TaxTMI 
TaxTMI 
2018 (3) TMI 301
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....rm amounting to Rs. 51,35,895/-. The assessee was called upon to explain the reasons for not offering any disallowance u/s 14A. It was submitted on behalf of the assessee that the investments were made out of own funds and, as such, there could be no disallowance of interest. The Assessing Officer did not agree with the assessee's contention and invoked the provisions of Rule 8D after recording satisfaction that: "The contention of the assessee that no expense was incurred in earning tax free income was not substantiated by any factual evidence in this regard." Applying the provisions of Rule 8D, the Assessing Officer computed disallowance u/s 14A to the tune of Rs. 15,77,74,000/-. The ld. CIT(A) observed on page 14 of the impugned order that investment in shares etc. stood at Rs. 46,033.76 lac as against share capital and reserve and surplus to the tune of Rs. 1,64,967.58 lac. Applying certain formula, he computed disallowance of interest under Rule 8D(2)(ii) at Rs. 6.33 crore. After adding 1/2% of the average value of investments under Rule 8D(2)(iii) at Rs. 225.47 lac, the ld. CIT(A) computed confirmation of addition u/s 14A at Rs. 858.47 lac. Both the sides are aggrieved in res....
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....ted that there were enough interest free funds at its disposal for making investment. The ld. CIT(A) got convinced with the assessee's submissions and deleted the addition. Before the Tribunal, it was contended on behalf of the Revenue that the shareholders' funds were utilized for the purchase of its assets and hence the assessee was left with no reserve or own funds for making investment in the sister concern. Thus, it was argued that the borrowed funds had been utilized for the purpose of making investment in the sister concern and the disallowance of interest was rightly called for. The Tribunal, on appreciation of facts, recorded a finding that the assessee had sufficient funds of its own for making investment without using the interest bearing funds. Accordingly, the order of CIT(A) was upheld. When the matter came up before the Hon'ble High Court, it was contended by the Department that the shareholders' funds stood utilized in the purchase of fixed assets and hence could not be construed as available for investment in sister concern. Repelling this contention, the Hon'ble High Court observed that : "In our opinion, the very basis on which the Revenue had sought to contend o....
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....5 (Bom). It is further observed that this issue is no more res integra in view of the recent judgment delivered by the Hon'ble Supreme Court in Godrej & Boyce Manufacturing Company Ltd. vs. DCIT (2017) 394 ITR 449 (SC), in which it has been held that when interest free funds in the form of share capital and reserves are more than investments, then no disallowance of interest can be made u/s 14A. 8. Adverting to the facts of the instant case, we find that the assessee's share capital along with reserve and surplus is many times higher than the amount invested in shares etc. yielding exempt income. Applying the ratio of the above referred decisions, we are of the considered opinion that no disallowance can be sustained under Rule 8D(2)(ii). 9. Turning to clause (iii) of Rule 8D(2), it is noted that the Assessing Officer as well as the CIT(A) computed/confirmed disallowance u/s 8D(2)(iii) @ ½% of the average value of investments. The Hon'ble jurisdictional High Court in ACB India Ltd. vs. ACIT (2015) 374 ITR 108 (Del) has held that value of tax exempt investments should be considered instead of total investments for adopting average value of investments of income ....
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....sallowance of Rs. 28,36,740/- made by the Assessing Officer on account of disallowance of brokerage expenses. The Assessing Officer noticed that the assessee was recognizing income on the basis of 'Percentage of completion method'. Invoking the matching principle, the Assessing Officer held that the brokerage paid was also to be correlated with the revenue declared from various projects. This resulted into an addition of Rs. 28,36,740/-. The ld. CIT(A) deleted the addition. 14. Having heard the rival submissions and perused the relevant material on record, it is noticed that similar issue was raised in DLF Ltd.'s case, which is assessee's sister concern. Vide order dated 11.03.2016, whose copy has been placed on record, the Tribunal in ITA No.2677 & 3061/Del/201 has deleted such addition by relying on the decision of the Hon'ble Delhi High Court in the case of DLF Universal Ltd. Since the facts and circumstances of the instant ground are mutatis mutandis similar to those considered and decided by the Tribunal in the case of the assessee's sister concern for the assessment year 2006-07, we hold that the addition has been rightly deleted. The impugned order is countenanced to ....
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....(A) deleted in the first appeal. 18. Having heard both the sides and perused the relevant material on record, we find that similar issue came up for consideration before the Tribunal in the afore-noted case of DLF Ltd. The Tribunal, after considering all the relevant arguments, has confirmed the deletion of addition in the first appeal. Relevant discussion has been made in paras 212 to 216 of the Tribunal order. Since the facts and circumstances of the instant ground are similar to those already considered and decided by the Tribunal, respectfully following the precedent, we uphold the impugned order on this score. This ground fails. 19. Ground No.6 is against the deletion of addition of Rs. 101,15,115/- made by the Assessing Officer on account of disallowance of excessive brokerage. The assessee paid brokerage of Rs. 34,64,892/- to M/s Gaurav Associates for facilitating renting of premises. A further sum of Rs. 75,60,312/- was paid to DTZ International Property Advisors Pvt. Ltd., for facilitating renting of premises. The Assessing Officer observed that the assessee entered into marketing and lease management service agreement with DLF Estates Pvt. Ltd., to provide marketing....
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.....4242.01 lacs d. Depreciation Rs.753.80 lacs 23. As regards the Establishment expenses, the Assessing Officer found that there was Establishment cost of Rs. 4.92 crore in respect of senior management. The same, in his opinion, was required to be allocated to the SEZ activity in the ratio of turnover of this activity to other activities. Finance charges of Rs. 8575.81 lac were allocated by the assessee exclusively to non-SEZ units. Similarly, Depreciation of Rs. 753.80 lacs was also claimed as deduction in respect of non-SEZ units. Only Rs. 55.18 lac out of 'Other expenses' of Rs. 4242.01 lac was allocated to SEZ project and Rs. 4186.83 lac to non-SEZ activities. Applying the ratio of turnover of SEZ activity vis-à-vis other activities as 65/35, the Assessing Officer reallocated the expenses which resulted into reduction in the amount of deduction u/s 80IAB to Rs. 573.95 crore from the originally computed by the assessee at Rs. 584.93 crore. The ld. CIT(A) deleted the addition by observing that the assessee had given details of head-wise expenses incurred by the SEZ and non-SEZ activities and the same was required to be accepted. That is how the disallowance of de....