TaxTMI 
TaxTMI 
2018 (2) TMI 2146
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.... 8D of the Income Tax Rules, 1962. 3. Brief facts leading to the present appeal are that during assessment proceedings assessee had submitted to the A.O that it had incorrectly made disallowance of Rs. 8,59,664/- under section 14A of the Act, suo moto, in the return of income filed by it. It was submitted that the said disallowance had been calculated without taking into consideration its own interest free funds and considering which the disallowance should be restricted to Rs.1,95,143/- A revised calculation of the disallowance was filed by the assessee during assessment proceedings. However the A.O. rejected the contention of the assessee and did not restrict the disallowance u/s 14A to Rs.1,95,143 /- 4. Aggrieved by the same the as....
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....(2)(iii) ignoring the submissions of the appellant made before him and also before the AO. 2. That the confirmation of disallowance of Rs. 8,59,664/- is against the law and facts of the case." 5. During the course of hearing before us Ld. Counsel for the assessee reiterated the contentions made before the lower authorities that no disallowance on account of interest as per rule 8D(2)(ii) was warranted since the entire investments had been made out of own interest free funds of the assessee. Ld counsel for the assessee drew our attention to the quantum of interest free funds available with it as outlined in a chart produced before us as under: "Disallowance u/s 14A/ Rule 8D(2)(iii) and 8D(2)(ni) by AO and confirmed by CI....
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.... assessee of availability of enough own funds and to thereafter adjudicate the issue in accordance with law. 7. The Ld. DR on the other hand contended that the disallowance of interest as per rule 8D(2)(ii) was mandatory once the AO was not satisfied with the correctness of the claim of the assessee in respect to expenditure incurred in relation to exempt income. Ld. DR contended that Rule 8D(2) was mandatory and had to be invoked to determine the quantum of expenditure relatable to earning of exempt income. Ld. DR placed reliance on the following decisions in support of her contention: i) Punjab Tractors Limited v/s CIT in I.T.A no. 458 of 2015 dated 03/02/2017 (P&H) ii) Avons Cycles limited v/s CIT in I.T.A no. 227 of....
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....ade by the assessee which was the reason for upholding the same. 10. We do not agree with the same. It is well settled, having been decided on a number of occasions by the Hon'ble Supreme Court and many other Courts of our country, that the object of the income tax proceeding is to determine the taxable income of the assessee and tax payable thereon fairly and as per law only. Article 265 of the Constitution of India also provides in express terms that no tax can be collected without the authority of law. Moreover, even the Central Board of Revenue now called as the Central Board of Direct Taxes had issued a circular in 1955, guiding Assessing Officer's that they should assess the taxable income and compute tax liability of the t....
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....estments had been made out of borrowed funds is also rejected since this relates to the facts of the case which cannot be presumed but have to be clearly brought out and with the assessee presenting a different set of facts during assessment proceedings, it is the duty of the tax authorities to look into and establish the facts of the case first and thereafter decide the issue as per law, rather than assuming the facts. 12. Having said so, we find that the assessee has contended that in view of sufficient own funds available with it, no disallowance on account of interest u/s 8D(2) (ii) was warranted since the presumption in the said fact situation is that the investment, earning exempt income, had been made out of the said own funds. Re....