TaxTMI 
TaxTMI 
2018 (9) TMI 286
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....n the case of Liberty India (supra), did not press Ground No.1 of the appeal of the assessee. Ground No.1 is, therefore, dismissed as not pressed. 4. On Ground No.2, assessee challenged the order of the Ld. CIT(A) in restricting and retaining the apportionment allocation of 10B unit of Rs. 10,54,371/- (Rs.12,78,120/- (-) Rs. 2,23,748/-) on account of Head Office, common expenses and allocation of Rs. 1,05,305/- to Kotdwar Unit-III under section 80IC of the I.T. Act. It is also stated in this ground that Ld. CIT(A) has erred in not totaling deleting the allocation of above expenses to Unit 10B and Kotdwar Unit-III as similar claim have been accepted in earlier years. Learned Counsel for the Assessee referred to Para 5.10.7 of the impugned appellate order in which this issue have been decided by the Ld. CIT(A). The Ld. CIT(A) noted that this issue relates to allocation of common expenses towards profits of units eligible under section 10B and units eligible under section 80IC respectively. The Counsel for Assessee pleaded before Ld. CIT(A) that in making the disallowance, the A.O. wrongly assumed the expenses appearing in Schedule-20, 21 and 22 pertain only to Central Office/Head Of....
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....ssessee has been accepted by the Ld. CIT(A), therefore, this ground has become infructuous and perhaps the appeal effect order would have given the present figure which is mentioned in the written submissions of the assessee. 6. Learned Counsel for the Assessee in view of the submissions of the Ld. D.R. also stated that whatever claim of assessee was made before Ld. CIT(A) have since been accepted, therefore, this ground have become infructuous. 7. Considering the facts of the case in the light of submission of the parties above, we are of the view that no interference is required in the matter. The Ld. CIT(A) accepted revised working of the assessee which was based on reasonable basis. A.O. was accordingly directed to re-compute the disallowance as per statement made by assessee. It, therefore, appears that the contention of the assessee now raised for deleting the addition of Rs. 11,35,150/- may be coming out of the appeal effect order passed by the A.O. which cannot be challenged in the present proceedings. Since the Ld. CIT(A) has already allowed relief to the assessee, therefore, no further interference is called for in the matter. Ground No.2 of the appeal of the assessee h....
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....d on the subject. The assessee-company did not have any Senior qualified Administrative Staff apart from Engineers or technical persons. No expenditure having proximate connection with dividend income is incurred expect the above expenditure. The dividend income is directly remitted by mutual fund and companies to the Bank account of the assessee. The assessee-company had not taken any loan or borrowed funds for investments placed with portfolio managers. The assessee had huge interest free general reserve and credit funds aggregating to Rs. 101 crores. The A.O. ignored the specialized nature and range of services rendered by portfolio managers not only for the assessee but to their other clients also. The A.O. failed to take into account the modern technology in the form of computerization and online transactions, De-mat Accounts, Direct online access of the portfolio managers with all mutual funds managements and stock exchanges, all mutual funds administrations and there was little other expenditure to be incurred. The A.O. has not brought anything on record, if expenses were incurred for earning exempt income. No services were rendered by administrative staff. No rent was paid ....
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....e light of the decision of Hon'ble Delhi High Court in the case of CIT Vs Maxopp Investments 64 DTR 122, should be on cogent grounds. I find that the appellant had pleaded before the AO that it had significant own funds of Rs. 101 crores, whereas against that it had made investments of Rs. 57 crores as on the year-end on 31.03.2011. The AO was not satisfied with this explanation, since the appellant company also had borrowed funds. In view of this, the AO was of the view that the claim of the appellant with regard the expenses incurred for earning dividend income was incorrect. Under the circumstances, the only course of action left with the AO was to apply the provisions of rule 8D of the Income Tax Rules, which is the only prescribed method for computing disallowance under section 14-A under such circumstances. In view of this, I find that the action of the AO was duly mandated by law in this regard. 5.8.3.3. Moreover, the explanation given by the appellant before the AO that the claim of Rs. 4,01,209/- includes an estimated amount of Rs. 2 lakh towards administrative expenses incurred for earning income, is itself based on a presumptive estimation of administrative expense....
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....mate connection with dividend Income is incurred except, as submitted earlier, occasional interaction between the Managing Director and the Portfolio Managers. Dividend income is directly remitted by Mutual Funds and Companies to the Bank accounts of the appellant. The Appellant Company had not admittedly taken any loans or borrowed funds for investments placed with the Portfolio Managers. It had its own huge interest free General Reserve funds and credit Balance in the Profit Account which aggregated to over Rs. 101 crores. Notwithstanding the fact that apart from Portfolio management fees and other expenses incurred by them no other expenses had direct and proximate connection with the exempt Income. With a view however to avoid any controversy, a further sum of Rs. 2 lacs was additionally allocated by the Appellant to exempt Income." 5.8.5. On careful consideration of the above submission of the appellant, it is seen that the plea of the appellant has been twofold is namely (i) the appellant had significant funds of its own and hence no interest expenses were incurred for making investments for earning exempt income, and (ii) the two portfolio managers were singularly responsi....
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.... seen that there are certain common expenses in the business of the appellant, which the appellant had attributed towards various business undertakings of the appellant. On the same reasoning, such common expenses were also to be apportioned towards the exempt income as well, which the appellant has failed to do. Under the circumstances, I uphold the action of the AO of made disallowance in the Section 14A (2), which was made by the AO by invoking the prescribed method under Rule 8D. In view of this, Ground number 5 of the appeal is dismissed." 12. We have heard the Ld. Representatives of both the parties and perused the material on record. The Ld. Counsel for assessee reiterated the submissions made before the authorities below and also submitted that investments are completely made and handled by portfolio managers. The authorities below completely ignored these facts. Similar issue is considered by ITAT, Delhi Bench in the case of the assessee for A.Y. 2012-2013 in ITA.No.1764/Del/2016 in which vide order dated 28.02.2018, the departmental appeal has been dismissed. Ld. Counsel for the assessee submitted that Rule 8D is subject to condition that the AO only after having regard ....
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....see had also offered additional disallowance of Rs. 3,79,432/- which escaped the Assessing Officer's attention. Thus, it was found that the assessee offered disallowance for total sum of Rs. 6,42,120/- and not Rs. 2,66,688/-. Considering the fact that the investment portfolio of the assessee was handled and managed by portfolio managers and the portfolio of the assessee managers' fees was voluntarily disallowed by the assessee along with other direct expenses, the ld. CIT(A) held that disallowance to the extent of Rs. 6.46 lac was in order. He, therefore, deleted the remaining disallowance. The Department is aggrieved against the deletion of such disallowance. 8. We have heard both the sides and perused the relevant material on record. It is found as an admitted position that the assessee's investments were handled by portfolio managers to whom only a particular sum was paid as fees, which along with other direct expenses, comes to Rs. 2,42,047/-, being the amount voluntarily disallowed by the assessee. 9. Sub-section (2) of section 14A clearly stipulates that the Assessing Officer shall determine the amount of expenditure incurred in relation to exempt income as per Rule 8D ....