TaxTMI 
TaxTMI 
TaxTMI 
2023 (11) TMI 862
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.....2018-19 was treated as lead case. 2. The Revenue has raised following grounds of appeal: "(1) On the facts and in the circumstances of the cases and in law, the Ld.CIT(A) has; erred in deleting the' disallowance of Rs. 2,70,85,577/- made by the Assessing Officer under Sec.l4A of the Act without: considering the fact that the assessee have neither furnished the details of expenses incurred for earning exempt income nor has made disallowance under Sec.14A of the Act in original return or in the revised return of income and it has only submitted a revised computation of income showing a disallowance of Rs. 4,59,140/- only as against the total exempted income of Rs. 68,45,93,255/-. (2) On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in placing reliance on the decision of the Hon'ble Jurisdictional High Court and. Hon'ble Supreme Court in the case of in PCIT Vs. Sintex Industries Ltd. (82 Taxmann.com) 428 and his predecessor's decision in the assessee's own case for Asst. Year 2014-15, without appreciating the fact that there has been amendment in Rule 8D of the I.T. Rules, 1962 w.e.f. 02.06.2016 and in the assessment year under c....
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....lowance of Rs. 4,59,140/- is 1.00 % of exempt income. The assessee also submitted that Rs. 16,57,950/- was also disallowed while computing total income, which was incurred from running exempt income. The Assessing Officer recorded that "it seems that disallowance under section 14A has not been calculated as per the Act". The Assessing Officer issued show cause notice as to why disallowance should not be made in accordance with provision of Rule 8D and itself been added to the total income of assessee. The assessee filed its reply dated 28.06.2021. In the reply, the assessee stated that in assessee's own case for AY 2008-09, the assessing officer made similar disallowance under section 14A, which has been deleted by Tribunal in order dated 04.04.2016 in ITA No.2738/Ahd/2011 and following said decision similar addition was deleted by ld. CIT(A) in appeal for AY.2013-14 and 2014-15. The assessee further stated that they have earned dividend income of Rs. 4.59 crore which includes dividend of share of Rs. 42.17 lakhs and mutual fund dividend of Rs. 4.19 crore. The dividend income was earned mainly from shares and mutual funds held by assessee for the purpose of investment only on which....
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....y ld. CIT(A) is applicable on assessee's case. Further, the assessee has not given bifurcation of expenditure and that there is no disallowance either in original return of income or in revised return of income, so disallowance under section 14A of suo moto disallowance is not acceptable. The assessee simply revised the computation of income wherein section 14A disallowance was made to avoid penalty. The Assessing Officer worked out the disallowance of Rs. 2.70 crore under section 14A by invoking the formula of Rule 8D. The Assessing Officer worked out the average value of investment of Rs. 254.27 crore and disallowed 1.00% there are, as well as the direct expenses shown by assessee of Rs. 16.57 lakhs (already disallowed by assessee). 6. The Assessing Officer on further perusal of computation of income finds that assessee claimed deduction of Section 80G of Rs. 66.00 lakhs on account of donations made to various trusts, i.e. Rs. 52.00 lakhs to Dudhiben Ambalal Gondalia Education Foundation Trust, Rs. 11.00 lakh to Shri Leuva Patel Pragati Mandal and Rs. 2.50 lakh to Shri Saurashtra Patel Kelawani Mandal. The assessee was asked to furnish the details. The Assessing Officer noted th....
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....ssessee has not utilized borrowed funds. The assessee has already disallowed 1.00% of dividend income and indirect expenses. The indirect expenses are on account of STT, GST on investments or said investment, transaction charges etc. on shares, legal and professional charges given to investment advisory. Now, when the assessee in fact has not incurred any further expenditure for earning dividend income, it is imperative on the part of the Assessing Officer to record his satisfaction as to why the contention of assessee is not acceptable. The Assessing Officer has not pointed out any other expenses which would have gone in earning dividend income. The assessee has availed free of cost services of mutual fund companies. Even if any disallowance to be made, it should be restricted to 2.00% on appropriate percentage of dividend income. 8. The assessee further stated that Assessing Officer considered the average investment by including the investment and partnership firm. The assessee submitted that income earned from partnership firm is earned on distribution of profit after payment of tax and same cannot be termed as income under the exempt income in the hands of partners. The share ....
