TaxTMI 
TaxTMI 
2018 (8) TMI 274
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....o Rs. 9,12,39,472/- made by the Assessing Officer u/s 14A of the Income-tax Act, 1961 (hereinafter also called 'the Act') read with Rule 8D of the Income-tax Rules. 3. Briefly stated, the facts of the case are that the assessee is engaged in the business of financing, borrowing, lending, advancing money, dealing in debt instruments, investing, depository services and portfolio management services. The assessee received exempt dividend income of Rs. 3,38,62,672/-. In the absence of any disallowance offered u/s 14A of the Act, the Assessing Officer required the assessee to show cause as to why disallowance be not made. The assessee tendered some explanation. Not satisfied with the assessee's point of view, the Assessing Officer invoked the....
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....itted that for calculating the average value of Investments, the Assessing Officer wrongly considered the value of all the investments appearing in the balance sheet, including those in respect of which no dividend income was earned during the year. This contention could not be factually controverted on behalf of the Revenue. 6. The Hon'ble Delhi High Court in ACB India Ltd. vs. CIT (2015) 374 ITR 108 (Del), has held that the average value of investments, for the purposes of Rule 8D(2)(iii), should be confined to those securities in respect of which exempt income is earned and not the total investments. Similar view has been taken by the Special Bench of the Tribunal in the case of ACIT vs. Vireet Investments (P) Ltd. (2017) 165 ITD ....
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....investments of Rs. 111,30,09,245/- in the shares as on 31.03.2007 with corresponding figure of loans and advances at Rs. 5,26,64,161/-. It was, thus, opined that the opening stock of shares was acquired through the borrowed funds and further investments in new shares of Rs. 291.12 crore made during the year were also out of borrowed interest bearing funds. This was countered by the ld. AR contending that interest of Rs. 9.51 crore was paid in respect of borrowed funds which were not utilized for the purposes of investments in the current as well as the preceding year. It was further submitted that though the assessee made fresh investment of Rs. 291.12 crore during the year, at the same time, it also sold investments of Rs. 344.87 crore dur....
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....investments in the securities. 9. The ld. AR submitted that in the order of assessment for the A.Y. 2007-08, the Assessing Officer added a sum of Rs. 5 lac u/s 14A towards salary costs and administration expenses u/s 14A on agreed basis. It was, therefore, submitted that no disallowance of interest should be made in respect of the securities purchased during the preceding years. He relied on the judgment of the Hon'ble Karnataka High Court in CIT vs. Sridev Enterprises (1991) 192 ITR 165 (Kar.) and certain other decisions canvassing the proposition that if the assessee's claim in the previous assessment years regarding interest on borrowed capital has been accepted, the Revenue cannot make disallowance of interest in the succeeding y....
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....or the first time in the year in question and there can be no presumption that the AO accepted in the preceding year that no interest bearing funds were utilized by the assessee in making the investments in respect of opening balance of investments, so as to disable him from making disallowance of interest under rule 8D, even if it is proved that interest bearing funds were utilized for the purpose. Ergo, this contention of the ld. AR is jettisoned. It is, therefore, directed that the Assessing Officer will examine the question of disallowance of interest under Rule 8D(2)(ii) in the above hue and compute the same after allowing opportunity of being heard to the assessee. 11. It is noticed that the assessee earned exempt dividend income o....