TaxTMI 
TaxTMI 
2019 (8) TMI 928
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.... filed by the assessee in ITA no. 7061/Mum/2017 pertain to ay:2013-14 and is directed against appellate order dated 06.10.2017 passed by learned CIT(A) for ay: 2013-14, the appellate proceedings had arisen before learned CIT(A) from assessment order dated 17.02.2016 passed by AO u/s 143(3) of the 1961 Act for ay: 2013-14. 2. The grounds of appeal raised by Revenue in memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") in ITA no. 3092/Mum/2016 for ay:2012-13, reads as under:- "Whether on facts and in the circumstances of the case and in Law, the Ld.CIT(A) erred in restricting the disallowance to Rs. 4,59,998/- as against Rs. 1,54,62,223/- made by the AO, without appreciating the fact that section 14A r.w. Rule 8D is squarely applicable in this case and disallowance has to be made as per the formula given in Rule 8D." 2.2. The grounds of appeal raised by assessee in memo of appeal filed with the tribunal in ITA no. 7061/Mum/2017 for ay:2013-14, reads as under:- "1. "Whether on the facts and circumstances of the case and in law, the learned CIT (A) erred in not deleting the addition made by A.O without appreci....
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.... or shall not form part of the total income, as appearing in the balance sheet or the assessee, on the first day and the last day of the previous year 11,04,053 Total disallowance u/s. 14A 1,54,62,223 Since, the assessee had suo motu voluntarily disallowed an amount of Rs. 4,59,998/- u/s 14A of the 1961 Act, the AO disallowed balance amount of Rs. 1,50,02,225/- by invoking provisions of Section 14A of the 1961 Act read with Rule 8D of the 1962 Rules, vide assessment order dated 13.02.2015 passed by the AO u/s 143(3) of the 1961 Act 4. The assessee being aggrieved by an assessment framed by the AO u/s 143(3) of the 1961 Act vide assessment orders dated 13.02.2015 filed first appeal before Ld. CIT(A) and submitted that majority of borrowings were directed towards Inter Corporate Deposits and investments in Debentures which generated interest income which was chargeable to income-tax. It was also submitted that some of the investments were made in Mutual Fund-Growth Scheme wherein no tax free income could have been received. It was also claimed that assessee has also earned an interest income of Rs. 532.92 lacs and net interest figure after setting off interest e....
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....340. The assessee also submitted that for ay: 2010-11 on similar facts, the issue was decided by learned CIT(A) in favour of the assessee. 4.5 The assessee also submitted before learned CIT(A) that so far as administrative expenses being disallowed by invoking Rule 8D2(iii) of the 1962 Rules @0.5%, it was submitted by the assessee that the AO even included investments in Properties/Mutual Funds/Debentures & Bonds wherein no tax-free income is receivable which in any case should be excluded while computing disallowance of expenditure u/s 14A of the 1961 Act. The assessee claimed before learned CIT(A) that it has rightly made disallowance of expenditure to the tune of Rs. 4,59,998/- @ 0.5% of the average investments by invoking Section 14A read with Rule 8D(2)(iii) of the 1962 Rules. 5. The learned CIT(A) observed that the assessee has earned dividend income of Rs. 83,48,000/- which was claimed as an exempt income. The assessee claimed before learned CIT(A) that it has interest free funds to the tune of Rs. 1343.42 lacs whereas long term investments made in shares are to the tune of Rs. 1127.11 lacs. The assessee also submitted that it has both interest income(Rs. 532.92 lac....
