TaxTMI 
TaxTMI 
2019 (2) TMI 2152
X X X X Extracts X X X X
X X X X Extracts X X X X
....sallowing expenditure u/s 14A of the Act read with rule 8D of the Income-tax Rules, 1962 without establishing any nexus between the expenditure incurred and income earned which does nor form part of the total income and the Commissioner of Income-lax (Appeals) has erred in partly confirming the above action of AO by upholding the addition of Rs.12,00,000/- out of addition of Rs.1,02,75,673/-made by the AO. (b) Without prejudice to the appellant's contention on application of section 14A read with rule 8D of the Rules, the AO has erred in law and facts by including the amount of investments in Subsidiary Companies and Joint Ventures while calculating average investments as per the formulae of rule 8D and the Commissioner of Income-tax [Appeals] has erred in not giving effect to the above facts while confirming the addition of Rs.12,00,000/-out of addition of Rs.1,02,75,673/- made by the AO. 3. During the course of assessment proceedings, the Assessing Officer (AO) observed that though the assessee has claimed dividend as exempt income, it has not quantified any amount for disallowance u/s 14A of the Act. In response to a query raised by the AO vide order sheet entry ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of the parties as we have restricted the disallowance u/s 14A at Rs. 5,00,000/- on exempt income of Rs. 5,92,90,214/-. Thus keeping in view the disallowance in ITA No. 1050/Mum/2013 wherein the identical disallowance was restricted to Rs. 5,00,000/-. In the case under consideration, the assessee has earned dividend income of Rs. 2,69,12,543/-. Thus, following the principle of consistency as we have restricted the disallowance u/s 14A is restricted to Rs. 2,00,000/- (Rupees two lakhs). The AO is directed accordingly. Hence, ground of appeal raised by assessee is partly allowed." Also referring to the order of the Tribunal for the AY 2011-12 in assessee's own case, the Ld. counsel submits that a disallowance of Rs.5,00,000/- only has been upheld. 6. On the other hand, the Ld. DR submits that the AO has recorded that the assessee has not quantified any amount for disallowance u/s 14A. It is argued by him that after having examined the reply filed by the assessee in response to a query raised during the course of assessment proceedings to show cause as to why provisions of section 14A may not be applied, the AO relying on the decision in Godrej & Boyce Mfg. Co. Ltd. (supra) has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mains that such dividend income is non taxable. In this scenario, if expenditure is incurred on earning the dividend income, that much of the expenditure which is attributable to the dividend income has to be disallowed and cannot be treated as business expenditure. Keeping this objective behind Section14A of the Act in mind, the said provision has to be interpreted, particularly, the word 'in relation to the income' that does not form part of total income. Considered in this hue, the principle of apportionment of expenses comes into play as that is the principle which is engrained in Section 14A of the Act. This is so held in Walfort Share and Stock Brokers P Ltd., relevant passage whereof is already reproduced above, for the sake of continuity of discussion, we would like to quote the following few lines therefrom. "The next phrase is, "in relation to income which does not form part of total income under the Act". It means that if an income does not form part of total income, then the related expenditure is outside the ambit of the applicability of section 14A... The theory of apportionment of expenditure between taxable and non-taxable has, in principle, been no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see. We also direct the assessee to file the relevant documents/evidence before the AO. Thus the 1st ground of appeal is allowed for statistical purposes. 8. The 2nd ground of appeal 2. The AO has erred in law and facts in adding annual let out value of Rs.44,76,011/-under the head "Income from House Property" under the provisions of section 22 of the Act by estimating deemed rent at Ps.63,94,301/- on unsold property of the Project developed and constructed by the appellant held as stock in trade for sale and, the Commissioner of Income-tax (Appeals) has erred in confirming the above actions of the learned A.O. 9. The above ground relates to the addition of Rs.44,76,011/- by estimating deemed rent at Rs.63,94,301/- by the AO under the head "income from house property" as per provisions of section 22 of the Act. In the balance sheet under the head "inventories" the assessee has shown finished goods in the nature of apartments/flats of Rs.9,13,47,158/-. The AO following the decision in Ansal Housing Finance & Leasing Co. Ltd. (2013)354 ITR 180 (Del) computed the income from house property assessable in the hands of the assessee for the year in respect of such property ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ority, shall be taken to nil." Thus, in order to give relief to Real Estate Developers, section 23 has been amended w.e.f. AY 2018-19 (FY 2017-18). By this amendment, it is provided that if the assessee is holding any house property as his stock-in-trade which is not let out for the whole or part of the year, the annual value of such property will be considered as Nil for a period up to one year from the end of the financial year in which a completion certificate is obtained from the competent authority. In view of the above amendment to section 23, we are not adverting to the other case laws relied on by the Ld. counsel. In the instant case, the assessee is a builder and developer. The issue of taxability is with regard to unsold flats. The AY is 2011-12. In view of the insertion of sub-section (5) in section 23 by the Finance Act, 2017, w.e.f. 01.04.2018 narrated hereinbefore, we uphold the order of the Ld. CIT(A) and dismiss the second Ground of appeal filed by the revenue." In the instant case, the assessment year is 2012-13. Facts being identical, we follow the above order of the Co-ordinate Bench and allow the 2nd ground of appeal. 12. The 3rd....