TaxTMI 
TaxTMI 
TaxTMI 
2017 (7) TMI 1361
X X X X Extracts X X X X
X X X X Extracts X X X X
....and 2010-11 respectively. Though the appeal raises several grounds in this regard, the only argument pressed by the ld. Authorized Representative (AR), the assessee's counsel, relying on the decisions by the Hon'ble jurisdictional High Court in Redington (India) Ltd. v. Asst. CIT (in TCA No.520/2016 dated 23/12/2016); CIT v. Chettinad Logistics Pvt. Ltd. (in TCA No.24/2017 dated 13/3/2017); and the Memorandum explaining the provisions of Finance Bill, 2001 (introducing s.14A) (reported at [2001] 248 ITR (St.) 162, at page 195), furnishing copies of the same, is that only investment in shares that have actually given rise to dividend income, being at Rs. 3,08,529 and Rs. 2,05,070 for the two successive years respectively, ought to be included in computing the disallowance of indirect interest as well as indirect administrative expenses, both of which are with reference to investment u/r. 8D(2)(ii) & (iii) respectively. The details of the shares on which dividend has been earned, along with investment therein, it was claimed, stand provided in the proceedings before the Revenue authorities and, in any case, shall be duly provided. A suitable direction, i.e., for inclusion of only....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the assessee." (2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely :- (i) the amount of expenditure directly relating to income which does not form part of total income; (ii) in a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accordance with the following formula, namely :- A x B C Where A = amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year; B = the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year; C = the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year; (iii) an amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not form part ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r. 8D, is toward expenditure incurred in relation to income which does not form part of the total income, i.e., is tax-exempt. While surely it is this income that is to be isolated, the expenditure incurred, and which therefore is to be segregated and excluded, is with reference to the total such investment, i.e., yielding or may yield such income, and is therefore to be estimated. Investment in shares (say) of different companies is made. Which share shall yield dividend for a particular period is not known, much less its volume. Expenditure by way of interest or toward managing the investment, however, arises, and is, and is accordingly incurred. That is, the expenditure incurred is with reference to entire investment, irrespective of which part of the investment portfolio yields income during a particular period. This explains the inclusion of the entire investment in the rule. The assessee cannot be presumed to be bestowed with prescience to invest in only shares that would yield dividend, which itself may vary from year to year. Again, the expenditure cannot be incurred selectively, i.e., with reference to that which would yield the income, as is being suggested, even as, as a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owed u/s. 14A. We have perused the said decision word by word. The following observations and findings by the Hon'ble Court, as well as from that part of its decision recording arguments, being relevant, is extracted below: '.. as referable to the earning of the said dividend income and ...(pg. 454). '....computed interest expenditure as being relatable to the earning of dividend income. The said appellate order(s)... '(pg. 455/1). '.... to be attributable to earning the dividend income of Rs. 34,34,78,656.' (pg. 455). 'The Legislature intended to check the claim of allowance of expenditure incurred towards earning exempted income in a situation where an assessee has both exempted and non-exempted income or includible or non-includible income.' (pg. 466). '.....yet, the expenditure incurred to earn that income must be allowed on the basis that no tax on such income has been paid by the assessee. (pg. 466) 'The above, actually fortifies the situation that section 14A of the Act would operate to disallow deduction of all expenditure incurred in earning the dividend income under section 115-O which is not includible in the total income of the assessee.' (pg. 469) 'Expens....
