served upon the assessee. Thereafter, the AO vide order dated 26.3.2010 assessing the total income o....
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....tion to income which does notform part of total income under the Act. As per section 14 A(2) the AO shall determine such expenditure in accordance with the method prescribed i.eas per formula provided in rule 80(2) of the rules. However, the AO can determine such expenses as per rule 8D(2) only if the AO is not satisfied with the correctness of claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income. In the case under consideration, the appellant offered disallowance of expenditure in respect of investment in shares of only one company which had yielded exempt income and not in respect of investments which had not yielded exempt income. In view of ITAT Special Bench Delhi decision in the case of Chimenvest Ltd. Vs. ITO (2009) 121 ITD 318, the appellant's claim was not correct. Therefore, the AO correctly formed a satisfaction that appellant's claim was not correct. In the facts and circumstances the AO was justified in applying the provisions of rule 8D (2). 2.3(c) The next issue -for consideration is as to whether the AO correctly applied the provisions' of rule 8D (2). In my considered view, the appella....
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....that the interest expenditure relating to investments was at only Rs. 45,85,485/ -. Appellants further argument is also convincing and acceptable that since this interest expenditure was directly identifiable therefore, the same was required to be considered as direct expenses under sub-clause (i) of rule 8D(2). The A.O. is, therefore, directed to consider the interest expenditure of Rs,45,85,485/- as direct expenditure falling under sub clause (i) of Rule 8D(2). 2.3(f) This issue was also there in appellant's own case in A.Y.2006-07 & 2007-08. In those years the disallowance made by A.D. u/s. 14A r.w. Rule 8D(2) of the Act was confirmed by the undersigned with some modifications. In the appeal orders of those years it was held that the appellant failed to prove that the interest expenditure was directly attributable to any particular income or receipt. It was also held that the appellant has not proved the nexus between the own funds and investments. However, in the year under consideration the appellant (in its submissions in above paras) has satisfactorily demonstrated the nexus between the investments and the borrowed/own funds. It is also worth to mention here that the ....
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....of Mjs.KLG Systems Ltd. and Magma Shirachi Finance Ltd. totaling to Rs. 97,73,02,216/- were made on 28.03.2008 (the payments for which were made in next financial year) and therefore, there could not have been incurred managerial and administrative expenses for these investments to the extent of Rs. 24,43,258/-. Appellant's this argument is not acceptable. Under sub clause (iii) of Rule 8D(2), the administrative and managerial expenses are determined which would have been incurred for the purpose of taking decision as well as purchasing of the investments. Though in the case under consideration the investment in these two scrips were made on 28.03.2008, however, all exercises relating to study of these two scrips, taking decision to purchase these two scrips and other works were completed by 28.03.2008 and only thereafter these two scrips were purchased. After purchase of the scrips there could not have been incurred any administrative or managerial expenses. Therefore, the appellant's argument on this issue are not accepted. Moreover, the determination of such expenses were strictly as per formula provided in sub clause (iii) of Rule 8D(2) and there were no convincing reasons ....
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.... the ld.AR that the disallowance cannot exceed in any case u/s 14A r.w.r.8D from the amount of exempt income. • In the case of Ms Daga Global Chemicals suprathe Mumbai Bench of the Tribunal has held as under "2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is a limited company, engaged in trading of bulk and fine, chemicals, solvent and pharmaceutical raw materials declared its income at Rs. 74,40,000/- on 26/09/2009. The assessee credited dividend income of Rs. 1,82,262/- in its profit and loss account. The Assessing Officer while framing the assessment invoke section 14A r.w. Rule 8D by contending that assessee claimed various expenses which are related to exempt income in its profit & loss account and disallowed Rs. 14,58,412/-. On appeal, before the ld. Commissioner of Income tax (Appeals) broadly the stand taken in the assessment order was affirmed against which the assessee is in further appeal before this Tribunal. The totality of facts clearly indicates, as claimed by the assessee that no borrowed funds were utilized for earning the exempt income by the assessee and furthe....
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....xmann.com 28 (Delhi), has held that no disallowance u/s 14A can be made in the absence of any exempt income. In Joint Investments (P.) Ltd. v. CIT [2015] 372 ITR 694 (Delhi), it has been held that disallowance u/s 14A cannot exceed the exempt income. Since the assessee admittedly did not earn any exempt income during the relevant year, respectfully following the precedents, we hold that no disallowance u/s 14A can be made. This ground is allowed." • In the case of MsJohn Distilleries Ltd,suprait has been held by the Tribunal "10. The only issue is whether any disallowance is called for under rule 8D(2)(iii) or not. The contention of the assessee that no expenditure was incurred to earn dividend income of Rs. 29,000/- was not accepted by the AO. As held by the Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. Vs. CIT (347 ITR 272) it is not the purpose of the expenditure which is relevant. Once exempt income is earned, it means that some expenditure being incurred in relation to the exempt income which should be disallowed by applying formula laid down in rule 8D(2)(iii). Therefore, action of the AO is correct in applying rule 8D(2)(iii) but the amount o....