TaxTMI 
TaxTMI 
2021 (12) TMI 96
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....m tax. The AO further noted that the assessee has made suo moto disallowance u/s 14A of Rs. 9,75,000/-. The AO asked the assessee to explain the basis of the suo moto disallowance of Rs. 9,75,000/- but the assessee has not explained the basis as to how this figure of Rs. 9,75,000/- has arrived. Accordingly, the AO proceeded to make the disallowance u/s 14A as per the formula of apportionment of the indirect expenses provided under Rule 8D of Income Tax Rules, 1962. The AO consequently computed the disallowance on account of interest expenditure at Rs. 1,89,86,065/- and disallowance on account of administrative expenses @ 0.5% of the average investment which comes to Rs. 1,15,50,027/-. Thus, the AO has computed the total disallowance u/s 14A of Rs. 3,05,36,092/- as against the suo moto disallowance of Rs. 9,75,000/- consequently a differential disallowance of Rs. 2,95,61,092/- was made by the AO. The assessee challenged the AO before the CIT(A) and submitted that the disallowance made by the AO u/s 14A on account of indirect interest expenditure is unjustified and unwarranted as assessee has not utilized any borrowed funds for the purpose of investments made in the shares and securi....
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.... the case. 4. That the Appellant craves leaves to add, alter, amend or forgo any ground(s) of the appeal before or at the time of hearing. Grounds of Revenue's appeal read as under: - 1. "On the facts and circumstances of the case the Ld. CIT(A) erred in law in restricting the disallowance of Rs. 2,95,61,092/- to Rs. 13.71 lacs made by the Assessing Officer u/s 14A of the Income Tax Act, 1961 r.w.r. 8D of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law as Ld. CIT(A) has not given any basis for deleting the disallowance of interest expenses and changing the computation of disallowance of interest u/s 14A r.w.r. 8(D(2)(iii) of Income Tax Rules, 1962. 3. Whether for application of section 14A(1) of the Income Tax Act, 1961 the purpose for making investment and earning tax exempt income thereon is an essential legal requirement. 4. Whether the term "in relation to" as used in section 14A of the Act contemplates a direct and proximate nexus between "expenditure incurred" and "earning of exempt income". 5. Whether the CIT(A) is legally justified in not upholding disa....
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.... the AO against the suo moto disallowance made by the assessee invoking of the provisions of the Rule 8D(2)(iii) is not valid and consequently the disallowance sustained by the CIT(A) is liable to be deleted. 5. On the other hand, Ld. DR has submitted that the AO has discussed the issue in detail while rejecting the claim of suo moto disallowance of Rs. 9,75,000/- which amounts to record satisfaction by the AO while invoking the provisions of Rule 8D(2)(iii) of the Income Tax Rules. She has referred to the order of the AO in para 3.2 and submitted that the AO has discussed each and every aspect of the issue by referring the relevant facts and, therefore, it cannot be said that the AO has made a disallowance u/s 14A without recording his satisfaction. 6. We have considered the rival submissions as well as relevant material on record. The AO has recorded the primary facts regarding the investment made by the assessee in the shares/mutual funds as on 31.03.2013 to the tune of Rs. 162.89 crores. The AO further noted that the working of suo moto disallowance by the assessee u/s 14A was considered but no basis was explained by the assessee to arrive at the said figure of Rs. 9,75,0....
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....evel of the management. Therefore, the decision of making and selling the investments involves the top management of the assessee and hence, claim of the assessee that no expenditure has been incurred is contrary to the basic facts and thus, not acceptable. Even otherwise once the assessee has made a suo moto disallowance the claim of no expenditure is self contradictory. Before the CIT(A) the assessee itself has pleaded that the disallowance may be restricted to Rs. 13.71 lacs as recorded in para 5.2 of the impugned order: 5.2 On the basis of above data it has been submitted that the company had received dividend income with reference to average investments of Rs. 103.78 crores and excluding investment in subsidiary company, namely, Hindustan Media Ventures Ltd., of Rs. 56.86 croes, balance average investment come to Rs. 46.92 crores. On above amount of average investment disallowance at 0.5% works out to Rs. 23.46 lacs. On the basis of above it has been submitted that the disallowance is to be restricted to Rs. 23.46 lacs in view of the orders of CIT(A) in appeals for A.Yrs. 2011-12 and 2012-13. Since appellant company had already made disallowance of Rs. 9.75 lacs furth....
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.... the decision of Hon'ble Supreme Court in the case of Maxopp Investment Ltd. Vs. Commissioner of Income Tax 402 ITR 640. The Ld. DR has also referred to the decision of this Tribunal in assessee's own case for the AY 2012-13 dated 22.02.2021, wherein this Tribunal has decided this issue in favour of the Revenue and against the assessee by following the decision of Hon'ble Jurisdictional High Court in assessee's own case. Thus, the Ld. DR has contended that the impugned order of the CIT(A) is not sustainable to the extent of excluding the investment made in the subsidiary company while computing the average investment. She has relied upon the order of the Assessing Officer as regards the disallowance made on account of interest income. 12. On the other hand, the Ld. AR of the assessee has accepted that so far as the exclusion of the investment in the subsidiary company the issue is covered by the decision of Hon'ble Supreme Court as well as decision of Hon'ble High Court in assessee's own case. However, as regards the disallowance made on account of interest expenditure the same is unjustified and unsustainable as the assessee has not utilized any borrowed fund for the purpose of....
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....r, to the extent that it makes observations with respect to exclusion of income derived from strategic investments, is hereby set aside." 7. Following the order of the Hon'ble High Court, the revised disallowance is comprehensively determined as under: "CIT(A) vide para 5.1d of the order upheld the disallowance to the extent of Rs. 26,70,000/-, which was determined as under following the judgment of Hon'ble Delhi High Court in the case of ACB India Ltd. vs. ACIT, 374 ITR 108 (Del.). Particulars Investment as on 31.03.2011 (crores) Investment as on 31.03.2012 (crores) Average Investment (crores) Investments on which dividend income was received during the year. 117.75 102.75 110.25 Less: Invesment in subsidiary company. 56.85 56.85 56.85 Remaining investment 60.90 45.90 53.40 Disallowance at 0.5% Rs. 26,70,000 In view of judgment of Hon'ble Supreme Court in the case of Maxopp Investment Ltd. (2018) 402 ITR 640 (SC), investment in subsidiary company is also to be considered for the purpose of disallowance. Accordingly, the order of CIT(A) is to be reversed to the extent he had exclude....
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....2013 is less than the investment as on 31.03.2012. Accordingly, there is no extra fund utilized by the assessee during the year for making the investment in shares or securities but the sale proceeds of the existing investment is more than the purchases, if any made during the year. The AO has not made any disallowance on account of interest expenditure u/s 14A of the I.T. Act in the preceding years. Therefore, when no fresh investment is made other than the proceeds of the sale of existing investment then the disallowance of interest expenditure is not warranted. Hence, we do not find any error or illegality in the impugned order of the CIT(A) qua this issue of deleting the disallowance made by the AO u/s 14A of the Act on account of interest. 15. The assessee has also raised an additional ground vide application dated 07.08.2021 under Rule 11 of the Income Tax Appellate Tribunal Rules, 1963. The additional ground raised by the assessee reads as under: "2. That the Applicant/Appellant seeks the permission of Hon'ble Tribunal to raise, urge and argue the below mentioned additional ground of appeal in addition to grounds of appeal raised in the appeal filed by it: - ....
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.... of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. 6. In the case of Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688, this court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This court....