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.... As on 31/3/2011 Rs. In lacs 1 Investment in Mutual Fund(Note No.9) 77.13 2499.09 2.a In Shares(Note-7) 540.48 b. In Shares of Subsidiaries 99.00 c. In J M Financial Property Fund Venture Capital fund 487.63 1127.11 712.88 Total 1204.24 3211.97 5.6. The assessee claimed that out of total investments of Rs. 7,182.19 lacs, the assessee has investments of Rs. 639.48 lacs in equity shares which is capable of generating dividend income which is not chargeable to tax and further it was submitted by assessee that it has investment of Rs. 487.63 lacs in Venture Capital Fund which is capable of giving investors by way of interest and dividend. The assessee claimed that investment as per Note No. 9 has been shown under Current Assets-Current Investments are not for earning tax free income. The assessee submitted before learned CIT(A) that income from growth fund is chargeable to tax as per normal provisions of the 1961 Act. The assessee also claimed that short term capital gains (without STT) of Rs. 1,99,63,962/- from sale of Investment in Growth Mutual Fund ( sho....
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....of expenses to the tune of Rs. 1,50,00,225/- was confirmed to be disallowed by the AO u/s 14A of the 1961 Act, which stood later deleted by Ld. CIT(A) except an amount of Rs. 2,000/- towards direct expenses. The learned DR would rely on the assessment order passed by the AO. 6.2. The Ld. Counsel for the assessee on the other hand submitted that AO has not recorded satisfaction before invoking provisions of Section 14A of the 1961 Act read with Rule 8D of the 1962 Rules. The learned counsel for the assessee relied upon the decision of Hon'ble Supreme Court in the case of PCIT v. Moonstar Securities Trading and Finance Company Private Ltd., (2019)263 Taxmann 458(SC), wherein SLP against judgment of Hon'ble Delhi High Court in the case of PCIT v. Moonstar Securities Trading and Finance Company Private Limited, (2019) 105 taxmann.com 274(Delhi) stood dismissed by Hon'ble Delhi High Court. The learned counsel for the assessee also relied upon decision of Hon'ble Bombay High Court in the case of CIT v. Jubilant Enterprises Private Ltd., in ITA no. 1512 of 2014, vide judgment dated 28.02.2017. The learned counsel for the assessee also relied upon decision of Hon'ble Gujarat High Court ....
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....e issue is no more res-integra keeping in view Hon'ble Supreme Court decision in the case of Maxopp Investment Limited v. CIT, reported in (2018) 402 ITR 640(SC). Similarly, the contention of the assessee that it has made strategic investments which should not be included for the purposes of computing disallowance of expenses u/s 14A of the 1961 Act cannot be accepted in view of decision of Hon'ble Supreme Court in the case of Maxopp Investment Limited(supra). The assessee has made investments in properties and also made investments in Debentures, Bonds, Mutual Fund- Growth Fund, wherein it is claimed that these investments which yield taxable income cannot be included for the purposes of computing disallowance of expenses u/s 14A of the 1961 Act, we agree with this proposition of the assessee as it is only those securities and investments which are capable of yielding an exempt income is to be considered for making disallowances of expenditure u/s 14A of the 1961 Act.We also agree with the proposition that in case the assessee hold both interest free funds as also interest bearing funds and in the absence of specific co-relation of interest bearing borrowed funds with investmen....
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.... Act, we have noted that the assessee has received exempt income by way of dividend to the tune of Rs. 83,48,000/-. The assessee has suo motu disallowed an expenses of Rs. 4,59,998/- u/s 14A of the 1961 Act. The assessee disallowed aforesaid expenses by applying 0.5% of the average investments.The onus is on the assessee to bring on record, the details of modus operandi adopted by it for making investments, arranging its affairs and managing investments which ought to be firstly brought by assessee before the AO in discharge of primary onus as is cast on the assessee. No such details are filed before us to prove that the assessee discharged its primary onus. The assessee rather made suo motu disallowance of expenditure u/s 14A of the 1961 Act, accepting and admitting applicability of Section 14A. It applied of its own 0.5% of average investments for making disallowance u/s 14A of the 1961 Act by invoking Rule 8D(2)(iii) of the 1962 Rules, towards administrative expenses. Now, to resile from its own admitted position at this stage is not warranted. The AO on its part has duly recorded satisfaction albeit cryptic in para 5.1 and 5.2 of its assessment order. Thus, under these factual ....