TaxTMI 
TaxTMI 
TaxTMI 
2023 (6) TMI 216
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....e of Rs. 302,91,27,610/- and book profit u/s. 115JB of Rs. 450,21,46582/-. 2.1. During the year under consideration, the assessee earned exempted dividend income of Rs. 1,21,28,448/- and assessee suo moto disallowed a sum of Rs. 28,78,876/- under section 14A of the Act. The return was taken up for scrutiny assessment, after calling for various details the Assessing Officer made disallowance u/s. 14A applying Rule 8D as follows: I Expenditure incurred as claimed by assessee (A) Amount of expenditure by way of interest debited in the P & L A/c. 2266605891 Opening Value Closing Value (B) Average investment on which tax free income is received or receivable 8370400000 10482400000 9426400000 (C ) Average value of total assets as appearing in the Balance Sheet 66524200000 70830400000 68677300000/ II (A)X(B)/(C) 31,11,06,199 III 0.5% of the average value of investment on which tax free income is received or receivable 4,71,32,000 TOTAL = I + II + III 358238199 Already disallowed by the assessee 2878....
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....15-16 Arya Omnitalk Radio Talking 6,00,50,000 6,00,50,000 Atul Limited 9,00,49,084 9,66,49,684 Amol Dicalite Ltd 5,77,500 5,77,500 Total 15,06,76,584 15,06,76,584 Average Value of Investments 15,06,76,584 3.3. Thus the assessee submitted the working u/s. 14A read with Rule 8D as follows: Particulars Considering Net Interest Expenditure as per Para 2.4 (as per the order of CIT(A) for AY 2015-16 A Interest Expenses directly relating to exempt income under rule 8D(2)(i) 0 B Proportionate disallowance of interest expenses under rule 8D(2)(iii): (I II/III) 0 (I) Interest Expenses as discussed in Para 2.4 supra 3,91,63,787 Interest Income as per Para 2.5 59,65,68,413 Net Interest Expenditure 0 (II) Average value of investments actually earning exempt income as per para 2.7 15,06,76,584 a. Opening balance (as on 31.03.2015) 15,06,76,584 b. Closing Balance (as on 31.03.2016) 15,06,76,584 (III) Average value of Total Assets 68,67,73,00,000 &....
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....e 8D(2)(ii), it is observed that AO has computed such disallowance based upon interest expenditure of Rs 222.66 crores. As held in preceding years, interest paid on borrowed funds for specific purpose cannot be considered for the purpose of disallowance u/s 14A of the Act. As per decisions referred in funds for specific purpose cannot be considered for the appellate order of earlier years, it is observed that interest expenditure in respect of general borrowing can only be considered for such disallowance The break up of such expenditure is as under: Particulars Amount (in Rs. ) Interest on inter corporate deposits 2,86,86,446 Other interest 1,04,77,341 Total 3,91,63,787 It is observed that as against interest expenditure of Rs 3,91 crores, appellant has earned taxable interest income of Rs 59. 5 crores As held by Hon'ble Jurisdictional High Court in case of Nirma Credit & Capital (P.) Ltd. [2017] 85 taxmann.com 72 assessment years. as well as appellate order of earlier it is held that only net interest expenditure can be considered for making disallowance u/s 14A r.w.r 8D(ii) of the Act. In the present case, appellant has earned net interest income hence proporti....
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....nding in case of Appellant, the disallowance of administrative expenditure under the provisions of section 14A r.w.r 8D is restricted to exempt income of Rs. 1,21,28,448/-. Further it is observed that the Appellant has while filing Return of Income made disallowance of Rs. 28,78,876/- and accordingly disallowance u/s 14A is restricted to Rs. 92,49,972/-. Thus, related grounds of appeal are partly allowed. 4.1. Similarly, on the addition of Rs. 35,53,59,323/- made u/s. 14A r.w. Rule 8D while computing the Book Profit u/s. 115JB of the Act, the Ld. CIT(A) deleted the same observing as follows: ".... During the course of Appellate Proceedings the Appellant argued that merely because disallowance is made u/s 14A rw.r 8D while assessing income as per normal provisions of the Act does not resulting to suo moto addition of such amount while computing Book Profit u/s 115.JB of the Act. It is observed that my predecessor CIT(A) has while passing Appellate order for A.Y 2015-16 vide order dated 29/08/2018 in Appeal No: CIT(A)- 1/DCIT/Circle- 1(1)(1)/10379/2017-18 has deleted disallowance made u/s 14A to the Book Profit u/s 115JB of the Act by following Appellate order in Appellant's o....
