TaxTMI 
TaxTMI 
2019 (4) TMI 854
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.... of Rs. 5,42,98,180/-. Subsequently a revised return was filed by the assessee on 15.02.2012 declaring total income of Rs. 5,43,63,946/-. During the year under consideration, the assesee-company had earned dividend income of Rs. 10,88,37,814/- on the investment made in Shares and Units of Mutual Funds and the same was claimed to be exempt from tax. As noticed by the Assessing Officer, the assessee-company had disallowed only the direct expenses and indirect expenses as per Rule 8D read with Section 14A of the Act and no disallowance under Rule 8D(2)(iii) calculated at the rate of 0.5% of the average of the value of investment was made by the assessee. He accordingly worked out such disallowance on account of common administrative and managerial expenses, which the assessee might have incurred for earning exempt income as per Rule 8D(2)(iii) at Rs. 82,81,539/- and made addition to the extent to the total income of the assessee in the assessment completed under section 143(3) vide an order dated 23.03.2013. 4. The disallowance made by the Assessing Officer under section 14A read with Rule 8D(2)(iii) was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and....
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....lready held that net interest (reducing interest earned from gross interest paid) needs to be considered for the purpose of section 14A of the Act. Accordingly, I direct the AO to consider Rs. 10,72,88,038/- as interest disallowable u/s 14A of the Act instead ofRs.10,88,37,814/- as interest paid. 3. The same issue arose for my consideration as whether foreign investment should be considered or not for the purpose of calculation of average investment as mentioned in Rule 8D of the Income tax Rules 1962. Under the identical set of facts, as held in my previous order, I agree with the appellant that the investments in foreign company should not be considered while computing the average investment for the purpose of Rule SD. The appellant has taken this ground as without prejudice. Since in the preceding paragraphs, following the tribunal's order in the case of the appellant itself, I have hold that Rule 8D is not applicable, this ground is allowed for statistical purpose. Vide ground 15 the appellant has challenged the applicability of Rule 8D for the purpose of computation of book profit under the MAT provisions. In this regard, the appellant relied on the judgment of Jurisdict....
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....ken by the AO at Rs. 1,20,00,000/- being the fair market rent for which the property was expected to let from year to year. Keeping in view that there was no change in the factual position, the Assessing Officer adopted the annual value of the property at Rs. 1.20 crores by following the stand taken in the earlier years and computed the income of the assessee under the head "income from house property" after allowing deduction under section 24(a) at Rs. 84 lakhs as against the income of Rs. 2,52,000/- offered by the assessee, which resulted in the addition of Rs. 81,48,000/-. 8. The addition of Rs. 81,48,000/- made by the Assessing Officer under the head "income from house property" was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) deleted the said addition for the following reasons given in paragraph no. 3.2 of his impugned order:- "3.2. I have carefully considered the submissions of the appellant along with the supporting evidences furnished and perused the facts of the case. It is seen that the appellant company owns a....
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....let out property, only the actual rent received was required to be considered as annual value of property. The AO failed to appreciate such estimation of annual letable value as per provision of section 23(1)(a) was called for only in case of vacant property and not where the property was actually let out since in the case of let out property, the assessee was not entitled to anything over and above the agreed rent. The said action of the AO has resulted in taxing notional income in the hands of the assessee, which never accrued and hence cannot be brought to tax. Accordingly, we are of the view that the CIT(A) has rightly deleted the addition and hence we confirm the order of the CIT(A) on this issue. I once again hold that the A.O. cannot ignore the actual rent received by the appellant i.e. Rs. 30,000/- p.m. and under the facts of the present case, he cannot substitute the said actual rent by any other notional figure. Accordingly, the A.O. is directed to compute the income of the appellant by considering the rental income at Rs. 30,000/- p.m. i.e Rs. 3,60,000/- for the immediate previous year. Thus, this ground of appeal of the appellant is allowed in favou....
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....7,58,604/- out of which expenditure only to the extent of Rs. 14,01,83,6-7/- was allocated against the different heads of income other than "royalty and membership fees". According to the Assessing Officer, the balance expenditure of Rs. 7,35,74,997/- thus was claimed to be incurred by the assessee against the income earned from royalty and membership fees. He, therefore, asked the assessee to establish that the expenditure to that extent was incurred for earning the income from royalty and membership fees. In reply, it was submitted on behalf of the assessee that actual expenditure to the extent of Rs. 49,78,823/- was incurred relating to the royalty income. According to the Assessing Officer, the assessee-company thus had claimed an excess expenditure of Rs. 6,85,96,174/- (Rs.7,35,74,997/- minus Rs. 49,78,823/-). He noted that the assessee-company on its own had disallowed an expenditure of Rs. 1,05,14,908/- in the computation of total income. He also noted that there was a difference of Rs. 14,71,501/- in the disallowance offered by the assessee in the computation of total income on account of pro-rata expenditure for Management fees from Mena House Oberoi, Egypt. After making a....
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....for diminution in value of investments 380,362 Guest house maintenance expenses 4,101,408 Contribution to Staff Welfare Fund 1,100 Depreciation as per books of account 5,456,929 Loss in partnership firm 66,899 10,514,908 150,698,515 63,060,089 Less: Legal, Professional & Consultancy Fees as per accounts 48,505,475 Share of common business expenses allocable against royalty (A) 14,554,614 Add: Legal expenses incurred for protecting royalty income (*being part of Rs. 48,505,475/_ (B) 4,978,823 Total expenses allocable against royalty income (A + B) 19,533,437 Total earnings from royalty 108,495,779 Percentage expenses to revenue 18.00 Note: Items of common expenses considered for allocation against royalty income- Employees remuneration, rent, advertisement, travelling, postage & telephone, printing & stationery, statutory payments and other expenses as reflected in the annual accounts (Refer schedules 17....
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....to PIL Account 213,758,604 Less: Specific Expenditure against other source other than royalty and Less membership fees 140,183,607 73,574,997 Less: Specific Expenditure against royalty income 4,978,823 68,596,174 Less: Expenditure disallowed further in computation of income 10,514,908 58,081,266 Add: Expenditure further disallowed by the assessee at assessment stage against fee for technical service 1,471,501 59,552,767 Less: Disallowed in assessment order u/s 14A 8,281,539 51,271,228 From the above mentioned table it is transparent that the AO did not consider the common expenses allcoated by the appellant i.e. Rs. 1,45,54,614. During the appellate proceedings, the appellant submitted that the allocation of common expenses was done only with respect to royalty income as required by the AO. For other sources, only specific expenses with respect to that source are considered. For example, the expenses against hotel operation have been taken from audited unit accounts only which is specifically mentioned by the appellant in the calculation submitted before the AO. It is quite common i....