AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 44
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....ng the addition of Rs. 5,81,408/- u/s 14A made by the AO as returned income without properly appreciating the facts of the case that the AO has no discretion to quantify the amount incurred in earning the exempt income except to follow the provisions of Rule 8D." 2. The facts on record are that the AO in this year has also considered the same advance which was given to its sister concern, M/s ASB Health Care (P) Ltd. during the A.Y.2006-07 and closing balance of the same during the year under consideration as on 31.03.2008 at Rs. 3,01,34,498/-. In the impugned order, the AO has also given reference to the A.Y.2006-07 and A.Y.2007-08 to arrive at the conclusion that interest-bearing fund has been diverted for nonbusiness purposes and made disallowances of Rs. 31,00,953/- out of interest paid by the assessee. Further the AO has mentioned that the assessee has made investment, on which it has earned exempt income but no expenditure has been debited on account of earning the said exempt income. Therefore, vide show cause notice dated 24.11.2010, he asked the assessee to explain as to why necessary disallowance u/s 14A read with Rule 8D should not be made amounting to Rs.Rs.5,81,408/....
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....ance remains to be same as it was during the year AY 2006-07. After examining these facts, the Hon'ble ITAT, Agra arrived to the conclusion during the Assessment Year 2006-07 that the assessee has advanced the money for the purpose of its business as a measure of commercial expediency and therefore, after following the decision of the Hon'ble Supreme Court in case of S.A. Builders vs CIT(A) (Supra), addition made by the AO in A.Y.2006-07 u/s 36(1)(iii) of the Act has been deleted. Respectfully following the decision of the Hon'ble ITAT, Agra in this year also, the addition made by the A.O u/s 36(1)(iii) at Rs. 31,00,953/- cannot be sustained as the facts of the case during Assessment Year 2006-07. Therefore, I delete the addition of Rs. 31,00,953/- and accordingly ground number 1 is allowed." "6.7 In present case, the AO has given detailed reasoning for invoking the provisions of section 14A and applying Rule 8D as discussed by him in para no.3 of the assessment order. Therefore, I do not find any legal infirmity in invoking the provisions of section 14A read with Rule 8D by the Assessing Officer. Now, the question to be decided is about determining the amount of d....
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....e average of the value of the investment, income from which shall not form part of the total income, therefore, in this sub part what is disallowed is ½ per cent of average value of investment. Therefore, after holding that no disallowance is to be made on account of expenses incurred for earning of exempted income under first two sub parts of Rule 8D, the Hon'ble ITAT Kolkata Bench has held that the disallowances under section 14A read with Rule 8D is to be made in relation to the income which does not form part of the total income and this can be done only by taking into consideration the investment which has given rise to the income which does not form part of the total income and under such circumstances, the computation of the disallowances u/s 14A read with rule 8D(2)(iii) which was the issue in the case of REI Agro Ltd (supra) , this matter was restored to the file for the AO for re-computation because the AO in that case had not identified those investments of the assessee on which dividend could 'have been received by him. Therefore, it was very clear from this judgments that under the above circumstances, where the assessee has claimed that no expenses has ....
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.... utilized borrowed funds for earning business income as well as for purposes other than the business. Hence, the assessee failed to discharge its onus to prove the no part of the borrowed funds have been utilized for the purpose other than the business. He placed reliance on the order of the Hon'ble Calcutta High Court in the case of M/s Dhanuka& Sons vs. CIT, Central-I, in ITA No. 633 of 2004 (Cal) held as under: "In the case before us, there is no dispute that part of the income of the assessee from its business is from dividend which is exempt from tax whereas the assessee was unable to produce any material before the authorities below showing the source from which such shares were acquired. Mr. Khaitan strenuously contended before us that for the last few years before the relevant previous year, no new share has been acquired and thus, the loan that was taken and for which the interest is payable by the assessee was not for acquisition of those old shares and, therefore, the authorities below erred in law in giving benefit of proportionate deduction. In our opinion, the mere fact that those shares were old ones and not acquired recently is immaterial. It is fo....
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....1 (Page No.81 to 92 of paper book) after examining in detail, which has become final after rejection of departmental appeal by 1 Hon'ble Allahabad High Court (Page No. 93 to 94 of paper book). Assessee relies thereon. (b) This position has been accepted by the Deptt. and so no disallowance has been made in subsequent assessment year 2009-10 and thereafter. 2) Assessee company has invested Rs. 56.12 lacs in the shares of other companies, which are, Very old. Paid up capital & Free reserves of the assessee company at the close of the year were Rs. 17.53 crore. Assessee claimed that no expenditure was incurred for earning the dividend. However, Learned AO has disallowed deemed interest expenditure Rs. 6.10,968/- U/s 14A under rule 8D ignoring the fact about sufficient availability of own funds with the company for the purpose of investment in the shares. Moreover, Learned AO has wrongly calculated addition u/s 14A, as total assets of the company as on 31.03.2008 were Rs. 56,17,79,311/- and not Rs. 3,66,92,065/- as considered in the order, resulting wrong calculation of addition on this count. Learned CIT(A) reduced addition to Rs. 29,560/- against Rs. 6,10,968/- by the le....
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....ares were barely Rs. 59.12 lacs only (0.32%). All the investments are very old and balance sheet of relevant years are not readily available. No new investment was made by the company during the year under consideration. As per last available balance sheet, as on 31st March, 1999, there was no outstanding CC limit with bank, while appellant's investment in shares were i.e. Rs. 59.12 Lacs and free reserve and capital of the company were Rs. 428.71 lacs, which clearly depict sufficient availability of own funds, even 10 years back also. Rule 8D prescribe methodology to be adopted only when provision of section 14A of the Income Tax are applicable. In the case, there is no nexus between tax free income and expenditure relating thereto. In the audit report u/s 44AB, no such case is reported by Tax Auditor in Form 3CD. Thus, appreciating the facts and material on record, no addition invoking provisions contained in section 14A read with rule 8D, should be sustained. It may be further added that there is no change in the investments part of the appellant during fie subsequent assessment years 2009-10 and 2010- 11. Your learned predecessor in the assessment A.Y.2009-10 has de....