TaxTMI 
TaxTMI 
2020 (12) TMI 398
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.... Act' for short]. In all the years, the A.O. noticed that the assessee had made investments and received exempt dividend income also. However, the assessee did not make any disallowance u/s 14A of the Act. Accordingly, the A.O. computed disallowance u/s 14A of the Act as per rule 8D of I.T. Rules as given below: Asst. Year Disallowance made by A.O. Interest Expenditure Total 2010-11 32,30,142 25,23,026 57,53,168 2011-12 1,73,66,708 90,46,806 2,64,13,517 2012-13 1,67,25,716 74,64,982 2,41,90,698 3.1 In the appellate proceedings for A.Y. 2010-11 & 2012-13, the Ld. CIT(A) directed the A.O. to restrict the disallowance u/s 14A of the Act to the extent of dividend income earned by the assessee. In assessment year 2011-12, the Ld. CIT(A) noticed that the dividend income earned by the assessee was more than the amount of disallowance made by A.O. Accordingly, the Ld. CIT(A) confirmed the disallowance made in A.Y. 2011-12. 4. Aggrieved by the order passed by Ld. CIT(A), the assessee has filed appeal for all the 3 years and the revenue has filed the appeal for assessment year 2012-13. 5. We heard the parties on this issue and perused the record. We shal....
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....ang/2016 dated 15.7.2016) in support of the above said alternative contention, which was accepted by Ld CIT(A). Despite this, the assessee has challenged the above said decision of Ld. CIT(A) in AY 2010-11 and 2012-13. 6.1 We notice that the Ld. CIT(A) has followed the decision rendered by the coordinate bench in holding that the disallowance u/s 14A of the Act should not exceed the amount of exempt income. The Ld. CIT(A) referred to the decision rendered by Hon'ble Delhi High Court in the case of Joint Investments Pvt. Ltd. (372 ITR 694). We also notice that the decision of Ld. CIT(A) is supported by the decision rendered by Hon'ble Delhi High Court in the case of PCIT vs. Caraf Builders & Construction (P) Ltd (2019)(101 taxmann.com 167), wherein it was held as under:- "25. Total exempt income earned by the respondent-assessee in this year was Rs. 19 lakhs. In these circumstances, we are not required to consider the case of the Revenue that the disallowance should be enhanced from Rs. 75.89 crores to Rs. 144.52 crores. Upper disallowance as held in Pr. CIT v. McDonalds India (P.) Ltd. ITA 725/2018 decided on 22nd October, 2018 cannot exceed the exempt income of that year." 6.....
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....developing the land & building for ITC Ltd. Since the assessee was following percentage completion method for the above said project, it claimed the compensation amount also proportionately. Accordingly, a sum of Rs. 74,32,777/- was claimed during the year under consideration. The A.O. disallowed the claim for the following observations: "4. In view of the fact and circumstances discussed above, I am of the opinion that a. NEPL, facilitated the transfer of land from M/s. Sunrise Realty Leisure Pvt. Ltd. primarily to earn profit and not to secure the construction and development contract from to ITC Ltd. b. NEPL has independently and separately entered into agreements with Mr. Mahesh Bhupathi and ITC Ltd. for development of the property at different points of time. c. There is no nexus between the compensation payable on account of cancellation of joint development agreement with Mr. Mahesh Bhupathi and the project NLI that is executed on the land owned by ITC Ltd. Moreover the payment is made without deducting any tax at source to Mr. Mahesh Bhupathi, a non-resident, which is against the provisions u/s 195 of the Act. Therefore, the sum of Rs. 74,32,777 debited to the pr....
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....he said proviso, no disallowance is required to be made if the assessee is not deemed to be an assessee in default under the first proviso to section 201(1) of the Act. The Ld. A.R. submitted that the above said proviso is held to be retrospective in many judicial decisions. He submitted that the coordinate bench in the case of Ananda Markala (ITA No.1584/Bang/2012 dated 13.9.2013) has expressed the view at para 26 of the Order that the second proviso inserted to section 40(a)(ia) of the Act is intended to remove hardship. Accordingly, the Ld. A.R. submitted that the second proviso should be applied to the instant year also and the matter may be restored to the file of the A.O. for examining the applicability of the second proviso. 8.2 We heard Ld. D.R. on this issue. We notice that the Hon'ble Bombay High Court has considered the question as to whether the second proviso inserted in sec. 40(a)(ia) is retrospective in nature or not, in the case of M/s Perfect Circle India P Ltd vs. CIT (ITA No.707 of 2016 dated 7.1.2019). The order of Hon'ble Bombay High Court rendered in the above said case is extracted below:- "1. This appeal is filed by the Revenue challenging the judgment of....