TaxTMI 
TaxTMI 
2022 (3) TMI 1121
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....essing Officer under Section 14A read with Rule 8D of the Income Tax Rules, 1962 which is sustained by the learned CIT(A) to the extent of Rs. 4,18,543/-. 2. The assessee, in the present case, is an individual who filed his return of income for the year under consideration on 29.01.2016 declaring total income of Rs. 74,91,950/-. The said return was selected for limited scrutiny; and, during the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee had made an investment of Rs. 6.39 crores and Rs. 1.93 crores in various mutual funds and shares - the income of which was exempt from tax. He also noticed that interest expenditure of Rs. 38,85,059/- was claimed by the assessee. In this regard, the assesse....
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....e learned CIT(A) and the submissions made before the Assessing Officer were reiterated on behalf of the assessee before the learned CIT(A) in support of his case that the disallowance made by the Assessing Officer under Section 14A read with Rule 8D was not sustainable. After considering the submissions made by the assessee as well as the material available on record, the learned CIT(A) decided this issue vide paragraph Nos. 5 to 6.4 of his impugned order which read as under:- "5. I have carefully considered the facts on record, arguments put forth in the assessment order, the written submission and the further written submission of the appellant. The AR is also heard in the matter. 6. Appellant has contested against disal....
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....altogether remains only Rs. 13,59,30,436/-. AR should have explained as to how investment is more than sources of fund. In other words, it is implied that investment is made out of fund which is more than the appellant's own capital and advance /secured loan summed up together. 6.2 Another glaring fact must be brought on record that appellant enjoys 70% share in Varsha Fashion LLP (AAKFV66911L) in which his capital as on 31-03-2014 was Rs. 5,27,14,390/-. Admittedly, sudden increase in capital was due to diversion of loan availed from Bajaj Finance Ltd in FY 212-13. Undisputedly, income earned from Varsha Fashion is exempt u/s 10(2A). These facts are verifiable from appellant's Balance sheet and ITR and one need not to refer....
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.... the considered view that total disallowance u/s 14 A r.w. Rule 8D cannot exceed exempt income. In statement of facts filed on-line, appellant himself admits earning of exempt income of Rs. 4,18,543/-. Computation of income file before me also suggests exempt income u/s 10(34) earned during FY 2013-14 at Rs. 4,18,543/-. Accordingly, AO is directed to restrict the disallowance under rule 8D to the extent of Rs. 4,18,543/-. Balance addition of Rs. 1497762/- (19,16,305 - 4,18,543) is hereby deleted. Appellant succeeds partly on sole ground including sub grounds." 4. The learned CIT(A) thus restricted the disallowance of Rs. 19,16,305/- made by the Assessing Officer under Section 14A read with Rule 8D to Rs. 4,18,543/-. Aggrieved by the orde....
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....ed by the learned Counsel for the assessee. As is evident from the balance-sheet of the assessee as on 31.03.2014, the assessee had sufficient interest free funds in the form of own capital and unsecured loans available in the year under consideration; and, since the same were sufficient to make investments in mutual funds and shares, there was no utilization of interest bearing borrowed funds by the assessee in mutual funds and shares. On the other hand, the interest bearing borrowed funds were utilized by the assessee for making investment in M/s. Varsha Fashion LLP in the form of partner's capital; and, since there was no exempt income received by the assessee during the year under consideration as share of profit from the said firm whic....