TaxTMI 
TaxTMI 
2018 (1) TMI 600
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....taken as the lead case. 3. The Revenue has raised the following grounds of appeal (in lead case in ITA No.172/Kol/2016, Assessment Year, 2008-09) are as follows: "1. That in the facts & circumstances of the case and in law, the ld. CIT(A) has erred by allowing relief to the assessee in respect of the disallowance made u/s 14A of the I.T. Act r.w.r 8D(2)(ii) of I.T. Rule whereas, the assessee failed to establish the fact in course of assessment that its interest being funds were not utilized for investments which yielded exempt income which was the onus upon the assessee to prove as observed by the Hon'ble Calcutta High Court in the case of Dhanuka and Sons [ITA No.633 of 2004 dated 19.04.2011]. 2. That in the facts & circumstances of the case and in law, the ld. CIT(A) has erred on the issue of disallowance made under Rule 8D(2)(iii) as because offering of short term capital gain for tax on sale of investments does not mean that such investments has lost its nature to yield dividend income and should not be considered to be included in computation of average value of investments for disallowance under the said Rule. 3. That the appellant craves for lea....
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.... detail on 29/12/2010 computing total disallowance as perrule 8D at Rs. 1,05,383/-. The assessee had also put a note below such computation which readsas under: 1. Expenditure on interest is attributable to the business of the assessee and, as such, hasnot been considered for the purposes of amount inadmissible u/s. 14A. 2. All the investment other than those stated above have not been considered for thepurpose of average investment u/s. 14A as the same had been offered for short term capital gainin assessment year 2008-09 and 2009-10. Moreover, the unquoted investment shall be offeredfor taxation in the year of sale. Regarding details of use of borrowed fund, the assessee has submitted that the borrowed fund during the year increased by Rs. 12,72,95,212/-. Lt was submitted that the fund was used for business purpose only. The borrowed fund was utilized forpurchase of space on ownership Rs. 9,10,12,500/-, for purchase of other assetsRs.34,69,153/-and for working capital of Rs. 3,38,95,637/-. It was stated by the assessee that the borrowed fund was used for the purpose of business and not for investment. The Assessing officer observed that the assessee had simply stated ....
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.... bears much interest, therefore, AO held that interest attributes to investments as well as business and hence, the same should also be considered for computation of disallowance. The assessee was also not correct in taking only minimum investment leaving others with a note that short term capital gain was paid on such investment as dividend arose or shall arise from such investments also. Based upon the above discussion, the AO made the disallowance as per Rule 8D as under: As per Rule 8D(i) : Rs.100/- (as per assessee's computation) As per Rule 8D(2)(ii):AxB/C = 1,09,83,149x9,99,72,533/25,04,47,228= Rs.43,84,210/-. (This is to be mentioned that the notations A, B & C are having the same meaning as assigned to them under Rule 8D) As per Rule 8D(2)(iii): Investment in Shares as on 01/04/2007: Rs.6,52,43,631/- Investment in Shares as on 31/03/2008: Rs.13,47,01,434/- Average value of investment : Rs.9,99,72,533/- ½ of above: : Rs.4,99,863/- The AO disallowed Rs. 48,84,173/- (Rs.43,84210 + 4,99,863 + 100). Since the assessee had already disallowed Rs. 1,05,100/-, therefore net disallowance was made by AO at Rs. 47,79,073/- (....
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....s the onus upon the assessee to prove and therefore, the order of the CIT(A) was erroneous and not based on the facts. The ld. DR for the Revenue had submitted that under Rule 8D(2)(ii), the assessee had failed to establish the fact that interest bearing funds were not utilized for investment which yielded exempt income. 8. On the other hand, the ld. Counsel for the assessee submitted that assessee is engaged in real estate investment and investment in share and securities. The assessee company has its own surplus funds to invest in share and security. Therefore, disallowance under Rule 8D(2)(ii) should not be made. Apart from this, the ld. Counsel also submitted that disallowance under Rule 8D(2)(iii) in order to compute average investment only dividend bearing securities/shares should be taken into account for disallowance. In addition to this, the counsel for the assessee has relied on the judgment of ITAT Kolkata in the case of REI Agro ltd. vs. DCIT reported in [2013] 35 taxmann.com 404, wherein it was held that in order to compute average investment, only dividend bearing securities/shares should be taken into account for disallowance. 9. Having heard the rival submissi....