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TMI Blog2012 (7) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CIT(A) and restore the matter to his file for deciding the issue afresh. Disallowance of donation - Held that:- Though the assessee claimed that donation was deductible u/s 37(1), but not an evidence was placed before the lower authorities as how the expenditure is related to the business of the assessee nor the activities of the SREI Foundation were narrated. Since the assessee failed to establish the nexus of the aforesaid amount with the business of the assessee, apparently the claim is not admissible Denial of the claim of allowability of leave encashment - Held that:- Disallowance of an amount n terms of directions dated 8th May, 2009 of the Supreme Court in the case of Exide Industries Ltd. [2007 (6) TMI 175 (HC)]with a rider that the assessee is free to move a rectification petition on the final out come in the case of Exide Industries Ltd., we do not find any infirmity in the approach of the ld. CIT(A) Dis allowing TDS credit - Held that:- there is no recourse available to the deductee to get credit regarding TDS for any mismatch in the departmental computer system. As per section 199(2) of the I.T. Act credit for tax deducted is automatic and there is no pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant) for the assessment year under reference and accordingly necessary directions may please be given. 6. That the appellant craves leave to add, to amend, modify, rescind, supplement or alter any of the grounds stated hereinabove, either before or at the time of hearing of this appeal. 2. Adverting first to ground nos.1(a) 1(b) in the appeal, facts, in brief, as per relevant orders are that the return declaring nil income filed on 30.09.2008 by the assessee, carrying on the business of infrastructure/construction equipment rental services, after being processed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act ), was selected for scrutiny with the service of a notice u/s 143(2) of the Act issued on 19th August, 2009. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee made investment of Rs.114,72,12,000/- in shares and securities and earned dividend income of Rs.5,63,000/-. To a query by the AO, seeking details of expenditure incurred in relation to dividend income for the purpose of disallowance in terms of provisions of sec. 14A of the Act, the assessee replied that all the investments made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held as under: "The following principles would emerge from section 14A and the decision in CIT v. Walfort Share and Stock Brokers P. Ltd. [2010] 326 ITR 1 (SC): (a) the mandate of section 14A is to prevent claims for deduction of expenditure in relation to income which does not form part of the total income of the assessee; (b) section 14A(1) is enacted to ensure that only expenses incurred in respect of earning taxable income are allowed; (c) the principle of apportionment of expenses is widened by section 14A to include even the apportionment of expenditure between taxable and non-taxable income of an indivisible business; (d) the basic principle of taxation is to tax net income, This principle applies even for the purposes of section 14A and expenses towards non-taxable income must be excluded; (e) once a proximate cause for disallowance is established-which is the relationship of the expenditure with income which does not form part of the total income-a disallowance has to be effected. All expenditure incurred in relation to income which does not form part of the total income under the provisions of the Act has to be disallowed under section 14A. Income which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act read with Rule 8D of the IT Rules,1962. The ld. DR added that in terms of provisions of section 14A of the Act, disallowance has to be worked out in terms of Rule 8D of the I.T. Rules, 1962. 6. We have heard both the parties and gone through the facts of the case as also the decisions relied upon by the ld. AR on behalf of the assessee. We find that the assessee submitted before the AO that all the investments made by it were through internal funds of the assessee and it did not incur any expenditure having direct or indirect nexus with dividend income. Apparently, the assessee did not furnish any such details of incurring expenditure while making huge investments of Rs.114,72,12,000/- in shares and securities. In the absence of any details of expenditure incurred for management and supervision of aforesaid investments, following the view taken in Godrej Boyce Mfg. Co. Ltd. (supra), the AO invoked rule 8D of the IT Rules,1962 and disallowed an amount of Rs.58,34,750/-, without specifying the nature of such expenditure incurred for earning income from dividend. The ld.CIT(A) also followed the aforesaid decision in Godrej Boyce Mfg. Co. Ltd. (supra) and upheld the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) [as it now stands] as also in its initial avatar as section 14A. It is only the prescription with regard to the method of determining such expenditure which is new and which will operate prospectively. In other words, section 14A, even prior to the introduction of sub-sections (2) (3) would require the assessing officer to first reject the claim of the assessee with regard to the extent of such expenditure and such rejection must be for disclosed cogent reasons. It is then that the question of determination of such expenditure by the assessing officer would arise. The requirement of adopting a specific method of determining such expenditure has been introduced by virtue of sub-section (2) of section 14A. Prior to that, the assessing officer was free to adopt any reasonable and acceptable method. 