TaxTMI 
TaxTMI 
2022 (6) TMI 1119
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....7, Mumbai (hereinafter referred as CIT(A)) erred in confirming the action of the AO in making disallowance u/s 14A of the Income Tax Act, 1961 (Act) without recording his satisfaction having regard to accounts of the Appellant. (b) The CIT(A) erred in confirming the action of the AO in considering entire investment for the purposes of computing disallowance u/s 14A r.w. Rule 8D(2)(ii) and SD(2)(ii) of the Income Tax Act, 1962 (Rules) as against only those investment on which Appellant has actually earned the exempt income. (c) The CIT(A) erred in making the enhancement of disallowance made u/s 14A of the Act thereby making the disallowance under rule 8D(2)(ii) of the Rules ignoring the facts that own fund of the Appellant are far in excess of investments of the Appellant. (d) The CIT(A) erred in making the enhancement of disallowance made u/s 14A of the Act by applying the amended Rule 8D of the Rules amended vide notification dated 02/06/2016 without appreciating that the amended rule is applicable from the assessment year 2017-18 onwards and not for the subjected assessment year. 2. The CIT (A) erred in confirming the action of the AO in not allowing the TDS credit of Rs.....
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.... the total income of Rs.136,04,86,326/-. 06. This order was challenged before the learned CIT (A). The learned CIT (A) rejected the argument of the assessee that Rule 8D has been invoked without recording any satisfaction under Section 14A (2) of the Act. The learned CIT (A) referred to Para no. 5 and held that proper satisfaction is recorded. The learned CIT (A) further noted that all the assets either yielded exempt income during the year or could yield in future, those assets should be considered for working out disallowance. Therefore, he rejected contention of assessee that only exempt income yielding assets should be considered for disallowance. He therefore upheld the disallowance of Rs.7,31,84,746/-. The learned CIT (A) further noted that the learned Assessing Officer has failed to consider the amount disallowable under Rule 8D(2) of the Rules in the final computation of disallowance and therefore, he enhanced the disallowance by Rs.28,12,000/- to be included. He further analyzed the annual accounts of the assessee and held that assessee has used mixed funds. He also invoked the new amended Rule where 1% of the annual average investment is required to be disallowed. Theref....
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....nt invoke by the learned CIT (A) for A.Y. 2016- 17 is not proper. For this proposition, he relied on the decision of Hon'ble Supreme Court in case of CIT Vs. Essar Teleholding Limited 401 ITR 445 (SC), wherein it has been held the amended rules cannot be applied retrospectively. (v) He therefore submitted that enhancement made by the learned CIT (A) by invoking the amended Rule 8D of the Rules is incorrect. 08. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer. He also supported the order of the learned CIT (A) vide Para no. 9.2. He submitted that the learned CIT (A) extracting Para 5 of the assessment order has categorically held that there is a satisfaction recorded with respect to disallowance computed by the assessee. On the issue of quantum of disallowance, he supported the orders of the lower authorities. 09. We have carefully considered the rival contentions and perused the orders of the lower authorities. The ground no. 1 is with respect to the disallowance confirmed and enhanced by the learned CIT (A) under Section 14A read with rule 8D of the Rules. Admittedly, the assessee has earned exempt income of Rs.80,75,....
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.... for the learned Assessing Officer prior to rejection of the voluntary evidences offered by the assessee to look at the amount of disallowance offered, exempt the disallowance offered with the accounts of the assessee and then, record his satisfaction that why the disallowance offered by the assessee voluntarily is not correct. Unless, he records such satisfaction, he cannot proceed to a disallow sum as per Rule 8D of the Rules. Thus, recording of the satisfaction about the incorrectness of the claim of the assessee is Sine qua non before and making in disallowance under Rule 8D of the Rules. 011. Section 14A (2) & (3) provides as under :- [(2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a cas....
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....erein it is held that only after the satisfaction recorded under Section 14A of the Act (2), the occasion to apply Rule 8D of the Rules for apportionment of expenses can arise. It was held that :- "41. Having regard to the language of Section 14A(2) of the Act, read with Rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance under Section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, nature of loan taken by the assessee for purchasing the shares/making the investment in shares is to be examined by the AO." 014. So is also held by Hon'ble Bombay High Court in case of PCIT Vs. Bajaj finance Limited 309 CTR 28 (Bom). In Para no. 9 Hon'ble High Court deleted the disallowance under Rule 8D of the Rules for the reason that the assessee offered voluntarily and made detail representation with no other expen....
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.... Rs.80,75,88,816/- without any systematic management of its investment portfolio. Further, investment decisions being complex in nature require market research, day to day analysis and planning. Furthermore, the assessee has not maintained separate accounts for its taxable and exempt income. Hence, the present case is a fit case to invoke Rule 8D of the IT Rules. The assessee has suo moto worked adhoc disallowance u/s 14A amounting to Rs. 12,06,069/ However, as stated above, the disallowance is required to be calculated as per Rule 8D. Following the ruling of the Apex court in the case of Maxopp Investments [(2018) 402. ITR 0640 (SC) the disallowance in the instant case is computed as under. Rule 8D Nil Rule 8D(ii) Rs.28,63,486/- Investments as on 31/03/2015 1444,55,14,263 Investments as on 31/03/2016 1531,08,11,698 Average investments 1487,81,62,980 Average total assets 4543,56,61,827 Interest 85,88,016X1487,81,62,980/4543,56,61,827= Rule 8D(iii) 0.5% of 14878162980 =Rs.7,43,90,815/- Disallowance u/s 14A as per rule 8D = 7,43,90,815/- Less: Adhoc Disallowance already made= 12,06,069/- Total disallowance under Section 14A=7,31,84,746/- 018. On ....
