TaxTMI 
TaxTMI 
2018 (12) TMI 1203
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....CIT(A)-4, Bangalore, who dismissed the assessee's appeal on the aforesaid issue of disallowance u/s 14A r.w.r. 8D(2)(iii) vide order dated 27.03.2018. 3.1 Aggrieved by the order of CIT(A)-4, Bangalore, dated 27.03.2018 for Assessment Year 2012-13, the assessee has filed this appeal before the Tribunal; wherein it has raised the following grounds: 1. The CIT(A) erred both in Law and on the Facts of the Case in sustaining the addition of Rs. 8,40,705/- u/s.14 of the Act. 2. He failed to appreciate that the dividend was received on one date and was credited to the appellant's Bank Account and that, therefore. it did not incur any expenditure for earning the dividend. 3.He erred in not following the decision of the Special Bench in ACTT Vs. Vireet Investments (P) Limited (165 ITD 27), where it was held that only the investments yielding the dividend must be considered for disallowance u/s.14A. 4.The appel lant submi t s that , in any cas e, the addi tion made i s exces s i ve and unreasonable. 5.The appellant, therefore, prays that the addition of Rs. 8,40,705/- may be deleted. 3.2 In these grounds (supra), it is seen the sole issue of dispute for consideration is ....
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....R not enter into the computation under Rule 8D(2)(iii) of Income Tax Rules, 1962 (in short 'the Rule'). The Special Bench, after consideration of this issue, in para 11-16 of its order, held that for computing the disallowance u/R 8D(2)(iii) 'only those investments are to be considered for computing average value of investment which yielded exempt income during the year.' The operative part of this decision of the Special Bench at paras 11 to 11.18 are extracted hereunder: "11. We have considered the submissions of both the parties and have perused the record of the case. The basic issue for consideration is that the investment, which did not yield any exempt income, should enter or not enter into the computation under Rule 8D, while arriving at the average value of investment, income from which does not or shall not form part of the total income. 11.1. In the present case, our decision is restricted only to the extent of interpretation of language employed in Rule 8(2)(iii). The submission of ld. counsel for the assessee is that this issue is now covered by the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Holcin India (P) Ltd. (supra), wherein it has been ....
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....ion. In coming to the conclusion, the Special Bench primarily relied on the ratio laid down by the Hon'ble Supreme Court in the case of Rajendra Prasad Moody (supra). 11.5. In the case of Rajendra Prasad Moody (supra), the facts were that the assessees were brothers and each of them had borrowed moneys for the purposes of making investment in shares of certain companies. During the relevant assessment year they paid interest on the moneys borrowed but did not receive any dividend on the shares purchased with these moneys. Both of them made a claim for deduction of the amount of interest paid on borrowed moneys but this claim was negated by the ITO and on appeal by the AAC on the ground that during the relevant assessment year the shares did not yield any dividend and, therefore, interest paid on the borrowed moneys could not be regarded as expenditure laid out or expended wholly and exclusively for the purposes of making or earning income chargeable under the head 'income from other sources', so as to be allowable as a permissible deduction u/s 57(iii). The Tribunal, however, on further appeal, disagreed with the view taken by the taxing authorities and upheld the claim of each ....
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....sale of fixed assets of Rs. 16,52,225/-. As against this, the respondent assessee had claimed administrative and miscellaneous expenditure written off amounting to Rs. 8.75 Crores. For the Assessment Year 2008-09, the assessee had filed return declaring loss of Rs. 6.60 Crores approximately. The assessee had declared revenue receipts in the form of foreign currency fluctuation difference gain of Rs. 12,46,595/-. It had claimed expenses amounting to Rs. 7.02 Crores as personal expenses, operating and other expenses, depreciation and financial expenses. 11.9. In both the assessment orders, the Assessing Officer held that the respondent-assessee had not commenced business activities as they had not undertaken any manufacturing activity or made downstream investments. It was observed that the respondent-assessee, after receiving approval of Foreign Investment Promotion Soard (FIPS) dated 20.12.2000 acquired shares capital of Ambuja Cement India Ltd. This, the Assessing Officer felt, was not sufficient to indicate or hold that the respondent-assessee had started their business. He, accordingly, disallowed the entire expenditure of Rs. 8.75 Crores for the Assessment Year 2007-08 and R....
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.... though it is not argued before us, had taken the stand that the respondent-assessee had made investment and expenditure was incurred to protect those investments and this expenditure cannot be allowed under Section 14A. 11.13. Thus, Hon'ble Delhi High Court primarily decided the issue regarding applicability of section 14A even if no dividend income was earned. The Hon'ble High court in paras 14 to 16 of its decision observed as under: 14. On the issue whether the respondent-assessee could have earned dividend income and even if no dividend income was earned, yet Section 14A can be invoked and disallowance of expenditure can be made, there are three decisions of the different High Courts directly on the issue and against the appellant-Revenue. No contrary decision of a High Court has been shown to us. The Punjab and Haryana High Court in Commissioner of Income Tax, Faridabad vs. MIs. Lakhani Marketing Incl., ITA No.970/2008, decided on 02.04.2014, made reference to two earlier decisions of the same Court in CIT vs. Hero Cycles Limited, [2010]323 ITR 518 and CIT vs. Winsome Textile Industries Limited, [2009] 319 ITR 204 to hold that Section 14A cannot be invoked when no exemp....
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..... what is also noticeable is that the entire or whole expenditure has been disallowed as if there was no expenditure incurred by the respondent-assessee for conducting business. The CIT(A) has positively held that the business was set up and had commenced. The said finding is accepted. The respondent-assessee, therefore, had to incur expenditure for the business in the form of investment in shares of cement companies and to further expand and consolidate their business. Expenditure had to be also incurred to protect the investment made. The genuineness of the said expenditure and the fact that it was incurred for business activities was not doubted by the Assessing Officer and has also not been doubted by the CIT(A). 11.14. Now the position of law as stands is that the decision of Hon'ble Jurisdiction High Court is directly on the point in dispute whereas the decision of Hon'ble Supreme court in the case of Rajendra Prasad Moody (supra) has been rendered in the context of section 57(iii), the applicability of which has been ruled out by Hon'ble Delhi High Court in the case of Cheminvest (supra). 11.15. Under Article 227 of the Constitution of India, the courts function under ....
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....t and start proceedings in direct violation of it. If a Tribunal can do so, all the subordinate courts can equally do so, for there is no specific provision, just like in the case of Supreme Court, making the law declared by the High Court binding on subordinate courts. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working; otherwise there would be confusion in the administration of law and respect for law would irretrievably suffer." (ii) CIT V. Sunil Kumar (1995) 212 ITR 238 (Raj.), it was observed as under: "The point which has been raised could have been considered to be debatable because other High Courts have taken a different view. But since the view taken by this court is binding on the Tribunal and other authorities under the Act in this State, it could not be considered to be a debatable point in view of the decision of this court in the case of CIT v. M.L. Sanghi (1988) 170 ITR 670." (iii)Indian Tube Company Ltd. V. CIT & others (1993) 203 ITR 54 (Cal.) , it was observed as under: "In....