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TMI Blog2013 (7) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 The appeal raises in effect three issues per its three grounds, which we shall take up in seriatim. The first is the disallowance of expenditure u/s.14A in the sum of Rs.29,41,000/-; the assessee being in receipt of dividend at Rs.206.36 lakhs, which was claimed exempt u/s.10(34) of the Act. The disallowance has been worked out in terms of Rule 8D (of the Income Tax Rules, 1962 - 'Rules' hereinafter), following the decision by the Special Bench of the Tribunal in the case of ITO v. Daga Capital Management Pvt. Ltd. (2009) 117 ITD 169 (Mum)(SB). The assessee claimed to have incurred no expenditure in relation to the dividend income; the relevant investments having been made in the past, the source of which was ascribed to its capital and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy loans for import of equipment, placing on record the relevant loan proposals (PB pgs.2- 8). No part thereof, therefore, could be ascribed to the financing of the investment on which tax-free income has been earned. This, in fact, has been the assessee's consistent stand throughout, also finding mention in the specific grounds raised before us. The facts being undisputed, we are in agreement with it that no disallowance in respect of interest expense thereon, which stands apportioned to the dividend income at Rs. 2.84 lacs, could be made u/s.14A. Reference in the context is made to the case of Hercules Hoists Limited (in ITA Nos. 7944, 7946, 2255 & 7943/Mum/2011 dated 13/2/2013 - an order to which both of us are a party), wherein it has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t rather than showing existence of sufficient capital, the matter would be required to be examined from the stand-point of utilization of the borrowed interest bearing funds. That is, the asssessee would have to exhibit that no interest cost has, as a matter of fact, been incurred in respect of the said investment, if the prescription of the rule is not to apply. The matter thus hinges on the ability of the assesse to establish its claim/s in this regard with reference to its accounts. We say so as the AO has, prior to the application of s. 14A(1), meet the bar or stipulation of s. 14A(2), even as explained by the hon'ble court in Godrej & Boyce Mfg. Co. Ltd. (supra). Businesses normally have dedicated funds, as for financing projects or as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o holding or disposal; and liquidation, including its timing, either for reinvestment or for deployment in the principal business, are important business decisions, requiring consideration of several company specific and economic variables, often involving inputs to and, in any case, guidance by the top management. As such, to contend that no indirect expenditure stands incurred only as there has been no fresh investments during the year, would need being proved with reference to the actual management of the investment portfolio, as well as the assessee's accounts. The A.O., on such a claim being made, is, in terms of section 14A(2) r.w.s 14A(3) obliged to record a satisfaction or otherwise with the assessee's claim and, if not in agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d claim, a chart stands filed, to which reference was made by the ld. AR during hearing (PB pg. 9). We observe that a similar ground was also raised before the first appellate authority, who, however, has dismissed the same, holding the charge of interest u/s.234C to be mandatory and consequential in nature. The charge is no doubt mandatory, but there is nothing consequential about it inasmuch as the same is to be worked out with reference to the tax on the returned income, so that it is inflexible, and would not vary with time, i.e., on assessment being made at a different income or being modified in the appellate proceedings. There being no finding in relation to the said levy in the orders of the authorities below, we only consider it fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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