TaxTMI 
TaxTMI 
2017 (12) TMI 114
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....correlation of investments done by the assessee. 2. The CIT(A) is not justified in not independently adjudicating the addition made u/s 14A r.w. rule 8D, for the assessment year 2008-09, keeping in view of sub-sections(2) and (3) of Section 14A of the Act. 2. Facts are in brief that the assessee is engaged in the business of solvent extraction and generation of power. The assessee has filed return of income. The return filed by the assessee was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter called as 'the Act'), thereafter the case of the assessee is selected for scrutiny, following due procedure assessment is completed u/s 143(3) of the Act. In the assessment order, the A.O. has noted that the assessee company has invested an amount of Rs. 3,88,20,798/- in the equity shares of the following companies. a) M/s. Andhra Sugars Limited, Tanuku - Rs. 36,82,298/- b) M/s. Andhra Farm Chemicals Corpn. Ltd. - Rs. 51,000/- Kovvur c) The Andhra Pradesh Gas Power Corpn. Ltd. - Rs. 3,50,87,500/- The A.O. has noted that the assessee had received dividend income in all these years which were claimed as exempt u/s 10(34) of the Act. The as....
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....decision of the coordinate bench of this Tribunal in the case of M/s. Andhra Sugars Limited for the assessment year 2004-05, the Hon'ble ITAT in ITA No.162/Vizag/2006 dated 20.1.2011 and also by following the same assessee's case for assessment year 2007-08, 2008-09 & 2010-11 held that the disallowance made towards interest expenditure is not justified and disallowance of indirect expenditure invoking rule 8D is upheld and directed the A.O. to re-compute the disallowance accordingly for all the subjected years. 4. On being aggrieved, revenue carried matter in appeal before the Tribunal. The Ld. Counsel for the assessee has submitted that the issue involved in this appeal is covered by the order of the coordinate bench of the Tribunal, Visakhapatnam in ITA No.224 & 225 of 2012 for the assessment year 2007-08 & 2008-09 by order dated 20.5.2016. He also relied on the judgement of the Hon'ble Delhi High Court in ITA No.548 of 2015 dated 23.8.2017. 5. On the other hand, the Ld. D.R. has relied on the orders of the A.O. 6. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The case of the A.O. is that the ass....
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....d borrowed funds for the purpose of investments to earn exempt income. It is further contended that earning of dividend income need not to incur any expenditure. The assessee a manufacturing company invested its surplus funds in its subsidiary companies, therefore, its case cannot be considered on par with an investment company, which is involved in the main business of dealing in shares and securities. The provisions of section 14A of the Act is meant for disallowing the expenditure relatable to earning of exempt income, in the case of companies where the major business is trading in shares and securities with borrowed funds. Therefore, the A.O. was not correct in disallowing the interest and other indirect expenditure by invoking the provisions of section 14A of the Act. 10. The question before us is whether the A.O. is right is disallowed interest and other indirect expenditure relatable to earning exempt income u/s 14A of the Act. There is no dispute with regard to earning exempt income. During the year under consideration the assessee has earned dividend income, which was claimed exempt u/s 10(34) of the Act. The A.O. was of the opinion that the assessee has not proved the ....
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....present case, the A.O. does not indicate which part of the interest expenses falls in the above category. The Hon'ble Delhi High Court in the case of H.T. Media Limited (supra) has also considered the decision of Maxopp Investments Limited Vs. CIT (2012) 347 ITR 272 (Delhi) as well as the decision of the Bombay High Court in Godrej & Boyce Manufacturing Company Limited Vs. CIT (2010) 328 ITR 81 (Bom) wherein it has observed that there was to be a minimum compliance with the mandatory requirement u/s 14A(2) read with Rule 8D which requires A.O. to examination of the accounts of the assessee and upon arriving at a dissatisfaction as to correctness of the claim of the assessee in respect of expenditure incurred in relation to exempt income. The A.O. can determine the amount of expenditure which should be disallowed in accordance with the method prescribed under rule 8D of the rules. The court explained that unless such dis-satisfaction was recorded in the manner indicated u/s 14A of the Act, the question of invoking rule 8D of rules and the formula there under does not arise. In the present case, the assessing officer has not given any finding in respect of interest expenditure incurr....
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....warding the above job work was done purely in the interest and benefit of this company and the charges paid thereon were not unreasonable and excessive. All the payments were made by A/c. payee cheques after deduction of TDS as per the details already submitted and M/s. Sree Venkataraya Threads Pvt. Ltd. is an assessee on your files." 11. The A.O. after considering the reply he was not satisfied with the reasonableness of the payments, accordingly disallowed 10% of such payments made to the related party Sri Venkataraya Threads Private Limited disallowance was made u/s 40A(2)(b) of the Act to the tune of Rs. 12,59,049/- for the assessment year 2010-11 and for the similar reasons he also disallowed to the tune of Rs. 15,69,709/- for the assessment year 2011-12. 12. On appeal, it was submitted before the Ld. CIT(A) that the assessee had incurred the expenditure for the purpose of outsourcing the work and the work structure in the assessee company comes to Rs. 460/- per day for the year ending 31.3.2010 and Rs. 481/- per day for the year ended 31.3.2011 and the work structure on account of outsourcing was around Rs. 150/- only and submitted that the outsourcing work given to the sis....