2018 (10) TMI 1894

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....he disallowance u/s 14A from Rs. 92,27,343/- to Rs. 34,90,601/ -. 2. The CIT (A) erred in holding that the disallowance u/s 14A shall be restricted to the exempt income earned by the assessee." 3. Brief facts of the case are that the assessee-company engaged in trading of iron & steel filed its return of income electronically for the assessment year 2014-15 on 27.10.2014 admitting NIL total income and current year loss Rs. 82,23,103/-. The book loss was declared u/s 115JB of the Act at Rs. 46,35,650/-. During the assessment proceedings u/s 143(3) of the Act, the A.O. observed that the assessee has earned dividend income of Rs. 34,90,601/- and claimed it as exempt from tax. He also observed that the assessee has claimed an amount....

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....ad ITAT Hyderabad - ITA.No.846/HydI2016 - order dated 28.02.2017 5. ITO, Ward- 2(1), Hyderabad Vs. Sri Krishna Kishore Kuchipudi - ITAT Hyderabad - ITA No. 1805/Hyd/2012 (b) Other High Courts and Tribunals. 1. Commissioner Of Income Tax - Vadodara - 2 Versus Vision Finstock Ltd Gujarat High Court - Tax Appeal No 486/2017 - order dated 31.07.2017 2. Principal Commissioner of Income Tax I, Chandigarh Versus Mis Empire Package Pvt. Limited - Punjab and Haryana High Court - ITA No.415 of2015 - order dated 12.01.2016 3. Joint Investment Pvt. Ltd Vs. CIT - Delhi High Court - ITA NO.117/2015 order dated 25.02.2015 4. Vikrangee Ltd Vs. Dy.CIT, Cent.Cir.4(2), Mumbai - ITAT Mumbai - ITA No. 5792 & 5834 ....

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....hat assessee has incurred any expenditure for earning the said dividend income. There was no diversion of borrowed funds, hence there is no disallowance interest under rule 8d(2)(ii). The disallowance was only under Rule 8D(2)(iii). 6.1. Coming to the disallowance of % of average value of investment, some proportionate expenditure can be disallowed but in no case, it should exceed the amount earned claiming exemption. The Hon'ble High Court of Punjab & Haryana in the case of Pr. Commissioner of Income Tax Vs. Empire Package Pvt. Ltd., (supra), answered the question raised by Revenue in negative, wherein the Revenue has raised whether in the facts and circumstances of the case, the Hon'ble Tribunal is justified in law to hol....

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....ble income. 5 ITA No. 1541/Hyd/17 VBC Ferro Alloys Ltd., Hyd. Similarly courts have held that a finding in objective terms about assessee working being unsatisfactory is to be recorded by AO in the order. Chandigarh Bench of the Tribunal in the case of Punjab State Co-op. & Marketing Fed. Ltd. (supra) has held that in any case the disallowance u/s 14A cannot exceed tax free income of the assessee. If mechanical method of rule 8D is applied, it leads to manifestly absurd results in as much as for tax free income of Rs. 68,37,583/- disallowance of Rs. 2,16,51,917 (enhanced by CIT(A) at Rs. 2,19,47,772) is made u/s 14A which is way too much than the exempt income. As the interpretation of provisions of sec. 14A r/w rule 8D is leading to unanti....