TaxTMI 
TaxTMI 
2021 (5) TMI 763
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....ting any inaccuracy in the amount already disallowed by the appellant of Rs. 6,23,210/- in the return of Income.. 2. That learned Commissioner of Income-tax (Appeals) failed to bring anything on record to show as to how expenditure of Rs. 6,23,210/- already disallowed by the appellant company is not sufficient to earn the tax free income of Rs. 22,34,355/-. 3. That learned Commissioner of Income-tax (Appeals) failed to bring to record anything to show the proximity of expenditure calculated under Section 14A with the dividend income earned, apart from the expenditure already disallowed by the appellant. 4. That the impugned order dated 31.03.2016 passed by the learned Commissioner of Income-tax (Appeals), Gurgaon is bad in law and wrong on facts to the extent as stated above." 3. The revenue in its appeal in ITA No. 3432/Del/2016 has raised the following grounds of appeal:- "1. Ld. CIT(A) has erred on fact and in law in deleting the addition u/s 40A(2)(b) of the Act of Rs. 8308348/- made by the Assessing Officer on account of payment made to related party M/s DLF Home Developers Ltd. 2. Ld.CIT(A) has erred on fact and in law in deleting the addition of 2,38,26,486/- ma....
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.... by him. The ld AO is contesting the other disallowances whereas the assessee is contesting the retention of the disallowances to the extent of 0.5% u/s 14A of the Act. Thus, these two appeals are filed. 7. We have heard the parties on these appeals, perused the orders of lower authorities, and also gone through a paper book filed on behalf of assessee. 8. First, we take up the appeal of the ld AO. 9. First ground of appeal is against the deletion of the disallowances u/s 40A(2)(b) of the Act of Rs. 83,08,348/- made on account of payment commission made to related party M/s. DLF Home Developers Ltd for service charges on account of collection received from customers on account of project Capital Green Phase 1. The assessee has deducted tax at source on the same. The DLF Home Developers is a subsidiary company of the assessee company and therefore, claim of the assessee is that provision of section 40A(2)(b) do not apply to such payment. The said payment being made by the developers assessee for arranging and organizing the collection from customers on behalf of the assessee as marketing right of the project lies with DLF Home Developers only. The ld AO held that the assessee has....
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....construction of a compound wall, leveling of land etc. The ld AO disallowed the same as the assessee did not furnish any documentary evidence and such working was also not evident from the sale deed. The contention of the assessee was that above expenditure are reflected in the books of account consistently over the years and has been accepted by the revenue. The ld CIT(A) deleted the above addition. 12. It is apparent that the assessee company has sold land at Jamnagar at Rs. 7,91,35,786/- and incurred a loss of Rs. 5,47,66,443/-. The assessee has incurred the total cost of Rs. 2,38,26,486/- for which major portion is cost for development as per agreement dated 29.04.2008 at Rs. 2,26,10,196/-. Small petty expenses of leveling etc were also incurred. The cost of development was paid to Associated Infrastructure Company for cost of development of the land at the rate of Rs. 200 per sq ft as per tripartite arrangement dated 29.04.2008. The ld CIT(A) considered the agreement and referred to the clauses of agreement at para 5.3. It was noted that the above amount of cost of development was integral part of the development and therefore, it cannot be ignored and disallowed. The purcha....
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.... dealt with all these reasons and deleted the addition. Even before us, the findings of the ld cit (A) were not controverted. We find that the brokerage paid by the assessee is demonstrated in the bill , which is for the purpose of the sale of Vadodara Land. Therefore, in absence of any specific enquiry proving otherwise, the above disallowance cannot be made. Even otherwise, other findings of the ld AO about payment of brokerage on other properties sold were not found correct. Thus, we do not find any infirmity in the order of the ld CIT(A) in deleting the above disallowances. Accordingly, ground No. 3 of the appeal of the ld AO is dismissed. 15. Ground No. 4 and 5 of the appeal of the ld AO and ground No. 1 to 3 of the appeal of the assessee are on the issue of disallowance made u/s 14A of the Act. The facts shows that the assessee has made investment in shares to the tune of Rs. 53.51 crores and during the year assessee has received the dividend of Rs. 22,34,355/-, which is exempt income u/ 10 (34) of the act. The ld AO noted that the assessee has made interest payment and has also incurred certain expenditure. Therfore according to him, the assessee has incurred proportionate....
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.... from the investment in equity shares. It did not disallow any sum in the return of income, however, when assessee was confronted during the course of assessment proceedings, it surrendered a sum of Rs. 6,23,210/- being 50% of the salary of one employee as expenditure incurred for earning exempt income. This fact itself proves that assessee has incurred certain expenditure for the purpose of earning exempt income. However, the assessee did not given any basis for allocating 50% of the salary of one person. No other corresponding expenditure or incidental expenditure was disallowed. The ld AO noted this fact and recorded his satisfaction that the claim of the assessee is that it has not incurred any expenditure in earning the exempt income is incorrect. Thus no fault can be found with the action of the ld AO in applying provision of Rule 8 D as it satisfied the condition laid down u/s 14A (2) of the act. As far as the issue of interest expenditure is concerned, it is apparent that assessee has huge interest free funds in form of share capital and free reserve of approximately Rs. 983 crores against the investment in equity shares of Rs. 53 crores. Therefore, in absence of any contra....
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....f Maxxop Investment Ltd Vs. CIT Civil Appeal No. 104/20162018] 91 taxmann.com 154 (SC)/[2018] 254 Taxman 325 (SC)/[2018] 402 ITR 640 (SC)/[2018] 301 CTR 489 (SC) wherein, it has been held that dominant purpose for which investment into shares are made is not relevant for disallowance u/s 14A of the Act. The Honourable supreme court held that :- "34. Having clarified the aforesaid position, the first and foremost issue that falls for consideration is as to whether the dominant purpose test, which is pressed into service by the assessees would apply while interpreting Section 14A of the Act or we have to go by the theory of apportionment. We are of the opinion that the dominant purpose for which the investment into shares is made by an assessee may not be relevant. No doubt, the assessee like Maxopp Investment Limited may have made the investment in order to gain control of the investee company. However, that does not appear to be a relevant factor in determining the issue at hand. Fact remains that such dividend income is non-taxable. In this scenario, if expenditure is incurred on earning the dividend income, that much of the expenditure which is attributable to the dividend inco....