TaxTMI 
TaxTMI 
2026 (9) TMI 2045
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....am, learned Senior Standing Counsel for the respondent state that the issues arising in these appeals are covered by an earlier decision of this Court. 2. The substantial questions that have been admitted on 16.08.2010 are as follows: '(i) Whether on the facts and in the circumstances of the case, the order of the Tribunal directing the assessing office to apply Section 14-A read with Rule 8-D is valid in law, especially when no expenditure was incurred or claimed towards earning of those exempt incomes? (ii) Whether the Tribunal was justified in law in directing to apply Section 14-A and Rule 8-D for working out the proportionate disallowance when the accounts are maintained in accordance with the Banking Regulation Ac....
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.... Ltd (200 ITR 488) and in deducting proportionate expenses and taking into account management expenses as well. As the proportionate expenditure was of a sum of Rs. 31,35,470/-, the deduction was computed using the following formula, and the relevant portion of the assessment order reads thus: '3706331 X 1770524044 2092875007 = Rs. 31,35,471 The balance of net income from dividend Rs. 5,70,860. 60% thereon works out to Rs. 3,42,516. This will be allowed as deduction u/s. 80M. Rs. 3,42,516 Rs. 63,18,82,774 or Rs. 63,18,82,770.' 6. In first appeal, the assessee assailed the aforesaid restriction, being of the view that no expenditure ought to have been deducted at all. The Commissioner of Incom....
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....r any portion of the managerial expenses could be attributed to dividends and accordingly could be deducted from the gross dividends in order to arrive at the net dividends. The court did not have any occasion to look into the other expenses. It was only in this context that the Hon'ble Court had ruled on the deductibility of managerial expenses alone. 12.4. In view of the foregoing, I would hold that the Assessing Officer was perfectly justified in considering disallowance of expenses with reference to the dividends claimed for deduction u/s. 80M. However, the moot question is how much of the expenses could be said to have been incurred by the appellant for earning the dividends. Only such expenditure as could be related to the di....
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....i)(SB), held that Rule 8D provided for a formula for computation of expenses retrospectively, and remitted the matter to the file of the Assessing Authority with a direction to follow the decision of the Special Bench and decide the matter in accordance with law. 8. Both the assessee and the revenue had filed Tax Case (Appeals) before this Court. The assessee's appeals were numbered as T.C.(A) Nos.509 to 511 of 2010 and by order dated 08.02.2022, the matter stood remanded to the Assessing Officer in light of the judgment of the Supreme Court in South Indian Bank Ltd. v. Commissioner of Income-tax [2021] 130 taxmann.com 178(SC). Unfortunately, the revenue appeals were not heard along with the assessee's appeals. 9. The Asse....
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....e computed on net basis only is settled by the judgment of the Supreme Court in the case of Distributors (Baroda) Pvt. Ltd vs Union Of India (155 ITR 120). This is also clear from the scheme of Chapter VIA of the Income Tax Act 1961. Section 80A provides for computation of relief under various provisions in Chapter VIA based on the computation of total income, wherein the assessee is to reduce such expenditure that has a direct nexus to the earning of the income on which deduction is granted. 12. However, in the present case, the financials of the assessee reveal sufficient surplus funds for making of investments leading to the earning of dividends. The question of restriction of the dividend would thus not arise seeing as the inve....