2016 (9) TMI 1552

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..... 2. Brief facts of the case are that the assessee is a non Banking Financial Company. Assessee derives income from business, house property, capital gains and other sources which includes income from dividends which is exempt from income tax. During this year, according to assessee, the interest derived by them from Fixed Deposits was Rs. 17,19,626/- whereas the interest paid by them was Rs. 2,26,082/- which was also directly attributable to the income which is not exempt. Assessee on their own disallowed a sum of Rs. 49,235 on account of actual direct expenses of STT and on an estimate basis a further sum of Rs. 15,000/- which includes an amount of Rs. 6,901/- direct expense pertaining to depository charges. On 26.09.2009, assessee fil....

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....ssessee was having sufficient own funds from which investment could have been made and no part of the loan was utilized for this purpose. Secondly, interest received during the year is much more than the interest paid as such there is no question of incurring interest on the funds invested to earn the exempt income. There is no common interest expenditure which is neither specifically attributable to taxable income nor attributable to exempt income. Lastly, he submits that if the learned AO does not agree with the disallowance made by the Assessee in the return of income, in the Assessment Order the learned AO should have recorded the reasons and, therefore, mechanical application of section 14A of the Act read with Rule 8D of the Rules is ....

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.... profit and loss account and expenses details for the year ending with 31.03.2009 by way of paper book. It clearly shows the net worth of share capital and reserves of the Assessee as Rs. 10,53,11,697/-, Rs. 16,89,43,308/- and Rs. 16,75,02,472/- as on 1.4.2008, 1.4.2009 and 1.4.2010 respectively, whereas the increase in the investments was Rs. 31,74,793/- and Rs. 5,16,58,794/- during the years 2008 and 2009 respectively. In this factual scenario, we find that the decision reported in COMMISSIONER OF INCOME TAX vs. HDFC BANK LTD (2014) 366 ITR 0505 (Bom) applies on all fours. In that decision it was held that when assessee's capital, profit reserves, surplus and current account deposits were higher than the investment in tax-free securit....

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....    Rs. 6,57,368/-     Total of (1+2+3) Rs. 8,87,670/- 8. Now turning to the argument of the learned AR that in order to apply Rule 8D, recording of satisfaction by the AO under this section is sine qua non and the absence of such recording of satisfaction renders the application of Rule 8D vitiated, is concerned, Section 14A(2) mandates that the Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect ....

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....ith regard to the extent of such expenditure, such rejection must be for disclosed cogent reasons and it is only then that the question of determination of such expenditure by the AO would arise. For this proposition he also placed reliance on the decisions reported in 347 ITR 272 (Del), 361 ITR 131(P&H), 372 ITR 694(Del), 376 ITR 390(Del), AND 378 ITR 240 (Del).  10. In COMMISSIONER OF INCOME TAX, CENTRAL-I, CALCUTTA Versus ASHISH JHUNJHUNWALA G.A. No. 2990 of 2013, wherein the Hon'ble Jurisdictional High Court of Calcutta confirmed the following observations of this Tribunal in ITA No 1809/Kol/2012: "While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to ....