TaxTMI 
TaxTMI 
2016 (5) TMI 1425
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.....2010. 2. The only issue to be decided in this appeal is as to whether disallowance u/s. 14A of the Act could be made in the facts and circumstances of the case. 3. Brief facts of this issue are that the AO observed that assessee had earned dividend income to the tune of Rs. 13,83,515/-. The position of own capital, unsecured loans and investments as on 31.03.2008 as under: 31.03.2008 (Rs. In crore) Own fund (capital & Reserve) 19.20 Unsecured Loans 31.26 Investments 68.71 It is, therefore, apparent that the unsecured loans have been utilized for investment in shares. Accordingly, Sec. 14A of the Act is attracted in the instant case and the expense relatable to exempt income is lia....
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....p; Basis of calculation 1. Haryana Scrip was sold after 158 days from 01.04.2007, cost was 10076160/-. 2. As per audited Accounts, Loan Capital on 01.04.2007 was Rs. 100249343/- (32.91%). 3. Total interest on 10076160/- @ 11% for 158 days during 31.03.2007 amounted to 479291/-. Interest on LTCG of Haryana to be Disallowed: 279291 x 32.91% = 157895/- ........................... (A) INTEREST RELATABLE TO EXEMPT DIVIDEND INCOME Total interest (Dr.) as per Profit & Loss Account - Rs. 93,26,183/- Allocation of interest on different source of income Income Amount in (Rs.) Ratio Interest Allocation Dividend 13,83,5....
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....ection was assigned by the Id. A.O. in the assessment order. 2) For that under the facts and circumstances of the case the Ld. C.LT.(A) erred in law as well as in facts while enhancing the assessment by applying wrongfully the provisions of rule 8D(2)(iii) read with sec 14A of the LT. Act under a misinterpretation of ratio laid down by the Hon'ble IT AT Kolkata in the case of A.C.I.T. V. Champion Commercial Co. Ltd. 139 ITD 108 (Kol)." 4. The Ld. AR argued that no satisfaction was recorded by the Ld. AO having regard to the accounts of the assessee in terms of Rule 8D(1) of the Rules and accordingly, objected to invoking the provision of Rule 8D(2) of the rules. In support of his contention, he placed reliance on the decisio....
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....ied on by the Ld. AR in that regard requires to be rejected. He argued that the Ld. AO having applied the provisions of Rule 8D of the rules sought to invoke only rule 8D(2)(ii) of the Rules. The Ld. CIT(A) observed that rule 8D of the Rules has to be applied in full and hence, he invoked the provisions of Rule 8D(2)(iii) of the rules by making an enhancement in the assessment. He placed reliance on the Special Bench decision of Delhi Tribunal in the case of Cheminvest reported in 121 ITD 318. 6. The Ld. AR in defence argued that the decision relied on by the ld. DR in the case of Chem Invest of Delhi Special Bench has been reversed by Hon'ble Delhi High court in the same case reported in 378 ITR 33. 7. We have heard rival submissions....
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.... is reproduced herein below :- "On the issue whether the respondent-assessee could have earned dividend income and even if no dividend income was earned, yet Section 14A can be invoked and disallowance of expenditure can be made, there are three decisions of the different High Courts directly on the issue and against the appellant- Revenue. No contrary decision of a High Court has been shown to us. The Punjab and Haryana High Court in Commissioner of Income Tax, Faridabad Vs. M/s. Lakhani Marketing Incl., ITA No. 970/2008, decided on 02.04.2014, made reference to two earlier decisions of the same Court in CIT Vs. Hero Cycles Limited, [2010] 323 ITR 518 and CIT Vs. Winsome Textile Industries Limited, [2009] 319 ITR 204 to hold that ....
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....lier and can become taxable in future years. Further, whether income earned in a subsequent year would or would not be taxable, may depend upon the nature of transaction entered into in the subsequent assessment year. For example, long term capital gain on sale of shares is presently not taxable where security transaction tax has been paid, but a private sale of shares in an off market transaction attracts capital gains tax. It is an undisputed position that respondent assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private placement etc. cannot be ruled out and is not an improbability. Dividend may or may not be declar....