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....of clause (1) to Explanation to s 115JB, in the event of disagreement with the action of Assessing Officer. We are alive to such concerns. However, as noted, we are governed by the superior wisdom available in this regard. Hence, remedy to revenue, if any, perhaps lies elsewhere. Accordingly, respectfully following the decisions us governing the filed we direct the AO to delete the adjustments made on account of estimated disallowance determined under 14A of the Act while computing book profit u/s 115JB of the Act 7. In the result, appeal of the Assessee is allowed by the same token, the appeal of the Revenue integrated to same point requires to be decided in negative and against the Revenue. Respectfully following the said observation, the disallowance u/s 14A of the Act made while computing book profit u/s 115JB of the Act is deleted. Thus, this ground of appeal is partly allowed." Thus following the observation of my predecessor CIT(A) in A.Y 2015- 16 vide Appeal No: CIT(A) 1/DCIT/Circle - 1(1)(1)/10379/2017-18 dated 29/08/2018 and decisions of Jurisdictional ITAT in case of Adani Agro Ltd Vs ACIT (ITA No 182/Ahd/2012) on 31/03/2017 and Torrent Cable Ltd Vs ACIT (ITA No 31....
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.... filed by the Revenue also dismissed by Hon'ble Supreme Court on 23.03.2018. Therefore the deletion made by Ld. CIT(A) does not require any interference and the ground no. 1 raised by the Revenue is liable to be dismissed. 6.1. Per contra, the Ld. CIT-DR Shri Sudhendu Das appearing for the Revenue could not place any contrary facts or case laws before us. In the absence of the same, we have no hesitation in confirming the order passed by the Ld. CIT(A) who deleted the addition of interest expenditure of Rs. 31,11,06,199/- under Rule 8D(2)(ii) of the Act, thus the ground no. 1 filed by the Revenue is devoid of merits and the same is hereby dismissed. 7. Regarding ground no. 2, Administrative expenses under Rule 8D (2)(iii) of Rs. 3,50,03,552/-. The Ld. CIT(A) restricted this disallowance to the extent of exempt income earned by the assessee during the year, after taking into account suo-moto disallowance made by the assessee of Rs. 28,78,876/-. Thus Ld CIT[A] upheld the disallowance to the extent of Rs. 92,49,972/-. The Ld. Counsel for the assessee submitted the investments yielding exempt income shall only be subject matter of disallowance u/s. 14A and the investments resulting i....
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....empt. There is no dispute that if an investment has yielded exempt income in a particular year then it will enter the computation of average value of investments for the purposes of rule 8D(2)(iii). The assessee's contention that if there is no certainty that an income, which is exempt in current year, will continue to be so in future years and, therefore, that investment should also be excluded, is hypothetical and cannot be accepted [Para 11.17] In view of the above discussion, the matter is restored back to the file of Assessing officer for recomputing the disallowance under section 14A in terms of above observations. Thus, revenue's appeal is dismissed and assessee's cross-objection, on the issue in question, stand allowed for statistical purposes." 8.2. The Hon'ble Gujarat High Court in the case of CIT vs. Suzlon Energy Ltd. reported in [2013] 33 taxmann.com 151 (Guj.) held as follows: "II. Section 14A of the Income-tax Act, 1961 Expenditure incurred in relation to income not includible in total income [Dividends] - Whether where investment was made by assessee in foreign subsidiaries, disallowance of interest expenditure under section 14A was not justified si....