TaxTMI 
TaxTMI 
2018 (10) TMI 1041
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....tions for our consideration: "[A] Whether the Appellate Tribunal had erred in law and on facts restricting the disallowance to Rs. 15,44,972/instead of Rs. 5,78,22,678/u/ s.14A r.w.r 8D of the Act? [B] Whether the Appellate Tribunal had erred in law and on facts by not appreciating the ratio decided in Maxopp Investment Ltd. vs. CIT?" 2. In relation to the respondentassessee, for the assessment year 2008-09, the question of disallowance of expenditure in terms of section 14A of the Income Tax Act, 1961 ('the Act' for short) and rule 8D of the Rules came up for consideration before the Assessing Officer. The Assessing Officer noted that the assessee had invested its funds in investments earning tax free income. He therefore di....
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.... similar challenge of the Revenue. The Tax Appeal was dismissed making following observations: "10. As is well known, Section 14A of the Act relates to expenditure incurred in relation to income not includable in total income. Subsection (1) of Section 14A provides that for the purposes of computing total income under ChapterIV no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. As per subsection (2) of Section 14A the Assessing Officer would determine the amount of expenditure incurred in relation to such income which does not form part of the total income in accordance with the method as may be prescribed, if having regard to t....
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....not necessarily be the business of the assessee itself, the Revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the Board of Directors and assume the rule to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profit. The transfer of borrowed funds to a sister concern has to be seen from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits. 12. The exposition of law made by the Supreme Court in case of S. A. Builders and observation made therein have been applied by this court on various occasions, particularly in connection with ....
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....yana High Court in case of M/s. Max India Ltd., in a judgment dated 8.3.2017 considered a similar issue as under: "6. With regard to the second issue regarding expenditure related to exempt income, the same is covered by the decision of this Court in the case of the assessee in Commissioner of Income Tax, Jalandhar I, Jalandhar vs. M/s Max India Limited, ITA No.186 of 2013, decided on 6.9.2016, wherein after considering the relevant case law on the point, the issue was decided in favour of the assessee and it was recorded thus: " 9. This presumption is unfounded. Merely because the interest free funds with the assessee have decreased during any period, it does not follow that the funds borrowed on interest were utilized for the purpos....
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....at in the proceeding years, i.e. 20052006 to 20072008. The Division Bench of this Court in the aforesaid decision has specifically observed that in a case where the assessee was having sufficient funds available with it, more than amount invested for earning the dividend, the disallowance in respect of interest expenditure under Section 14A of the Act read with Rule 8(d) of the Rules is not permissible. The decision of the Division Bench of this Court in the case of the very assessee for the Assessment Year : 20042005 has attained finality. In the present case, it is required to be noted that in the earlier years also more particularly, even in the Assessment Year : 20042005, the assessee was also having mixed funds and still considering th....
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....nvestment would be justified. This issue does not arise in the present case. However, it is true that while disposing of bunch of appeals by the said judgment the Supreme Court also considered the correctness of the view of the Punjab & Haryana High Court in case of Avon Cycles Ltd. It was the case in which the Assessing Officer had invoked Section 14A read with Rule 8D and apportion the expenditure between investments made for earning tax free income and the rest. The CIT (Appeals) had deleted the entire disallowance upon which in the appeal filed by the Revenue the Tribunal restored portion of the disallowance observing that the funds utilized by the assessee being mixed funds, the disallowance is confirmed in view of the provisions under....