TaxTMI 
TaxTMI 
2026 (3) TMI 1690
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.... by Id. AO of Rs. 4,65,28,171/- u/s. 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 ('the Rules"). 1.2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) while affirming the action of the Id. AO erred in holding that: a) The AO had duly recorded his dissatisfaction with respect to the suo motu disallowance under Section 14A r.w.r 8D as computed by the Appellant; b) The Appellant had failed to establish that it possessed sufficient interest-free own funds to make the relevant investments; c) All equity instruments are capable of yielding exempt dividend income and longterm capital gains; d) For the purposes of computation of disallowance under Section 14A of the Act, the fair market value of the investment was required to be considered, as opposed to the cost of investment adopted by the Appellant. 1.3. The Appellant therefore prays that the disallowance of Rs. 4,65,28,171/- u/s. 14A r.w.r. 8D be deleted. 2. GROUND NO. 2: ADDITION OF Rs. 1,35,52,012/- MADE UNDER SECTION 43CA OF THE ACT: 2.1. On the facts and in the circumstances of the case and in law, the Id. CIT(A....
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....e assessee is in appeal before us, challenging the order of the Ld. CIT(A) on the abovementioned grounds. 6. The ground No.1 pertains to disallowance of Rs. 4,65,28,171/- u/s. 14A r.w.r 8D of the Act. The facts pertaining to the said ground are that the assessee company had shown non current investment of Rs. 950,24,32,695/- in its balance sheet as on 31.03.2018 and had disallowed a sum of Rs. 28,73,956/- towards expenditure incurred in relation to earning of the exempt income for the year under consideration. It is observed that the assessee has earned Rs. 1,72,34,100/- as dividend income and Rs. 98,83,00,996/- as long term capital gain where the total exempt income aggregated to Rs. 100,55,35,096/- as per schedule EI of return of income. After considering the assessee's working of the suo-moto disallowance the Ld. AO duly recorded his dissatisfaction and invoked the provisions of section 14A r.w.r 8D of the Act and made a further disallowance of Rs. 4,94,02,127/- being 1% of the average value of investments yielding exempt income which amounted to Rs. 494,02,12,730/-. The Ld. AO determined the total disallowance after reducing the suomoto disallowance made by the assessee and ....
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....a company following "AS" or "IND-AS" and therefore for computing 1% of the annual average of the investment made in equity shares the same has to be determined as per the actual cost of investment and not the fair market value as per the books. The Ld. A.R.s contention is that there can not be different rules for companies following "AS" or "IND-AS" for disallowing the expenses on the basis of fair market value of investment or whether the same has to be on the basis of the cost of investment for those following "AS". The Ld. A.R. further contended that the provisions of section 14A r.w.r 8D of the Act were introduced in the Act prior to the introduction of "IND-AS" which was notified in 2015 and since "IND-AS" was not in existence at that time the companies were preparing their financial statements in accordance with the "AS" and therefore the investments were recorded at the cost and not at fair market value. To support his contention the Ld. A.R. further stated that since the concept of fair market value never existed at the time of introduction of rule 8D there cannot be any applicability of determining the fair market value of investment which was followed absurdly by the Ld. ....
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....een held that the same applies prospectively only to assessment years 2022-23 onwards and not for the impugned year. We also draw support from the decision of the Special Bench of the Tribunal in the case of Vireet Investments (P.) Ltd. (supra) where it is now a settled proposition of law that only investments which have yielded exempt income are to be considered for computing average investments for making disallowance u/s. 14A r.w.r 8D of the Act. We, therefore, direct the Ld. AO to restrict the disallowance only to the extent of those investments which have yielded exempt income during the year under consideration. 10. The second issue raised by the assessee is that for the purpose of determining the annual average of the monthly average of the opening and closing balances of the value of investment, income from which does not or shall not form part of total income, whether the value of investment would be at fair market value of its investment in equity shares as per "IND-AS" accounting standards or the cost of investment method adopted by the assessee. For this, the Revenue contends that it has to be the fair market value as per "INDAS" accounting standard which was introdu....
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.... to this addition are that the assessee company had entered into the sale transaction with regard to immovable properties for a consideration of Rs. 5,01,01,516/- and another property for a consideration of Rs. 4,84,61,972/- for which the State Government Authority determined jantri value at Rs. 5,56,87,000/- and Rs. 5,64,28,500/- respectively. The details of the said transactions are tabulated herein under for reference: Sr. No. Transaction Date Transaction ID Transaction Amount Stamp duty value Difference u/s. 50C Property -1 29.09.2017 6781/2017 5,01,01,516 5,56,87,000 55,85,484 Property -2 Total 19.01.2018 502/2018 4,84,61,972 5,64,28,500 79,66,528 9,85,63,488 11,21,15,500 1,35,52,012 13. During the assessment proceedings the assessee was sought for explanation as to why the assessee had not adopted the full value of sale consideration received nor the jantri value of the property assessed by the State Government for determining the Long Term Capital Gain ("LTCG" for short) which according to the Revenue resulted in understated taxable income by way of LTCG. It is further observed that since t....
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....ty to Mr. Amit P. Jain the advance amount of Rs. 25,00,000/- was reduced and only the remaining was paid to the assessee which establishes the fact that the final allotment was done on 15.12.2016 which ideally has to be the date for determining the SDV u/s 43CA of the Act. The Ld. A.R. argued that with regard to the second property the booking confirmation letter was issued on 27.06.2013 when the sale consideration was also fixed and further the flat was allotted vide allotment letter dated 01.07.2013. It was further submitted that the advance amount of Rs. 25,00,000/- for booking the flat was received from Mr. Shitanshu B. Vora on 02.02.2012 itself and that the allotment was subsequently done on 01.07.2013 which was to be considered as the date for determining the SDV. The Ld. A.R. reiterated that the lower authorities erred in considering the date of sale registration to be the date for determining the SDV rather than considering the allotment letter as per the provisions of law where the essential ingredient of fixing of sale consideration and receiving part consideration by way of cheque was satisfied in the present case. The Ld. A.R. relied on a catena of decisions in support ....