2020 (4) TMI 97

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....ceed to dispose of both cases by this common order.   2. First we take Revenue's appeal. Sole grievance raised by the Revenue is that the ld.CIT(A) has erred in restricting the disallowance of Rs. 7,72,41,277/- made under section 14A of the Income Tax Act, 1961 r.w. Rule 8D of Income Tax Rules, 1962. 3. Brief facts of the case are that the assessee has filed return of income on 28.11.2013 declaring total loss of Rs.NIL. After processing the same under section 143(1) of the Act, the case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. During the scrutiny assessment, it was noticed by the AO that the assessee has earned dividend income to the tune of Rs. ....

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....ld not exceed the quantum of exempt income of Rs. 2,64,500/-. The ld.AO however did not satisfy with explanation of the assessee, he accordingly calculated proportionate presumptive expenditure for earning of tax free income with the aid of section 14A read with Rule 8D at Rs. 7,72,41,277/- and made addition to that extent. 4. Aggrieved by the action of the AO, assessee went in appeal before the ld.CIT(A). Before the ld.first appellate authority, assessee reiterated its submissions as were made before the ld.AO. Assessee filed summarized position of balance sheet as on 31.3.2013 and 31.3.2012 and submitted that assessee's own funds in the form of share capital and reserves were Rs. 682,01 crores at the beginning of the year, and Rs. 771.....

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....efore the Tribunal. 5. Before us, both the parties have supported respective orders of the Revenue authorities. 6. After hearing both the sides and on perusal of material available on the record, we find section 14A of the Act contemplates that the expenditure incurred in relation to earning of tax free income deserves to be disallowed. During this year, the assessee has earned exempt income of Rs. 2,64,500/- in the form of dividend. Assessee has submitted before the Revenue authorities that it has sufficient funds in the form of paid up share capital and reserves and surplus at Rs. 682.01 crores at the beginning of the year, and Rs. 771.39 crores at the end of the year, which is more than five times of the investment made by the asse....