TaxTMI 
TaxTMI 
2018 (12) TMI 410
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....;the tribunal') dated 27.02.2018. 2. The only issue raised by the Revenue in this appeal relates to the quantum of disallowance under Section 14A of the Act. Hence, we need not refer to any other issue and aspect. 3. The respondent-assessee in the return for the year had declared income of Rs. 6,30,950/- taxable under the head short-term capital gains earned from investment of Rs. 38 crores in mutual funds units, which units were also sold/redeemed during the year. 4. Respondent-assessee had invested more than Rs. 820 cores in equity shares of associated companies. No dividend income was earned on the equity shares. The shares were not sold or transferred. 5. Respondent-assessee had shown interest liability of Rs. 153,08,66,463/- consisting of the following components:- Interest on Term Loan Rs. 131,47,42,466/- Pre-payment and Other charges Rs. 7,03,40,439 Interest on Debentures Rs. 6,23,65,766/- Interest to Others Rs. 8,33,41,165/- Total Interest Liability Rs. 153,08,66,463 6. Respondent-assessee had earned and declared interest income of Rs. 41,61,57,245/- under the head 'income from other sources. This interest had ....
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....allowance of Rs. 27,55,00,000/- was made under clause (ii) of Rule 8D of the Rules. 15. Disallowance of Rs. 4,09,00,000/- being 0.5% of the average investment was made under clause (iii) of Rule 8D (2) of the Rules. For computing disallowance under clause (iii) the average investments at the beginning and at the end of the year and not the investment yielding exempt income were taken as the basis. 16. The Assessing officer did not give benefit of setting of interest of Rs. 41.81 crores received by the respondent-assessee from the subsidiary companies. 17. Accordingly self disallowance of Rs. 70,20,602/- made by the respondent-assessee was enhanced and increased by Rs. 143,82,48,096/- to Rs. 144,52,68,698/-. 18. Lastly, the Assessing Officer on the question of taxability of interest income of Rs. 41,61,57,245/- observed that Rs. 144,52,68,698/- had been disallowed under Section 14A leaving a balance sum of interest paid of Rs. 8,55,97,765/-, which remained to be appropriated. Interest of Rs. 8,55,97,765/- was set off against interest income of Rs. 41,81,11,353/- and the taxable income, other than short term capital gains, was enhanced to Rs. 33,31,99,690/- 19. The Com....
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....(2) would in a given case require consideration. We would not express any firm or final opinion in this regard, as the question of quantum of deduction under Section 14A of the Act read with Rule 8D of the Rules is otherwise covered against the Revenue by decisions of the Supreme Court and this Court. 25. Total exempt income earned by the respondent-assessee in this year was Rs. 19 lakhs. In these circumstances, we are not required to consider the case of the Revenue that the disallowance should be enhanced from Rs. 75.89 crores to Rs. 144.52 crores. Upper disallowance as held in Principal Commissioner of Income Tax vs. McDonalds India Pvt. Ltd., ITA 725/2018 decided on 22nd October, 2018 cannot exceed the exempt income of that year. This decision follows the ratio and judgment of the Supreme Court in the case of Maxopp Investments Ltd. vs. CIT (2018) 402 ITR 640 (SC) and the earlier judgments of the Delhi High Court in Cheminvest vs. CIT (2015) 378 ITR 33 and CIT vs. Holcim Pvt. Ltd. (2014) 272 CTR (Del.) 282. Relevant portion of the judgment in McDonalds India Pvt. Ltd.(supra) reads:- "8. The decision in the case of Maxopp Investment Ltd. (Supra) is significant and does ans....
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....omputing the total income under the Chapter, 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. Hence, what Section 14A provides is that if there is any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction. For the year in question, the finding of fact is that the assessee had not earned any tax free income. Hence, in the absence of any tax free income, the corresponding expenditure could not be worked out for disallowance. The view of the CIT(A), which has been affirmed by the Tribunal, hence does not give rise to any substantial question of law. Hence, the deletion of the disallowance of Rs. 2,03,752/- made by the Assessing Officer was in order". 15. Income exempt under Section 10 in a particular assessment year, may not have been exempt earlier and can become taxable in future years. Further, whether income earned in a subsequent year would or would not be taxable, may depend upon the nature of transaction entered into in the subsequent assessment year. For example, long t....