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....Revenue and the learned authorised representative (ld. AR) of the assessee. The ld. CITDR for the Revenue submits that ld. CIT(A) while granting relief to the assessee the ld CIT(A) place reliance on the decision of jurisdictional High Court in PCIT vs. Sintex Industries Limited, 82 taxmann.com 428 (Guj) and the decision of his predecessor in assessee's own case was AY.2014-15. The ld. CIT(A) failed to appreciate that Rule 8D of Income Tax Rule, 1962 was amended with the effect from 02.06.2016 and the Assessing Officer made disallowance as per amended Rule 8D read with section 14A, whereas the ld. CIT(A) relied upon the decision which was on account of payment of interest and availability of interest free fund as per the provision of pre-amended provision of Rule 8D. The assessee has neither shown suo motu disallowance under section 14A either in the original return of income nor the revised return of income. The assessee simply filed revised computation of income for AY.2018-19 after issuing notice under section 143(2) and duo moto disallowance was made to avoid the penalty. The assessee itself accepted that they have incurred expenses to earn exempt income, so the applicability o....
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....t any common expenditure which can go towards earning exempt income. Similarly, for AY.2017-18, the total expenses related exempt income is Rs. 8,29,548/- with total administrative expenses is of Rs. 74,59,245/- on total turnover of Rs. 167.76 crore which is 0.46% of turnover. 14. The ld. AR submits that there is no separate treasury management department with the assessee company and all the decisions relating to financial advisory are taken by directors itself. The directors remunerations during both the years, is only Rs. 18.00 lakhs and at the most small percentage of director salary may be disallowed on account of administrative expenses which may have gone through the decision making to trading management. The ld. AR submits that all the dividend income was credited to the assessee's account by way of NEFT/ECS/RTGS and does not involve in human efforts which needs to incur any expenses. To support his all other submission, the ld. AR of the assessee relied upon the assessee relied upon the decision of Bombay Tribunal in the case of DCIT vs. Reliance Industries Ltd., in ITA Nos.2587 & 2588/Mum/2022, dated 18.10.2023 and in ACIT vs. Crompton Greaves Ltd. (2019) 111 taxmann.com....
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....escribed under Rule 8D of Income Tax Rules- 1962. The Assessing Officer before invoking the method prescribed under Rule 8D is required to record his satisfaction with the correctness of claim of assessee in respect of such expenditure in relation to exempt income. We are aware of the fact that Rule 8D was inserted with effect from 2008. While inserting Rule 8D initially three clauses were made part of Sub-Rule (2) of Rule8D. further, Sub-Rule (2) is substituted with effect from 02.06.2016. While substituting Sub- Rule (2), a proviso is inserted therein. As per said proviso, the expenditure in relation to income which does not form part of total income shall not exceed the total expenditure claimed by the assessee. In our view, the words "expenditure incurred" in section 14A must be read in context with scheme of the Act and if so read, it is cleared it disallowed certain expenditure incurred to exempt income from being deducted from other income which is includible in the total income for the purpose of chargeability to tax. A return of investment or pay back is not expenditure incurred in term of Section 14A as has been held by Hon'ble Delhi High Court in ACB India Limited Vs ACI....
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....capital gain. Before us, the ld. AR of the assessee has given complete details of expenses incurred by assessee for earning taxable income. The total turnover of the assessee for the year under consideration is Rs. 127.39 crore and total administrative expenses is Rs. 79.58 lakhs only. Surprisingly, the Assessing Officer determined the disallowance under section 14A of Rs. 2.70 crore, which is not in consonance with the proviso attached with Rule 8D(2). The disallowance of section 14A cannot swallow the entire expenses administrative or otherwise which were incurred for earning taxable income. The ld. AR in his submission categorically contended that total administrative expenses claimed by the assessee apart from disallowance related to exempt income is only 0.62% of their total turnover. The ld. AR for the assessee while referring such administrative expenses submitted that the director's remunerations claimed during the year is only Rs. 18.00 lakhs and some percentage of directors' remuneration/salary may be disallowed. We find merit in such submission of ld. AR of the assessee, therefore, we direct that apart from suo moto disallowance which consist of Rs. 4,59,140/- being 1.00....