TaxTMI 
TaxTMI 
2016 (2) TMI 1187
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....U/s 14A applying rule 8D of the Income Tax Act amounting to Rs. 53,54,056/- and Rs. 1,29,52,621/- for AYs 2008-09 and 11-12 respectively. 3.1 Brief facts are assessee, Om Metals Infra-Projects Ltd. is a listed Company, engaged in the business activities of Hydro-mechanical dam gates as its main business and also business activities like hotel, multiplex, housing projects etc. In both the years assessee had earned dividend from old share holdings amounting to Rs. 1,14,77,297/- & Rs. 1,19645/- respectively. Original assessment for AY 2008-09 was completed u/s 143(3) where no such disallowance was made u/s 14A, the impugned addition in AY 2008-09 was made by reopening assessment u/s 147. and for AY 2011-12 has framed u/s 143(3). During the ....
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....impugned additions which was contrary to the factual position and judicial citations. The Ld. CIT(A) gave the relief in question by mainly holding that: (i) Ld. AO has not considered the financial breakup, working and judicial citation contended by the assessee. In AY 2008-09 the correct investment in JV shares and mutual funds was to the tune of Rs. 21,06,71,000/- and not Rs. 37,55,36,330/- as held by AO. The major share investment made in JV shares to hold controlling interest was a business necessity to promote its business and cannot be termed an investment to earn exempt income. (ii) Total share capital and reserves available with assessee were to the tune of Rs. 378.00 crores. It has been admitted by ld. AO that i....
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....s not form part of the total income. It was incumbent on the AO to find out as to whether the assessee has incurred any expenditure in relation to income which does not form part of the total income and if so to quantify the expenditure of disallowance. The AO has not brought on record any fact or material to show that any expenditure has been incurred on the activity of non taxable income. (vii) In AY 2008-09, assessee incurred expenditure of interest amounting to Rs. 3,26,05,191/- the break thereof is as under:- a. Term loan used for particular assets Rs. 2,35,26,803/- b. Working capital used for business Rs. 90,78,388/- Rs. 3,26,05,191/- Thus there was no nexus between the intere....
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....ng sub-rule (2) without elucidating and explaining why the voluntary disallowance made by the assessee was unreasonable and unsatisfactory. There was no such satisfaction recorded by the Assessing Officer before he invoked subrule (2) of rule 8D and made the computation. The Assessing Officer has to reject the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, in relation to exempt income; the Assessing Officer would have to indicate cogent reasons for the same. We do not find any such satisfaction recorded in the present case by the Assessing Officer before he invoked sub-rule (2) of rule 8D of the Rules and made the re-computation. Therefore the respondent assessee would succeed.'' (2) CIT V TAI....
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....owance is indicated in Section 14A, and is only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income". This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case.'' (4) REGENT AUTO. PVT. ITA/684/DEL/2014 (DEL ITAT) DTD 18-6-15 :- ''Delhi ITAT after considering its own judgment in the case of Holicim India Pvt. Ltd. and Hon'ble Delhi High Court in Joint Investments (supra) reiterated the view that the disallowance u/s 14A cannot the exempt income. 3.5 It is admitted by ld. AO himself that the investments in JV equity and mutual funds was made by the assessee out of own capital and reserves. The disallowance is made ....
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.....e. JV equity and mutual funds were made by the assessee out of its own capital and reserves. (ii) Assessee's explanation that in AY 2008-09, interest expenditure amounting to Rs. 3,26,05,191/- was incurred as under: (a) Term loan used for particular assets Rs. 2,35,26,803/- (b) Working capital used for business Rs. 90,78,388/- Rs. 3,26,05,191/- Thus there was no nexus between the interest expenses and exempt income. Similar position for AY 2011-12 also is not disputed. (iii) Ld. AO invoked sub-rule (2) without demonstrating why the assessee's explanation was unreasonable and unsatisfactory. On one hand it is admitted that impugned investments are not out of borrowed funds and they w....