TaxTMI 
TaxTMI 
TaxTMI 
2017 (10) TMI 532
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....ow expenses attributable to such exempt income. He found that the assessee has debited interest expenses of Rs. 7,10,78,955/- to the Profit & Loss Account. He, therefore, called upon the assessee to explain why the expenditure attributable to earning of exempt income should not be disallowed under section 14A. In reply it was submitted by the assessee that it has not earned any dividend income during the year from investment and it has not incurred any indirect expenses also. The assessee relying upon the decision of the Hon'ble Jurisdictional High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. vs. DCIT 234 CTR 1 contended that provisions of Rule 8D is not applicable to the impugned assessment year. The AO, however, did not find merit in the submissions of the assessee. He observed, the assessee has taken loans and paid interest on them. It has also debited indirect expenses. The AO observed, the investment portfolio yielding dividend income has to be monitored and supervised. Accordingly, he held that expenditure incurred for earning dividend income has to be disallowed under section 14A. After examining the details of expenditure incurred by the assessee, the AO held ....
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....is not forthcoming whether this particular factual aspect was at all examined. In case the assessee has not earned any exempt income during the relevant previous year no disallowance can be made under section 14A of the Act. The aforesaid view has been expressed by the Hon'ble Delhi High Court in the casd of Cheminvest Ltd. vs. CIT (supra). In fact, following the aforesaid decision different Benches of the Tribunal including Mumbai Benches have held that in absence of any exempt income in a particular assessment year no disallowance under section 14A can be made. In assessee's own case for A.Y. 2009-10 and 2010-11 (supra) the Tribunal has taken identical view. In view of the aforesaid, we direct the AO to examine this fact and if upon such examination it is found that in the relevant previous year the assessee has not earned any exempt income, by way of dividend or otherwise, no disallowance under section 14A can be made. Of course, in the course of hearing the learned A.R. relying upon the decision of the ITAT Delhi Special Bench in the case of ACIT vs. Vireet Investment P. Ltd. ITA No. 502/Del/2012 dated 16.06.2017 had also contended that those investments where the assessee ....
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....)(ia) of the Act. The assessee challenged the disallowance before the CIT(A). 8. Before the First Appellate Authority the assessee reiterated the stand taken before the AO. The learned CIT(A) after considering the submissions of the assessee sustained the addition by holding that payment made by the assessee is covered under Section 194H. While holding so, he also observed that the assessee has itself originally booked such expenditure as commission. 9. The learned A.R. submitted that the assessee has been authorised by the Reserve Bank of India (RBI) to deal in foreign currency. He submitted, the RBI also appoints/authorises certain persons/entities as Restricted Money Changers (RMC) who are authorised to purchase foreign currency from non-residents visiting different places in India including Goa. These RMCs operate from their shops/hotels to encash foreign currency and travellers cheques from foreign tourists. He submitted, the assessee has foreign exchange division approved by the RBI to buy foreign exchange currency and travellers cheque from RMCs. It was submitted that the RMCs are wholesale customers of the assessee's foreign exchange division and assessee pays premium to ....
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....change division approved by the RBI and is authorised to buy foreign exchange and travellers cheques from RMCs and others and sell them to persons in need of them. RMCs are also authorised by RBI to buy foreign currency from non residents visiting various places in India. These facts would show that the RMCs are not agents of the assessee but are appointed by RBI. Though, it may be a fact that the assessee buys foreign currency from RMCs depending upon the needs, however, there is no principal agent relationship between the assessee and the RMCs. The RMCs are free to sell foreign currency bought from tourists to assessee, RBI or any other person authorised by the RBI to deal in foreign currency. It is also to be noted that both the RMCs as well as the assessee have shown foreign currency as their stock in trade. The assessee has no relationship with the persons from whom the RMCs purchase foreign currency and the assessee is no way connected to the concerned tourists. Therefore, in our view the transaction between the assessee and the RMCs is on principal to principal basis and there is no principal agent relationship existing between them. Merely because in the financial statement....
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....submitted that the provisions of Section 40(a)(ia) are applicable only in case of non-deduction of tax at source and not for short deduction of tax at source. In support of such contention he relied upon the following decisions: - (i) CIT vs. S.K. Tekriwal (2014) 361ITR 432 (ii) CIT vs. Kishore Rao, HUF (2016) 387 ITR 196 15. The learned D.R. supported the findings of the CIT(A). He also relied upon the decision of the Hon'ble Kerala High Court in the case of CIT vs. PVS Memorial Hospital Ltd. (2016) 380 ITR 284. 16. We have considered the rival submissions and perused the material on record. The short issue arising for consideration before us is, whether the provisions of Section 40(a)(ia) of the Act can be invoked to make disallowance on account of expenditure claimed on which the assessee has deducted tax at source at a rate lower than the prescribed rate. We find, there is no decision of the Hon'ble Jurisdictional High Court on this issue. However, divergent views have been expressed by different High Courts on this issue. The Hon'ble Calcutta High Court in the case of S.K. Tekriwal (supra) held that no disallowance under section 40(a)(ia) can be made for short de....
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..... Since, we have already decided this issue while disposing off ground Nos. 1 & 2 of assessee's appeal in ITA No. 5440/Mum/2015 in the earlier part of the order, this ground has become infructuous, hence, dismissed. 20. In ground No. 2 the Department has raised the issue of violation of Rule 46A of the I.T. Rules by the CIT(A). 21. Briefly the facts are, during the assessment proceedings the AO having found that the assessee has debited expenditure amounting to Rs. 20,04,37,496/- on account of brokerage payment to various parties for arranging inter corporate deposits (ICDs) called upon the assessee to furnish necessary details. After verifying party-wise details of brokerage payment furnished by the assessee the AO alleged certain discrepancies in such payments and ultimately held that the payments are neither genuine nor for the purpose of assessee's business. Accordingly, he disallowed an amount of Rs. 1,77,68,298/- out of the total expenditure claimed. The assessee challenged the disallowance before the CIT(A). The learned CIT(A) after considering the submissions of the assessee deleted the addition made by the AO. 22. The learned D.R. relied upon the ground raised by the De....