AI Drafter 
TaxTMI 
TaxTMI 
2020 (12) TMI 612
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....Bench, Chennai, dated 07.10.2016, for the Assessment Years 2009-10, 2008-09 and 2010-11, by raising the following substantial questions of law: "1.Whether, on the facts and circumstances of the case, the Tribunal was right in confirming the disallowance made by the assessing officer under section 14A of the Act, in respect of the strategic investment made by the appellant? 2.Whether, on the facts and circumstances of the case, the Tribunal was right in confirming the disallowance under section 14A of the Act when the assessing officer has not recorded satisfaction for invoking section 14A of the Act? 3.Whether, on the facts and circumstances of the case, the Tribunal was right in not restricting the disallowance u....
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....ead with Section 14A of the Act, much beyond the quantum of exempted income of dividend earned by the Assessee in this year. The misconception of the Assessing Authority as well as Tribunal appear to have arisen because they have read Rule 8D providing for computation method of disallowance in isolation, as if it were an island provision or stand alone charging provision and they assumed that the disallowance as computed under Rule 8D is to be taxed as a notional income of the Assessee. This is absolutely impermissible in law. The reach of computation provision, namely Rule 8D cannot be read beyond the parent provision of Section 14A itself, which itself is not a charging provision, but a restriction on allowance of expenditure incurred to ....
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....ce to this extent, if it was to have its way, will constitute a hypothetical 'income' taxable in the hands of the Assessee, which could never be the intention of Section 14A of the Act, providing for a proportionate disallowance of expenditure incurred to earn the exempted income. 15. The expenditure incurred to earn any income has to be always below the extent of income itself and bear a reasonable proportion thereto, as the commercial prudence does not permit any one to spend more and earn less. The investment in shares of which dividend is earned and dividend being exempted income, the expenditure incurred for earning such dividend in the form of interest on the borrowed funds, which are employed to buy such shares can o....
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....ny expenditure to earn that income and therefore, a larger disallowance under Rule 8D should be allowed, is only an ingenuity of argument covered by the absurdity thereof. The disallowance of expenditure incurred for the year in question only can be considered under Section 14A of the Act and no such hypothetical earning in future as against no expenditure incurred for that, is envisaged under Section 14A of the Act. 17. With respect to the learned counsel for the Revenue, we cannot accept such unfounded and imaginary situtations and submissions. The nature of investment has nothing to do with Section 14A of the Act. It is the exempted income in the form of dividend which forms the cap or roof limit for disallowance. Firstly, the A....
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....s: Subsidiaries Rs. 2,38,89,48,500/- UTI Infrastructure Advantage Fund Series Rs. 10,00,000/- Investment in sister concerns Rs. 1,59,39,000/- 6.1. For the assessment year 2010-11, the total investment is as follows: Subsidiaries Rs. 4,35,42,53,360/- UTI Infrastructure Advantage Fund Series Rs. 10,00,000/- Investment in sister concerns Rs. 1,59,39,000/- 6.2. For the assessment year 2011-12, the total investment is as follows: Subsidiaries Rs. 5,17,41,16,895/- UTI Infrastructure Advantage Fund Series Rs. 8,53,000/- Investment in sister concerns Rs. 1,59,39,000/- 6.3. In this case, the assessee made average investment which yields no income or exempted income is a....