TaxTMI 
TaxTMI 
2018 (2) TMI 2015
X X X X Extracts X X X X
X X X X Extracts X X X X
....e "Act‟). 2. Ground No.1 raised by the Assessee relates to disallowance under section 14A read with Rule 8D(2)(iii) at Rs. 6,36,960/-. 2.1 The brief facts apropos this issue are that while making assessment u/s 143(3) of the Act, the Assessing Officer noticed that the assessee has earned a dividend income of Rs. 14,79,630/- in the assessment year under consideration. At the same time, the assessee has claimed interest expenses of Rs. 29,09,739/-. The assessee has shown non-current investments at Rs. 8,38,68,940/- and investments of Rs. 19,57,15,948/- in its balance sheet as on 31.03.2012. During the assessment proceedings, the assessee was asked to justify its claim of various expense, as per the provisions of section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e expenses must have incurred by the assessee, in order to take the investments decisions. Therefore, CIT(A) held that the AO had correctly applied Rule 8D(2) (iii) and worked disallowance u/s 14A of the Act to the tune of Rs. 6,36,960/- 2.3 Not being satisfied with the order of the ld. CIT(A), the assessee is in further appeal before us. The ld. Counsel for the assessee submitted before us that assessee-company has not incurred any expenses in relation to earning of exempt income. The counsel pointed out that a financial advisor was appointed by the mutual fund and the said financial advisor is paid commission by the mutual fund directly therefore, company is not incurring any expenditure to maintain the investments and to take the day to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....und - Growth Plan 40,00,000 5 HDFC Cash Management Fund - Treasury Advantage Retail Growth 1,50,49,917 Reliance Regular Savings Fund Debt Plan - Growth Fund 30,69,004 Total(B) 4,43,45,600 Total Mutual Funds (A+B) 5,90,67,943/- Details of Mutual Funds as on 31st March 2012 - Closing Investments Sl. No. Particulars Amount (Rs.) A Funds generating Exempt Income i. Equity Oriented Mutual Funds 1 Birla Sunlife Dividend Yield Plus - Growth 63,00,000 2 HDFC Equity Fund-Growth 58,58,590 3 ICICI Prudential Focused Bluechip Equity Retail Growth 25,00,000 4 Kotak Mid Cap-Growth 4,69,849 5 Pramerica Dynamic Fund-Growth 27,54,000 6 Reliance Growth Fund Retail Pla....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... aregiven below: Disallowance u/s.14A SN Particulars As per Assessing Officer As per Appellant Amount (Rs.) Amount (Rs.) Amount (Rs.) Amount (Rs.) i. Rule 8D(i) - Direct Expenses - - ii. Rule 8D(ii) - Interest expenses - - iii. Rule 8D(iii) - administrative expenses Opening balance of Investment as on 31st March, 2011 5,90,67,943 1,47,22,343 Closing balance of investment as on 31st March, 2012 19,57,15,948 2,40,54,751 Average investment 12,73,91,946 1,93,88,547 0.5% of average investment - Rule 8D(iii) disallowance 6,36,960 96,943  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....D(2)(iii) what is disallowable is ½% of the dividend bearing securities or funds generating exempt income. Therefore, not all investments become the subject matter of consideration while computing disallowance u/s 14A r.w Rule 8D(2)(iii). The disallowance u/s 14A r.w.Rule 8D(2)(iii) is to be in relation to the income which does not form part of the total income and this can be done only by taking into consideration the investments which has given rise to this income which does not form part of the total income. We note that as far as Rule 8D(2)(iii) of the Rules is concerned, it has been held by the Hon‟ble ITAT Kolkata Bench in the case of DCIT vs REI Agro Ltd. In ITA No.1811/Kol/2012 dated 14.05.2013 that it is only t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Kolkata and Hon'ble Kolkata High Court (supra),we restore the present issue to the file of the assessing officer for computation of disallowance u/s 14A r.w. Rule 8D(2)(iii) and we direct the assessing officer to consider only funds generating exempt income to compute the disallowance under Rule 8D(2)(iii) of the I.T.Rules. 2.6 In the result, the appeal filed by the assessee (Ground No.2), is allowed for statistical purposes. 3.Ground No.3 raised by the assessee relates to addition of income of Rs. 25,000/- made by the AO under the head of "profit and gains of business or profession", while computing the tax liability. The ld. Counsel for the assesseepointed out that assessing officer, while going through the in....