TaxTMI 
TaxTMI 
2020 (1) TMI 989
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....ng proportionate interest and administrative expenses at flat rate claimed to have been incurred relating to dividend or exempt income invoking the provisions of section 14A r.w.r.8D. b) The Id. CIT(A) failed to appreciate that having regard to the accounts there is no reason and basis in reaching to dis-satisfaction with the correctness of the claim of the Appellant that no expenditure was incurred in relation to dividend or exempt income which does not form part of the total income. c) In reaching to the conclusion and confirming and enhancing such addition, the Id. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. d) In any case the disallowance u/s. 14A r.w.r. 8D as worked out by the Id. AO and the Id. CIT(A) is excessive and unreasonable. 2.a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition of Z 6,00,40,820/- made by the AO to the book profit of the Appellant and further erred in enhancing the addition by Rs. 24,08,94,387/- (correct amount Rs. 27,63,67,....
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....the Rules and further challenged raising the addition in sum of Rs. 27,63,67,637/- u/s 14A r.w. Rule 8D of the Rules. The Ld. Representative of the assessee has argued that the assessee's own funds is more than investment, therefore, in the said circumstances, no disallowance is required in view of the decision of Hon'ble Bombay High Court in the case of CIT Vs. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom). It is also argued that the no disallowance is required in view of the provisions u/s 36(1)(iii) in respect of investment in view of the decision of Hon'ble Bombay High Court in the case of CIT-III Pune Vs. Sharda Erectors P. Ltd. (2016) 76 taxmann.com 107 (Bom) and in view of the decision of Hon'ble ITAT in ITA. No.837/Chd/2018 titled as M/s. Vardhman Polytex Ltd. Vs. DCIT dated 21.06.2019. However, on the other hand, the Ld. Representative of the revenue has refuted the said contentions and strongly relied upon the decision of the CIT(A) in question. In the instant case, it is observed that the assessee has earned the dividend income in sum of Rs. 94,00,147/-. The assessee invested surplus fund in the share of group company and the closing balance in respect of such investment as on....
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....g the same as having been incurred for earning exempt income in the form of dividend earned from the said investments. Under section 36(1)(iii) interest has been disallowed for the reason that the expenses were not found to have been incurred for the purpose of business of the assessee. In both the cases, however, interest expenditure incurred for making the investment has been disallowed. 28. Since we have held that no interest is to be disallowed u/s 14A of the Act, in the light of the fact that sufficient own funds were available with the assessee which raise the presumption that these interest free funds were used for making the investments, there remains no basis for making disallowance of interest expenses incurred for making the very same investments in any other section, which in the present case is section 36(1)(iii) of the Act. The order of the Ld. CIT(A) deleting the disallowance of interest u/s 36(1)(iii) amounting to Rs. 9.74 crores is therefore upheld. Ground of appeal no.2 raised by the revenue is therefore, dismissed." 5. Therefore, taking into account all the facts and circumstances above and also relying upon the law mentioned above, we are of....
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....on the decision of Hon'ble Supreme Court in the case of CIT Vs. Walford Share & Stock Brokers 326 ITR 1, wherein it has been held by the Apex Court that there must be proximate relationship of expenditure with the exempt income for the purpose of making disallowance u/s 14A of the Act. This decision was followed by the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. CIT 328 ITR 81 . 4.10. He further referred to the decision of Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. 347 ITR 272, wherein it has been held that no disallowance could be made under the said section where no expenditure had 'actually' been incurred by the assessee in relation to earning of the exempt income. The Hon'ble Delhi High Court approved the contention raised by the assessee that the term 'expenditure incurred' appearing in Sec. 14A(1) of the Act would mean actual expenditure incurred. Thus, the provisions of sec. 14A of the Act would be applicable only when the assessee had actually incurred certain expenditure which had proximate nexus with earning of exempt income. 4.11. Ld. counsel pointed out that the contention of Revenue that disallowance c....