TaxTMI 
TaxTMI 
2022 (8) TMI 595
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....mmissioner of Income Tax (A), confirming the disallowance made by the AO u/s.14A of the Act, in respect to expenses relatable to exempt income i.e. interest expenses u/r.8D(2)(ii) of the Income Tax Rules, 1962 (hereinafter "the Rules") at Rs.2,97,28,190/- for AY 2010-11, administrative expenses u/r.8D(2)(iii) of the Rules i.e. average value of investment @ 0.5% amounting to Rs.81,91,275/- for AY 2012-13, two disallowances i.e. interest disallowance u/r.8D(2)(ii) of the Rules at Rs.4,78,93,956/- and u/r.8D(2)(iii) of the Rules i.e. average value of investment @ 0.5% of investment i.e. Rs.76,81,443/- for AY 2013-14, disallowance of interest u/r.8D(2)(ii) of the Rules at Rs.5,98,34,476/- and u/r.8D(2)(iii) of the Rules, i.e. average value of investment @ 0.5% amounting to Rs.77,36,670/- for AY 2014-15. As regards to this issue, the facts and circumstances are exactly identical in all the years and hence, we will take up this issue from AY 2012-13 and discuss the facts and decide the issue for all other assessment years. 2.1 Brief facts of the case are that the assessee had invested to the tune of Rs.3419.82 lakhs and earned exempt income during the FY 2009-10 relevant to this AY 2010....
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.... assessment order for the AY 2010-11 and read out the entire assessment order and argued that there is no iota of any fact that the investment is made out of interest bearing funds in the instruments giving rise to exempt income. The ld.Counsel stated that once this is the position, presumption will go in favour of the assessee by the decision of the Hon'ble Bombay High Court in the case of CIT v. HDFC Bank Ltd., reported in [2014] 366 ITR 505 (Bom). The Ld.Counsel for the assessee stated that in other years also the AO has not brought out any nexus in regard to investment made by the assessee for earning of exempt income. The investment is made out of interest free funds. Once this is the fact, the disallowance u/s.14A of the Act r.w.r.8D(2)(ii) of the Rules, cannot be made. 2.4 On the other hand, the ld.Sr.DR could not controvert the fact situation, but stated that the factual aspect of availability of funds, can be referred to the file of the AO for verification, because, at the appellate stage, there is no mechanism for verification of balance sheet filed by the assessee. 2.5 After hearing rival contentions and going through the fact situation, we find that the assessee has g....
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....s.81,91,275/-. We direct the AO to verify the investments which give rise to exempt income and consider for disallowance u/r.8D(2)(iii) of the Rules, only those investments which has given rise to exempt income only and accordingly, make disallowance. Similar is the position in AY 2013-14, wherein, u/r.8D(2)(iii) of the Rules, the disallowance of Rs.76,81,443/- and for the AY 2014-15, the disallowance is Rs.77,36,670/-. Similar are directions in these two assessment years. The AO will verify the instrument giving rise to exempt income and only for those instruments, the investment will be considered for making disallowance u/r.8D(2)(iii) of the Rules and accordingly, this common issue is decided in terms of above directions. Consequently, the appeal filed by the assessee is partly allowed for statistical purposes. 4. The second common issue in ITA Nos.2759 & 2761/Chny/2019 is as regards to disallowance of staff training expenses made by the AO and confirmed by the Ld.CIT(A). In both the years, the facts and circumstances are identical and raised identical worded grounds and hence, we take the facts and grounds in ITA No.2759/Chny/2019 for the AY 2012-13. The relevant grounds raise....
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.... expediency and business expenditure accordingly, allowable u/s.37 of the Act. However, the ld.Counsel stated that this issue is covered against the assessee by the decision of the Tribunal in the assessee's own case for the AY 2010-11 in ITA No.2777/Mds/2014 dated 03.07.2015, wherein, the Tribunal has confirmed the disallowance by observing in Para No.5, which is as under: 5. We have considered the rival submissions on either side and perused the relevant material on record. It is not in dispute that the assessee incurred expenditure on higher education and foreign tours of the grandchildren/children of the Directors. As rightly submitted by the Ld. D.R, it is the responsibility of the parents/ grandparents to give education to their children/grandchildren. No business purpose is going to be served to the assessee by incurring expenditure on the foreign education of the children and grandchildren of the Directors. Merely because the company was in existence for decades, the law laid down by the jurisdictional High Court in RKKR Steels P. Ltd. (supra) and in K. Subramaniam Bros (supra) would not change. This Tribunal is of he considered opinion that the law laid down by Madras Hi....