X X X X Extracts X X X X
X X X X Extracts X X X X
....loying the words 'expenditure incurred or the purpose of making or earning such income', which were sought to be read by the Revenue to mean, as the assessee urges before us, only expenditure that results in income earned, clarified that this argument could not be accepted. And that the expenditure incurred for the purpose of making or earning such income could only mean as so, irrespective of whether expenditure fructifies into a positive income or not. It was not necessary that the expenditure was profitable, i.e., that in fact any profit was earned. The Revenue's interpretation would make the provision anomalous. As an example, it cited a case where an expenditure of Rs. 1000 would disqualify being allowed where no positive income resulted, but would stand to be allowed even if an income of Rs. 1/- arose, resulting in a loss of Rs. 999/-. The assessee's argument in the present case suffers from the same infirmity. In fact, s. 14A is more widely worded inasmuch as it speaks of any expenditure incurred in relation to the relevant income. The assessee's claim is accordingly rejected. Reference in this context, may also be profitably made to the decision in Sundaram Fasteners Ltd. v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Id.CIT(A) erred in deleting the addition of Rs. 20 Crores made as deemed dividend u/s 2(22)(e). 2.2 The Id.CIT(A; erred in holding that the amount paid by SASL was only repayment of advance given by the assessee and not a loan given to the assessee company since the assessee could not furnish the mode, amount and date on which the advance was given to SASL to prove that SASL has only repaid the advance received. 2.3 The Id.CIT(A) failed to appreciate the fact that the assessee has not proved its contention that the amount was received as an advance for sale of sugar. 2.4 The Id.CIT(A) ought to have appreciated that the department has not accepted the relied on decision of the CIT(A) for AY 2009-10 and further appeal has been filed in the Tribunal. 3. For these another grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored.' 5. Before us, while the ld. DR would, relying on the assessment order, submit that the impugned order is non-speaking, so that it is of no consequence, the ld. AR would rely on the order by the tribunal in the assessee's own case for AY 2009-10 (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble 40503997 0 Closing Balance 3730796478 4043334942 312538464 On a quick browse, it was enquired by the Bench during hearing as to how does he then explain the fund transfer appearing at sr. no.9 of the statement (at an aggregate of Rs. 141.31cr). The same, repaid in cash, clearly proves that the amount received, to that extent, is loan or advance, as explained by the Hon'ble jurisdictional High Court in CIT v. Raj Kumar [2009] 318 ITR 462 (Mad), after, as the tribunal (in the assessee's case) notes, considering the decision in Tarulata Shyam v. CIT [1977] 108 ITR 345 (SC), extracted at para 7 of its order, and after which it concludes in the manner afore-stated. He replied by stating that the entries in the said statement are not listed chronologically. As such, it may well be that the same is in discharge of either the opening balance (Rs. 318.3 lacs) or trade credit/s arising during the year, as (say) against purchase of raw materials, stores, or finished goods, etc. The matter could be, for necessary verification, restored to the file of the AO. The ld. DR would submit that inasmuch as the statement has not been subject to examination....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n required. Nothing thus turns on only the fact of the transactions being in the nature of a running account as a loan/ advance has not necessarily to be a constant or for a definite period to be so, i.e., a loan or advance, and all that is relevant, as explained by the Hon'ble High Court in Raj Kumar (supra) is if it is to give effect to a commercial transaction. Coming to the facts of the case, the addition was made as the assessee could not prove its case of the impugned sum as representing monies advanced in the normal course of business, i.e., as business transactions. The ld. CIT(A) ought to have dislodged this finding by issuing a definite finding/s of fact, and where based on material adduced for the first time before him, by observing the procedure u/r. 46A. He, instead, allows the appeal before him by following that by the first appellate authority for another year (AY 2008-09), which is not on record, nor is there any reference to the findings in the impugned order. As afore-explained, there is no dispute in principle, but the matter arises for want of finding/s of fact as to the transactions for the year as not representing a loan/s or advance/s, so that it had to be b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion though may by itself not be determinative, but only indicative. Two, the transactions, in our view, rather than being grouped under several categories, need to be so under two broad categories, i.e., 'commercial transactions' and 'fund transfer'. Certain transaction categories as 'other debits' and 'other credits' shall need to be reduced, on the basis of the underlying transaction that they represent, into these two broad categories. Does the same, as it appears, represent an adjustment in accounts, in which case it is only a transfer of funds, albeit indirectly, or is it toward a business transaction? In this context, clearly 'sugar money' received (on SASL's behalf) and that received by SASL (on assessee's behalf), is only receipt/payment of money, in account, from/to SASL. The word 'sugar money' would not detract from the fact that it is indeed 'money' paid or received by or on behalf of one company by another. Once this statement is re-categorized, it shall be apparent from the chronological flow of funds as to whether a particular fund transfer is on account of a loan or advance or in discharge of a commercial transaction, i.e., receipt of a sale consideration or advance....