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....ssing Officer restricted at the time of assessment order it to Rs.48,90,44,563/-. Thus, there was a short credit of Rs.2,93,74,400/-. The matter was agitated before the learned CIT (A), the TDS credit was rejected. He noted that TDS paid to the credit of Central Government in next year would be reflected in form no. 26AS for next year and therefore, a sum of Rs.71,50,215/- out of the above credit can be granted to the assessee only in the year in which it is reflected in form no. 26AS. Therefore, he confirmed the non granting of TDS of Rs.71,50,215/-. With respect to sum of Rs.54,59,764/- CIT (A) noted that the claim of the assessee with respect to the TDS deducted cannot be entertained as deductors have not deposited the above sum. He therefore, stated that assessee should approached its deductors to upload revised TDS returns and then only the assessee can be granted credit for this. He also confirmed the action of the learned Assessing Officer in not granting credit for Rs.54,59,764/-. He also noted that assessee has claimed Foreign Tax Credit of Rs.1,43,60,662/-. He noted that no details are available and therefore, no such tax credit can be granted. With respect to the sum of ....
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....he credit of Rs.32,04,902/-. Another sum of Rs.39,45,315/-, where the TDS is shown in form no. 26AS for A.Y. 2015-16 however, the assessee offered the income in A.Y. 2016-17. Therefore, the credit of the above TDS should also be granted to the assessee in A.Y. 2016-17. Naturally, it was stated before us that assessee did not claim the credit for such sum in A.Y. 2015-16. Therefore, AO is directed to grant credit of sum of Rs.39,45,315/-. Another is a foreign tax credit of Rs.1,43,60,662/- for which assessee submitted the detail working. However, the learned CIT (A) stated that no information is provided by the assessee. Assessee has given such working at page no. 65 to 66 of the Paper Book. Therefore, we set aside this issue back to the file of the learned Assessing Officer with a direction to grant credit of foreign tax amounting to Rs.1,43,66,662/- after verification. The assessee has shown a tax deduction at source made by tax deductor amounting to Rs.54,59,764/-, which has been paid to the credit of Central Government by the various parties. However, assessee has submitted the list of 16 such parties where the amount of income has been offered by the assessee as income however,....
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....hich no exempt income is earned during subjected year. 2. The CIT(A) erred in confirming the action of the AO in not allowing credit for (a) TDS deducted and paid in subsequent years by the deductor and (b) TDS deducted but not paid to the credit of Central Government by the deductor. 3. The CIT(A) erred in not allowing deduction of education cess under section 28/37 of the Act." 025. The assessee filed return of income on 29th November, 2017 at Rs.52,92,86,530/-. It was revised on 23rd March 2018 at Rs.53,3841,210/-. It was further revised on 28th March 2019 at Rs.40,60,90,400/-. The assessee has earned a dividend income of Rs.101,01,54,794/- and has offered suo motto disallowance under Section 14A of the Act of Rs.8,78,190/-. The learned Assessing Officer similar to the facts for A.Y. 2016-17 invoked the provisions of Rule 8D of the Rules and made a disallowance of Rs.15,78,402/-. Thus, the net addition / disallowance of Rs.15,70,212/- was made and assessment order under Section 143(3) of the Act was passed on 10th January, 2020 at a total income of Rs.55,86,90,612/-. The assessee preferred an appeal before the learned CIT (A), where on identical reasons, the learned CIT (A)....
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....issioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as 'CIT(A)' for the sake of brevity] erred in dismissing the appeal filed by Edelweiss Securities Limited [hereinafter referred as Appellant' for the sake of brevity] against the assessment order dated 23 December 2019 passed by the Assistant Commissioner of Income Tax, Circle 4(1)(1), Mumbai (hereinafter referred to as 'the AO' for the sake of brevity) under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' for the sake of brevity) by holding that the Appellant had opted to settle the dispute by filing an application under the Direct Tax Vivad se Vishwas Act, 2020. The Appellant submits that it had not filed any application under the Direct Tax Vivad se Vishwas Act, 2020 in respect of its appeal filed challenging the disallowances made by the AO in the assessment order passed under section 143(3) of the Act for assessment year under consideration. The Appellant, therefore, prays before Your Honours that the order passed by the CIT(A) may be set-aside. While on the subject, the Appellant humbly submits that it has fi....
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....nce under Section 14A of the Act is devoid of any merit. The main reason for saying so is that assessee has submitted that it has earned an exempt dividend income of Rs. 7,87,624/- and against which it has offered disallowance under Section 14A of the Act of Rs. 12,81,156/-. Therefore, any further disallowance is unwarranted, as the disallowance cannot exceed the exempt income earned by the assessee. Even otherwise, it is submitted that the learned Assessing Officer without recording any satisfaction in terms of Section 14A of the Act that how the disallowance offered by the assessee is incorrect, the learned Assessing Officer has proceeded to compute disallowance under Rule 8D of the Rules. He submitted that this action of the learned Assessing Officer is contrary to the decision of Hon'ble Supreme Court in case of Maxopp Investment Limited as well as the decision of Hon'ble Jurisdictional High Court in case of Principle Commissioner of Income Tax vs. BSE [ supra] . He therefore submitted that on the merits of the case the addition deserves to be deleted. 034. The learned Departmental Representative supported the order of the learned Assessing Officer. 035. We have caref....