TaxTMI 
TaxTMI 
2018 (8) TMI 130
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.... 31/03/2016 determining the assessee's loss at Rs. 7,48,33,819/- by disallowing an amount of Rs. 78,74,968/- u/s 14A and Rs. 11,05,393/- u/s 43B of the Income-tax Act, 1961 (in short 'the Act'). 3. When the assessee preferred an appeal before the CIT(A), the CIT(A) confirmed the order of AO. 4. Aggrieved with the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal: "1. The Order of the Commissioner of Income-Tax (Appeals)-5, Hyderabad dated 28-06-2017 is erroneous, contrary to law and facts of the case. 2. a) The Commissioner of Income Tax (Appeals) erred in law in conforming the disallowance of Rs. 78,74,968/- made by the Assessing Officer for the assessment year 2013-14 applying Sec.14A r.w.r.8D(2)(iii) on the ground that provisions of said section are applicable to Appellant's case stating that irrespective of the fact whether investments has yielded income or not, disallowance is in conformity with Rule 8D(2)(iii) and is therefore justified. b) The Commissioner of Income Tax (Appeals) ought to have seen that the Appellant's investments both as at 31.03.2012 and 31.03.2013 remained same and therefo....
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....ce, do not call for any interference in the order of AO. 8. Before us, the ld. AR of the assessee relied on the decisions of coordinate benches of this Tribunal in the case of M/s SNJ Synthetics Ltd. Vs. DCIT in ITA No. 1926/Hyd/2017 dated 11/05/2018 and in the case of M/s Kamadhenu Sukrit Pvt. Ltd. Vs. ITO in ITA No. 460/Hyd/2017 dated 22/11/2017, copies which are filed on record. 9. Ld. DR relied on the orders of CIT(A)/AO. 10. Considered the rival submissions and perused the material on record. The issue in dispute is squarely covered by the decision of the coordinate bench of this Tribunal in the case of SNJ Synthetics Ld. (supra) wherein the coordinate bench has observed as under: 6. We have considered the rival contentions and perused the facts on record and the case law relied upon. As seen from the order of the AO as well as the CIT(A), there is no finding that assessee has incurred any expenditure for earning the said dividend income. There was no diversion of borrowed funds, hence there is no disallowance interest under rule 8d(2)(ii). The disallowance was only under Rule 8D(2)(iii). 6.1. Coming to the disallowance of % of average value of inves....
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.... free income of Rs. 68,37,583/- disallowance of Rs. 2,16,51,917 (enhanced by CIT(A) at Rs. 2,19,47,772) is made u/s 14A which is way too much than the exempt income. As the interpretation of provisions of sec. 14A r/w rule 8D is leading to unanticipated absurdities which cannot be the intention of legislature. Under these circumstances help of external aids of construction for interpretation of statute is called for. Looking at the varying interpretation offered by various courts and benches of tribunal in relation to sec. 14A, it is quite arduous to precisely decide the issue. In given facts and circumstances without going into all the issues, in our view it is appropriate to take guidance from Chandigarh bench judgment in the case of Punjab State Co-opt Marketing Fed. Ltd. (supra) holding that the disallowance of expenditure in any case cannot exceed the income earned. In our view this judgment takes a holistic view that disallowance in terms of sec. 14A can be maximum to the extent of exempt income, there is no dispute that in this case which is at Rs. 68,37,583/-. This judgment implies that reasonable expenditure less than the exempt income can be disallowed. In our considered ....
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.... of the said amount out of Rs. 11,05,393/- was not justified as the provisions of section 43B are not applicable to the above payments of Rs. 1,76,564/-. However, the AO disallowed the same u/s 43B. CIT(A) relying on various decisions, upheld the disallowance. 12. Before us, the ld. AR reiterated the submissions as made before the revenue authorities, while, the ld. DR relied on the orders of revenue authorities. 13. Considered the rival submissions and perused the material on record. Provisions of section 43B read as under: 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or] (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, c) any sum referred to in clause (ii) of sub-section (1) of section 36, (d) any sum payable by the assessee as interest on any loan or borrowing from any ....