TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 2272
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....,29,249/- u/s.14A r.w. Rule 8D(ii) of the Act despite the fact that the 'interest' paid on term loans is not attributable to any income or receipt laid down in Rule 8D(ii)." 2). On the facts and in the circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals) ought to have upheld the order of the Assessing Officer. 3). It is therefore, prayed that the order of the Ld. Commissioner of Income-Tax (Appeals) may be set-a-side and that of the order of the Assessing Officer be restored." 3. The assessee has raised the following grounds in its CO: "1. On the facts and in the circumstances of the case, the CIT(A) has erred in confirming the disallowance of Rs.8,00,154/- made by the A.O. u/s. 14A on account of administrative expenses. 2. On the facts and in the circumstances of the case, the CIT(A) has erred in upholding addition of Rs.47,29,403/- to the book profit u/s.115JB of the Act on account of disallowance of Rs.47,29,403/- u/s.14A, when he himself had deleted disallowance of Rs.39,29,249/- on account of interest expenditure made by the A.O. u/s. 14A. 3. On the facts and in the circumstances of the case, the CIT(A) has erred in not entertaining the gr....
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....nvoked the provision of 8D and made the following disallowances: S. No. Particulars Amount 1. Direct Expenses Nil 2. Interest Expenses 39,29,249 3. Administrative Expenses 8,00,154 Total 47,29,403 Thus, the AO made the disallowances for Rs.47,29,403/- and added to the total income of the assessee. 7. Aggrieved, assessee preferred an appeal to ld. CIT(A). The assessee before the ld. CIT(A) submitted that its own funds exceed the amount of investment therefore there cannot be any disallowance under Rule 8D(2)(ii) of the Income Tax Rule. With regard to administrative expenses, the assessee submitted that the disallowance had been made on estimation basis, which is contrary to the provisions of law. The ld. CIT(A) after considering the submission of the assessee granted the relief in part by observing as under: "5.4 The submission are considered. The Assessing Officer has made disallowance u/s 14A applying rule 8D. It is pertinent to note that in A.Y. 2010-2011, appellant has not claimed any interest expenditure hence disallowance u/s 14A was only made with reference to administrative expenditure incurred by it under rule 8D (iii) whereas in present assessmen....
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....owance of interest made by the AO for Rs.39,29,249/- only. The assessee is in appeal before us against the addition confirmed by the Ld. CIT(A) for Rs.8,00,154/- on account of administrative expenses. 8. First, we take Revenue's appeal: The ld. DR before us vehemently supported the order of AO, whereas the ld. AR retreated the submission as merely to ld. CIT(A). 9. We have heard the rival contentions and perused the materials available on record. It is undisputed facts that the owned fund of the assessee as on 31-03-2011 is amounting to Rs. 96,90,77,999/- and the investment as on 31-03-2011 is amounting to Rs. 8,00,00,000/- only, thus, it is clear that own fund of the assessee exceeds the amount of investment as discussed above. In such circumstances, the Hon'ble Gujarat High Court in the case of UTI Bank Ltd. reported in 32 taxmann.com 370 has observed that where sufficient interest free funds are available to meet the amount of investment then no disallowance on account of interest expenses is warranted under section 14A r.w.r. 8D of Income Tax Rules. The relevant extract of the order is reproduced below: "3. The issue pertains to disallowance under Section 14A of the Act ma....
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.... contention of the Revenue that directly or indirectly some expenditure is always incurred which must be disallowed u/s. 14A cannot be accepted. Disallowance u/s. 14A requires finding of incurring of expenditure. In the present case, the AO has presumed that the assessee might have incurred expenditure to earn the exempt income. He has not given any finding of incurring of expenditure. In view of these facts and respectfully following the decision of High Court, we are of the view that no disallowance of administrative expenses can be made. We accordingly direct for the deletion of the addition made by the AO and allow this ground of the assessee." 4. In our opinion the Tribunal has committed no error. Basically the entire disallowance has been made on the basis of facts emerging on record. The Tribunal also relied on the decision of the Bombay High Court in case of CIT v. Reliance Utilities & Power Ltd. [2009] 313 ITR 340/178 Taxman 135. Additionally, we find that the Assessing Officer had, without giving a finding as to how much administrative expenditure have been incurred to earn the exempt income, had made disallowance. In the earlier years also, similar position obtained. T....
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....ncome-tax Rules, 1962 - Expenditure incurred in relation to income not includible in total income [Shares] - Assessment year 2008-09 - Whether provisions of section 14A are indeed attracted whether or not shares are held as stock-in-trade or as investments, even though provisions of rule 8D(2)(ii) and (iii) of 1962 Rules cannot be invoked in such a case, and even though provisions of rule 8D(2)(i) are much narrower in scope than scope of section 14A simplicitor - Held, yes - Whether, therefore, disallowance under section 14A in a situation in which exempt income yielding asset, such as shares is held as stock-intrade, and not as investment, will be of related direct and indirect expenditure, whereas disallowance under rule 8D will be restricted to disallowance of only direct expenses - Held, yes [Paras 8 and 10] [In favour of assessee" On the other hand ld. DR vehemently supported the order of authorities below. 11. We have heard the rival contentions and perused the materials available on record. In the instant case, the assessee has earned dividend income which was exempted u/s 10(34) of the Act. No disallowance was made by the assessee in relation to such dividend income. The ....
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....ssuing show-cause notice dated 15-10-2013 as reproduced below: "4.2 Accordingly, the assessee was asked vide notice dated 15.10.2013 as to why disallowance under section 14A read with rule 8D should not be made in view of the fact that you have earned dividend income which is exempt from tax and no expenses have been claimed to have been incurred for earning this income." Therefore, we hold that the AO has rightly invoked the provision of Rule 8D for making the disallowance of expenditure in relation to dividend income. We also note that the ratio laid down by the Hon'ble Supreme court in the case of Sintex Industries Ltd (supra) is not applicable to the facts of the instant case. In the case of Sintex Industries Ltd., the assessee has made the disallowance of administrative expenses of Rs.52,000/- for the expenses incurred in relation to exempted income. However, in the case on hand assessee has not made any disallowances, therefore, we are of the view that the ratio of the Supreme Court judgment cannot be applied in the given facts and circumstances. Similarly, the order relied upon by the ld. AR in the case of Gulshan Investment company Limited (Supra) does not support the ....
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....rib.) etc. - Amount of expenditure disallowable u/s 14A was to be added back while computing book profit under clause (f) of explanation (1) to section 115JB. Considering this, I am of the view that fool effect has to be given to provisions of section 14A irrespective of different in language of different subsections in provisions of section 115JB. Section 115JB requires that expenses related to exempt income is required to be added for computing book profit. Section 14 A provides a methodology for completing such expenditure. Reading harmoniously will require, the disallowance under section 14 A to be added while computing book profit under section 115 JB. In view of this, this ground of appeal is dismissed." Being aggrieved by order of ld CIT(A) assessee is in the second appeal before us. The ld. AR before us submitted that ld. CIT(A) has already deleted the addition made by the AO for Rs.39,29,249/- on account of interest expenses but the ld. CIT(A) erred in not considering the same while determining the income u/s 115JB of the Act. On the other hand ld. DR vehemently supported the order authorities below. 14. We have heard the rival contentions and perused the materials avai....