TaxTMI 
TaxTMI 
2018 (4) TMI 2040
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....(3) / 251/ 154 of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') dated 21.1.2014. 2. The only issue to be decided in this appeal is as to whether the disallowance u/s 14A of the Act read with Rule 8D of the Rules could be made in the facts and circumstances of the case. 3. The brief facts of this issue are that the assessee is a limited company engaged in the trading and servicing of vacuum cleaners, water filter cum purifiers and other small household appliances. The return of income for the Asst Year 2009-10 was filed by the assessee company on 29.9.2009 declaring total income of Rs. 27,20,74,929/-. In the said return, the assessee had voluntarily disallowed a sum of Rs 65,43,851/- u/s 14A of the Act read with Rule ....
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.... ld AO on 12.12.2013, wherein it was contended that only the third limb of disallowance under Rule 8D(2) of the Rules would be applicable and accordingly arrived at the disallowance figure of Rs 16,92,842/-. In other words, the assessee sought to replace the earlier disallowance figure offered in the return of income in the sum of Rs 65,43,751/- with Rs 16,92,842/-. The ld AO observed that the assessee had agreed that there was some error in the computation of disallowance u/s 14A read with Rule 8D of the Rules. The ld AO however did not agree to the aforesaid contention raised by the assessee and proceeded to make further disallowance of Rs 65,61,467/- in the order passed u/s 143(3) / 251/154 of the Act as under :- Disallowance under Ru....
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....ment in shares of Rs. 3,91,97,450/- as compared to the previous AY 2008-09 that means there is fresh investment in shares made during the year to this extent, It is further observed that the appellant company debited Rs. 4.91 crore on account of interest expenses during the relevant year as compared to Rs. 1.8 crore in AY 2008-09. The appellant could not substantiate the facts that no borrowed fund was used for making fresh investment in shares during the year. It is also noted that the AO has not given any findings regarding the nexus of utilization of borrowed funds in acquiring the shares during the year under appeal. Instead, he has simply worked out the disallowable interest expenses out of debited interest on account of borrowed funds....
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....is ground of appeal is partly allowed. 5.2.2 I have carefully considered the submission put forth on behalf of the appellant along with supporting documents furnished, perused the facts of the case including the impugned order under appeal. After going through the submission of the appellant, I find force in the argument of the appellant that for determining the disallowable expenses u/s 14A of the I. T. Act r. w. Rule 8D(2) (ii) of the I. T. Rules while computing the average value of investment in shares. the investments made in foreign companies which yielded taxable dividend income requires to be excluded . However, in the instant case of the appellant, I find that the AO determined & disallowed under Rule 8D(2)(iii) of Rs.65,43....
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....efore prays that the disallowance made by the AO u/s. 14A r.w.s. 8D (ii) be deleted. Without Prejudice to Ground I & II: Ground III: 1. On the facts and circumstances of the case and in law, the CIT erred in confirming the action of the AO in not following the basis of disallowance u/s. 14A r.w.s. 8D(iii) as adopted in A.Y. 2008-09. 2. The Appellant prays that AO be directed to follow the basis of disallowance adopted in assessment year 2008-09. Ground No. IV 1. The AO erred in levying interest u/s 234D of the Act. 2. The appellant prays that the interest chargeable u/s 234D of the Act be deleted/appropriately reduce. Ground No. V The Appellant craves leave to,....