42. Thus, the fact that we have held that sub-sections (2) (3) of section 14A and Rule 8D would operate prospectively (and, not retrospectively) does not mean that the assessing officer is not to satisfy himself with the correctness of the claim of the assessee with regard to such expenditure. If he is satisfied that the assessee has correctly reflected the amount of such expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal High Court, even where the assessee claims that no expenditure has been incurred in relation to income which does not form part of total income, the AO is required to verify the correctness of such claim. In case, the AO is not, on the basis of objective criteria and after giving the assessee a reasonable opportunity, satisfied with the correctness of the claim of the assessee, he shall have to reject the claim and state the reasons for doing so. Having done so, the AO has to determine the amount of expenditure incurred in relation to income which does not form part of the total income under the said Act, Hon ble High Court concluded. Following the view taken in this decision, Hon ble jurisdictional High Court in CIT vs. Machino Plastic Ltd in their decision dated 28.2.2012 in ITA no. 92 of 2011, restored the matter to the file of the AO, being handicapped because of failure of the assessee to furnish relevant details and particulars .In the instant case also, the AO was handicapped, because of failure of the assessee to furnish relevant details and particulars while making the disallowance There is nothing in the assessment order or impugned order as to whether the assessee e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these donation paid to its sister/parent concern is an allowable deduction. Section 37(1) of the Act clearly states that 'any expenditure laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head profits and gains of business or profession'. The onus is upon the appellant to prove that these expenses are laid out wholly and exclusively for the purpose of business. The case laws and the arguments of the AR are only on the issue whether donations are allowable as deduction or not. However, here in the case of the appellant, the issue to be considered is the actual purpose of the donation to its own sister/parent concern and whether the donation had helped the business of the appellant in some way. Since the onus is not discharged by the appellant nor any explanation furnished by the appellant, this expense towards donation to its sister/parent concern cannot be held as 'expended wholly and exclusively for the purpose of business and therefore no interference is called for in the disallowance made by the AO and this ground of appeal also stands rejected. 9. The assessee is now in appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t an amount of Rs.16,09,215/- on account of provision for leave encashment was actually paid, the AO showcaused the assessee as to why the amount be not disallowed in terms of provisions of sec. 43B(f) of the Act. To a query by the AO, the assessee relied upon the decision of Hon ble Calcutta High Court in Exide Industries Ltd. vs. Union of India, 292 ITR 470(Cal.). However, the AO rejected the contentions of the assessee, holding as under:- 13, Assessee s reply is duly considered and found unacceptable. In the appeal file against the order of the Calcutta High Court in the case of Exide Industries Ltd. (supra) the Hon ble Supreme Court vide order dated 08.05.2009 while granting stay in the matter has ordered as under:- Pending hearing and final disposal of the Civil Appeal, Department is restrained from recovery penalty and interest which has accrued till date. It is made clear that as far as the outstanding interest demand as of date is concerned, it would be open to the Department to recover that amount in case Civil Appeal of the Department is allowed. We further make it clear that the assessee would, during the pendency of this appeal, pay tax as if section 43B(f) is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2213 5875/Del./2011contended that claim is admissible, decision of co-ordinate Bench being binding. 15. On the other hand, the ld. DR while inviting our attention to the findings of the AO, quoting the observations of the Hon ble Supreme Court in their directions dated 8th May, 2009 while granting stay of demand until disposal of civil appeal, contended that the lower authorities rightly disallowed the amount. 16. We have heard both the parties and gone through the facts of the case. As is apparent from the facts of the case, the AO disallowed an amount of Rs.16,09,215/- in terms of directions dated 8th May, 2009 of the Supreme Court in the case of Exide Industries Ltd. (supra) while granting stay of demand until disposal of civil appeal.On appeal, the ld. CIT(A) upheld the findings of the AO, following the said directions of the Hon ble Supreme Court while observing that the assessee is free to move a rectification petition, if the final decision in the Hon ble Supreme Court is in favour of M/s Exide Industries Ltd.(supra).Before us, the ld. AR on behalf of the assessee relied upon the decisions in Universal Cables Ltd. (supra) and Indraprastha Gas Ltd.(supra). However, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, this ground of the appeal is also stands rejected. 18. The assessee is now in appeal before us against the aforesaid findings of the ld. learned CIT(A).The ld. AR on behalf of the assessee did not make any submissions before us on this ground. 19. We find that the ld. CIT(A) while rejecting the ground of appeal directed the assessee to approach the concerned administrative authorities for redressal of grievance. The approach of the learned CIT(A) is in accordance with law and there is no basis to interfere. However, the AO shall expedite necessary steps to allow credit for TDS in accordance with provisions of sec. 199 of the Act and the assessee shall place relevant material in their possession before the AO. Subject to these observations, ground no.4 in the appeal is disposed of. 20. Ground no.5 in the appeal being general in nature nor any submissions having been made before us on this ground , does not require any separate adjudication while no additional ground having been raised before us in terms of residuary ground no.6 in the appeal , accordingly, both these grounds are dismissed. 21. No other plea or argument was made before us. 22. In the result, appeal is p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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