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....for the purpose of business of the assessee and accordingly, following the decision of the Hon'ble Madras High Court in the case of D.B. Madan v. CIT, reported in (Mad) 261 ITR 193 and also in the case of CIT v. T.S.Hajee Moosa & Co., reported in (Mad) 153 ITR 422, disallowed the claim of the assessee by the AO. The Ld.CIT(A) also confirmed the action of the AO by following his predecessor order for the AY 2011-12 in ITA No.0117/2014-15, wherein, the foreign travel expenses of Director of assessee's sister Ms.Anitha Raajyalaxmi Ratnam, was confirmed. Aggrieved the assessee is in appeal before the Tribunal. 5.2 We have heard the rival contentions and gone through the facts and circumstances of the case. Before us, the Ld.Counsel for the assessee only made bald submission that the assessee has spent money towards travel expenditure of Consultants of the assessee company and for this, he relied on the decision of the Hon'ble Calcutta High Court in the case of JK Industries Ltd. v. CIT reported in [2011] 335 ITR 170 (Cal). Now, we noted that the Hon'ble Madras High Court has categorically held that expenses on foreign travel, wife of Director of assessee's company, the assessee has to....
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....not in the nature of business expenditure. Hence, the AO noted that the medical expenses incurred by the assessee company amounting to Rs.9,74,968/- towards treatment of Ms.Shirmathi Mahesh relative of the Director of the assessee company, are personal in nature or not incidental to the business of the assessee company and hence, disallowed. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A). 6.2 The Ld.CIT(A) after taking Remand Report from the AO dismissed this grounds of appeal confirming the action of the AO in making disallowance of medical expenses. Aggrieved, assessee came in appeal before the Tribunal. 6.3 Before us, the Ld.Counsel for the assessee stated that Ms.Shirmathi Mahesh, Director of the assessee company and as per the terms of his appointment, included medical expenses for self and family as in the case of other executives and employees of the company and terms of remuneration fixed by the Board of Directors and as approved by the Members of the company. The Ld.Counsel for the assessee explained that for the year ended 31.03.2012, an amount of Rs.9,74,968/- was incurred in foreign currency towards medical treatment of Ms.Shirmathi Mahesh, who is sp....
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....unting to Rs.9,74,968/- are personal in nature and not in relation to any business connection. Hence, the lower authorities have rightly disallowed the same and we confirm the same. 7. Similar are facts in AY 2013-14 in ITA No.2760/Chny/2019 and hence, taking a consistent view, we confirm the disallowance in this year also. 8. The next issue in ITA No.2759/Chny/2019 for the AY 2012-13 is as regards to interest on diversion. For this, the assessee has raised the following Ground No.2, which reads as under: 2. Disallowance of Interest for diversion of borrowed funds to subsidiary company at Lower rate of Interest? 2.1. The learned CIT (A) erred in wrongly assuming that M/S 'T'VS Srichakra Ltd is a subsidiary company. He has failed to appreciate the fact that M/ s 'T'VS Srichakra Ltd is an Associate Company and is only a supplier of materials to the Appellant. 2.2. The learned CIT (A) failed to appreciate the fact that the amount was advanced to them charging a proper interest to ensure uninterrupted supply of goods. The 'Advance was however returned back by the said company. 2.3. The learned CIT(A) failed to appreciate the fact that although no intere....
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....reciation 2150.06 14068.62 Less: Taxes paid -3472.62 Less: Dividend & Dividend Tax -6107.29 Balance 4488.71 Less: Investments made during the year in companies 656 Balance Surplus 3832.71 Amount Lent to TVS Srichakra (issue on diversion) 1500 Opening investment 17531.21 Opening Reserves & Surplus 42040.33 Closing investments 15233.89 Closing Reserves & Surplus 45158.25 8.4 In view of the above, the Ld.Counsel for the assessee stated at the best, the matter can be referred back to the file of the AO for verification of the actual availability of surplus funds. Since, assessee has filed these details before us as the assessee is having surplus funds with it for making advance to TVS Srichakra Ltd., according to us, in such situation, no disallowance has been made in view of the decision of the Hon'ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Ltd., reported in (2009) 313 ITR 340 (Bom). 8.5 Accordingly, we remit this issue back to the file of the AO with the above directions. This issue is allowed for statistical purposes. 9. The next issue in Revenue's appeal in ITA No.2754/Chny/2019 for the AY14-15 is as re....
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.... plying, hiring, leasing goods carriages, where such contractor owns 10 or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number to the person paying or crediting such sum. Section 194C(7) requires the deductor to furnish the same to the prescribed authority, in the prescribed format, within the required due dates as explained under Rule 31A of the Income Tax Rules. In this case, the appellant complied with the provisions contained u/s.194C (6) & (7) r.w.Rule 3IA. However, there is a huge delay in filing such TDS statements. In view of the compliance, although belated, the Assessing Officer was legally not correct to disallow the amount u/s 40(a)(ia) of the Act. However, it was open for the Assessing Officer to initiate and levy penalty u/s.271H. in view of the legal position, the disallowance u/s.40(a)(ia) for violation of provisions u/s 194C(6) & (7) are deleted. Accordingly, the related grounds at point No.2.1. to 7.6 are allowed. 9.3 Aggrieved, now the Revenue is in appeal before us. Before us, the Ld.Counsel for the assessee filed copy of judgement of the Hon'ble Madras High Court in the c....