TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 226
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....termined at Rs. 34,12,33,870/- and the total income u/s 115JB of the Act at Rs. 34,80,34,740/-. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who vide order dated 27.01.2015 in Appeal No.405/13-14/CIT(A)-4 granted substantial relief to the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal before us and has raised the following grounds of appeal: "1. Whether the Learned CIT(A) has erred in restricting the disallowance as per Section 14A by excluding debt oriented growth funds from investments and directing to restrict disallowance only to certain expenditure and that too in the ratio of exempt income to total receipt. 2. Whether the Ld CIT(A) has erred in deleting the addition by treating share redemption premium towards full value of consideration and not separately income from other sources. 3. The appellant craves leave for reserving the right to amend, modify alter add or forego any ground(s) of appeal at any time before or during the hering of this appeal." 4. Ground No.1 is with respect to disallowance u/s 14A of the Act. 5. During the course of assessment proceedings, AO noticed that assessee had received exempt divi....
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....scellaneous income of Rs. 6.51 lakh (rounded off) and profit on sale of non-trade investment of Rs. 5.9 lakh (rounded off) against which assessee had shown operating expenses of Rs. 87.51 lakh (rounded off) which included personnel expenses, communication expenses, legal and professional expenses, auditor's remuneration, repairs and rental expenses. CIT(A) noted that AO had taken into account the total amount of expenses claimed by the assessee and has also considered those expenses which were added back by the assessee in the computation of income. He thereafter noted that the expenses in the nature of rent, auditor's remuneration, travel and conveyance, electricity and water, insurance would anyhow have been incurred by the assessee whether it had earned any income from dividend or not and therefore he held such expenses could not be attributed towards earning of dividend income. He therefore held that AO should have restricted the disallowance to the extent of personnel expenses (Rs. 17.50 lakhs), legal expenses (9.43 lakhs) and communication expenses (Rs. 24.93 lakh) only towards earning of taxed income to taxable income. He also noted that if the provision of Rule 8D were to b....
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....ing the details of the expenses had identified those expenses which could have been said to have a bearing on earning of exempt income and directed the computation of the disallowance. He thus supported the order of CIT(A). 9. We have heard the rival submissions and perused the materials available on record. The issue in the present ground is with respect to the disallowance u/s 14A r.w.s 8D of the Act. Revenue is aggrieved by the directions of CIT(A) wherein he has restricted the disallowance u/s 14A of the Act by excluding debt oriented growth funds for working of the disallowance and directing to restrict disallowance only to certain expenditure and that too in the ratio of exempt income to total receipt. We find that CIT(A) had directed the exclusion of investment in Mutual Fund growth option for the reason that it does not result in generation of tax exempt dividend income but results into taxable capital gain on its redemption. No fallacy in the aforesaid findings of CIT(A) has been pointed out by Revenue. We find that Hon'ble Delhi High Court in the case of Joint Investments Pvt. Ltd. (supra) has held that Section 14A r.w. Rule 8D of the IT Rules 1962 cannot be interpreted ....
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....erence shares itself stood extinguished by the redemption and it could not be treated as transfer. He thereafter relying on the decision of Hon'ble Apex Court in the case of Vania Silk Mills Ltd. 191 ITR 647 concluded that the premium received on redemption on preference share was liable to be taxed as "income from other sources". He therefore considered the redemption premium received on redemption of preference shares aggregating to Rs. 20,65,00,000/- as "income from other sources". 12. Aggrieved by the order of CIT(A), assessee carried the matter before the CIT(A). CIT(A) held that investment in redeemable preference shares was based on the condition that the assessee was entitled to receive redemption fair market value of shares apart from premium amount and therefore the receipt of premium was part of full value of consideration received on redemption of shares and it could not be treated as independent of redemption. He thereafter held the action AO in considering the redemption premium to be taxable income from other sources to be without any basis. He thus decided the issue in favour of the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 13....