TaxTMI 
TaxTMI 
2024 (2) TMI 1043
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....facts and circumstances of the case, the Hon'ble CIT(A) and the learned AO have erred in assessing the total income of the Appellant at Rs 24,69,92,054 as against the returned income of Rs 19,09,86,020 under normal provisions of the Act, and at Rs 36,98,26,537 as against the returned income of Rs 31,24,41,003 under Section 115JB of the Act. Disallowance under section 14A of the Act read with Rule 8D of Income-tax Rules, 1962 ('Rules') 2. On the facts and circumstances of the case, the Hon'ble CIT(A) has erred in upholding the additional disallowance under section 14A of the Act made by the learned AO by directly invoking Rule 8D of the Rules, and without recording his satisfaction as to why the suo moto dis....
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....computing disallowance under the provisions of Rule 8D(2)(ii) of the Rules; 5.3. the learned AO had erred in not considering the fact that the investments were made by the Appellant out of its own funds and not out of borrowed funds. The Appellant respectfully submits that each of the above grounds/sub-grounds of appeal are without prejudice to and independent of one another. The Appellant craves leave to add, alter, amend, substitute and/or modify in any manner whatsoever all or any of the above grounds/ sub-grounds of appeal at any time before or at the time of the appeal." 2. The only effective ground raised by the assessee in this appeal is against the sustaining of disallowance made u/s 14A of the Income t....
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....idend income. He submitted that authorities below failed to appreciate the fact that no disallowance u/s 14A of the Act was called for. On account of the fact that the AO failed to record his satisfaction as to why suo moto disallowances made by the assessee are not correct having regard to the accounts of the assessee. Ld. Counsel for the assessee submitted that the lower authorities while computing the disallowance, grossly erred in taking the gross investments instead of restricting to the extent of investments which has earned dividend or exempt income. He further submitted that Ld.CIT(A) although accepting the contention of the assessee that only dividend yielding investments to be considered for computation of disallowance u/s 14A of ....
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....i) (Special Bench), supra. So far claim with respect to borrowing of the fund and its investment is concerned, the appellant has not controverted the finding of fact of the Ld. AO that it had a systematic investment over the period of time and therefore, the appellant contention that it has surplus find in the form of share capital and reserve and surplus being used for investment does not hold conclusive. It is also not the case of the appellant that investments made over the period of time has been through an exclusively independent investment account maintained separately for the purpose. 5.1.6. Since, the computation of disallowance u/s 14A made by Ld. AO has not factored in the above principle, it is optimum that disallowance ....
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....mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income". This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case......" 10. The contention of the assessee is that had the AO excluded the nondividend bearing investments and investment made out of non-interest bearing fund, no disallowance would have been called for. The Ld.CIT(A) has sustained the additions to the extent of exempt income without adverting to the contentions of the assessee regarding exclusion of investments that did not earn dividend....