TaxTMI 
TaxTMI 
TaxTMI 
2018 (12) TMI 319
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....7/- u/s. 14A r.w. Rule 8D of the Act on the alleged ground that the appellant company had incurred expenses in relation to earning exempt income. 3. Your appellant craves to add, alter, amend or delete any grounds of appeal." 2. Briefly stated, the assessee company which is engaged in the business of a property developer had e-filed its 'return of income' for A.Y. 2010-11 on 15.10.2010, declaring current year loss of (Rs.35,94,45,304/-). The said return of income was thereafter revised on 30.09.2011 declaring current loss of (Rs.35,93,90,734/-). The 'return of income' filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2). 3. During the course of the assessment proceedings, it was inter alia observed by the A.O that the assessee company had earned dividend income of Rs. 1,69,98,197/- and Long term capital gain (for short 'LTCG') of Rs. 36,57,71,185/- which were claimed as exempt from tax. However, as stated by the A.O in the assessment order, the assessee company had failed to disallow the expenditure incurred for earning of the exempt income in terms of Sec. 14A o....
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....be taken into account. On the basis of his aforesaid deliberations, it was concluded by the CIT(A) that the working of disallowance by the assessee under Sec. 14A r.w Rule 8D(2)(iii) at Rs. 37,27,246/- was not at all in consonance with the mandate of law. The CIT(A) also took cognizance of the fact that the A.O while dislodging the disallowance offered by the assessee under Sec. 14A r.w Rule 8D(2)(iii) had failed in his statutory obligation of recording his satisfaction as to why the said claim of the assessee was not to be accepted. The CIT(A) being of the view that the powers vested with him were co-terminus with those of the assessing officer and that he could do what the latter had failed to do, thus proceeded with and deliberated at length on the working of the disallowance of Rs. 37,27,246/- offered by the assessee under Sec. 14A r.w. Rule 8D. On the basis of his aforesaid deliberations the CIT(A) was not impressed with the disallowance of Rs. 37,27,246/- that was offered by the assessee under Sec. 14A r.w. Rule 8D(2)(iii). It was observed by him that the assessee had attributed only a minuscule part of the total administrative expenses (Rs.12.65 crore) and staff cost (Rs.9.3....
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....hort 'D.R') objected to the request of the assessee for condonation of the delay involved in filing of the present appeal. 6. We have given a thoughtful consideration to the facts leading to the delay of 48 days in filing of the appeal by the assessee before us. In our considered view the assessee had fairly stated the reason leading to the delay in filing of the appeal, and had not come forth with any frivolous ground for explaining the same. Admittedly, though an appellant is expected to be vigilant as regards filing of an appeal within the stipulated time period, but then we also cannot remain oblivious of the fact that under certain circumstances san any malafide or lapse on the part of an assessee, inadvertent delay in filing of the appeal may occasion. In the case before us, it is the claim of the assessee that the delay had occurred for the reason that the appeal could not be filed by its auditors viz. M/s Thar & Company, Chartered accountants to whom the order of the CIT(A)-53, Mumbai was delivered by the assessee well within time. Further, the reason leading to the delay on the part of the Chartered accountants viz. M/s Thar & Company in filing of the appeal, had been sta....
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....idering such investments income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee company on the first day and the last day of the previous year, but had also considered such investments from which was no exempt income was either received or receivable by the assessee during the year under consideration. In support of his contention that no disallowance under Sec.14A can be made if no exempt income is received or receivable by the assessee during the relevant previous year, reliance was placed by the ld. A.R on the order of the Tribunal in the assesses own case for A.Y 2009-10 viz. M/s Wadhawan Holdings Pvt. Ltd. Vs. ACIT, Central Circle 5(4), Mumbai (ITA No. 2662/Mum/2017; dated 31.01.2018). The ld. A.R taking us through the facts involved in its case for the preceding year i.e A.Y 2009-10 submitted, that the CIT(A) had in the said case considered the investments in shares of HDIL and DHFL, and also investments in shares of Wadhwa Food Retail Pvt. Ltd. for the purpose of working out the disallowance under Sec. 14A r.w Rule 8D(20(iii). The ld. A.R submitted that the Tribunal taking cognizance of the fact that investmen....
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.... Insofar the contention of the ld. A.R, that for the purpose of computing the disallowance as per the machinery provisions contemplated under Rule 8D(2)(iii) only the investments from which exempt dividend income was either received or receivable by the assessee were to be considered, we find substantial force in the same. Rule 8D(2)(iii) contemplating the determining of the administrative expenses involved in earning of the exempt income by the assessee, reads as under: "iii. an amount of equal to one-half per cent of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year." On a perusal of the aforesaid clause (iii) of sub-rule (2) of Rule 8D, it can safely be gathered that the same contemplates disallowance of one-half percent of the average of the value of investment, income from which does not or shall not form part of total income, as appearing in the 'balance sheet' of the assessee on the first day and the last day of the previous year. We are of the considered view that the inclusion of the value of any non-exem....
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....d issue had been deliberated upon by a coordinate bench of the Tribunal i.e ITAT Mumbai, 'L' Bench in DCIT-7(2), Mumbai Vs. Reliance Natural Resources Ltd. (2017) 166 ITD 385 (Mum). In the aforesaid case, it was observed by the Tribunal that where the assessee had earned exempt dividend income and had computed disallowance under Sec. 14A at certain amount, disallowance computed under Sec. 14A cannot be imported into clause (f) of Explanation 1 to Sec. 115 JB for the purpose of computing 'book profit' under Sec.115JB. On a similar footing the ITAT, Kolkata Bench 'C' in Integrated Coal Mining Ltd. Vs. DCIT, Circle 6, Kolkata (2016) 66 taxman.com 260 (Kolkata) had observed that computation of disallowance under Rule 8D can be used for computation of income under the normal provisions of the Act, and cannot be considered for computing the 'book profit' under Sec.115JB of the Act. 11. In the backdrop of the aforesaid facts, we are of the considered view that the disallowance under Sec.14A r.w Rule 8D is to be worked out by taking into consideration only those shares which had yielded exempt dividend income during the year under consideration. Further, in terms of our aforesaid observat....