TaxTMI 
TaxTMI 
2019 (7) TMI 473
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....ame fact is reiterated in recent decision by the Hon'ble Apex Court in Maxopp Investment Ltd. & others v. CIT (in CA Nos.104-109 of 2015 dated 12.02.2018) ? (b) Whether on the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in not deciding the ground of appeal raised by the appellant department in respect of disallowance of membership fees ?" 3. Mr.Varun Patel, the learned standing counsel appearing for the Revenue, submitted that the Tribunal committed a serious error in upholding the relief of Rs. 583.70 lakh under Section 14A of the Act on account of the interest expenses without appreciating the fact that the assessee was maintaining mixed funds and failed to establish that it had its own surplus funds for the purpose of investment in dividends. According to Mr.Patel, this aspect has been well dealt with by the Supreme Court in its recent pronouncement in Maxopp Investment Limited and others v. Commissioner of Income Tax, New Delhi, (2018)402 ITR 640. Mr.Patel submitted that the Tribunal, while passing the impugned order with respect to the disallowance under Section 14A, has referred to and relied on the decision of a coordinate ....
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.... in the context of the assessee having mixed funds, i.e. interest free as well as interest bearing funds. In the case of S.A.Builders Limited (supra), the relevant assessment years were Assessment Years 1990-91 and 1991-92, i.e. prior to the insertion of Rule 8D in the Income Tax Rules by the Income Tax (Fifth Amendment) Rules, 2008 w.e.f. 24th March 2008. It is also submitted that Section 14A has been inserted in the Income Tax Act by the Finance Act, 2001, with retrospective effect from 1st April 1962. 8. It is further submitted that after the insertion of Rule 8D, in all the cases of mixed funds, i.e. interest free as well as interest bearing funds, the subsequent decision of the Supreme Court in the case of Maxopp Investment Limited (supra), more particularly para 42 regarding the case of M/s.Avon Cycles Limited, would be applicable for disallowance under Section 14A and such disallowance is required to be assessed as per the provisions of Rule 8D only. The decision of this Court in the case of Shreno Limited, which is based on the prior decision of the Supreme Court in the case of S.A.Builders Limited (supra) is, therefore, not applicable to the cases of mixed funds. 9. On....
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....g Officer, the assessee preferred the Appeal challenging the disallowance made under Section14A of Rs. 5,83,15,000=00 disallowing the presumed interest expenditure for earning exempt income. 13. The CIT(A), in the Tax Appeal preferred by the assessee, accepted the contentions canvassed on behalf of the assessee after taking into consideration the ITAT order in the assessee's own case for the Assessment Years 2008-09 and 2009-10 on the very same issue. The CIT(A) also considered many decisions of this Court on the very same issue and deleted the addition made by the Assessing Officer of Rs. 5,83,15,000=00 under Section14A read with Rule 8D. The Tribunal, in the appeal preferred by the Revenue, passed a consolidated order taking up the issue of disallowance under Section 14A read with Rule 8D. The Tribunal, ultimately, dismissed the appeal. The Tribunal, while dismissing the appeal preferred by the Revenue, took notice of the fact that the spare interest free funds in the form of share capital, reserve and surplus were much more than the investments made for earning tax free income. The Tribunal further observed that the Assessing Officer had failed to establish that the borrow....
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....d be applicable in a case where shares or stocks of a company were purchased for the purpose of gaining control over the said company and incidentally tax free dividend income was generated. The assessee had contended that the dominant intention for purchasing the shares was not for earning the dividend but to gain control over the business in the company in which the shares were purchased. The Supreme Court held that the purpose for which the shares were purchased was inconsequential. As long as such investment generated tax free income, disallowance of expenditure for making such investment 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 dis....