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TMI Blog2013 (8) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... r : Shri Madhukar Kumar Bhag Sr. DR For the Respondent : Shri Rajesh Dureja Adv. ORDER Per R. P. Tolani, J.M:- 1. This is Revenue's appeal and assessee's cross-objections against CIT(A)'s order dated 1-3-2011 relating to A.Y. 2008-09. The issue in both the appeals concerns section 14A read with Rule 8D. Respective effective grounds are as under: Revenue's appeal (ITA no. 2695/Del/11): "2. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) has erred in deleting the restricting the addition u/s 14A of the I.T. Act to Rs. 74,57,347/- as against Rs. 1,48,07,132/- made by AO. 2.1. The Ld. CIT(A) ignored the finding recorded by the AO and the fact that the addition was correctly made by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of investment in shares and other activities. It is claimed that assessee deals only in trading of shares and no other activity. (ii) It has been assumed by assessing officer that assessee company must have incurred certain expenses for earning the tax free dividend income. However, not a single expenditure has been linked as incurred for earning of dividend income. Section 14A cannot be applied unless there is co relation between the expenditure and dividend income. (iii) Unless the assessee's activities are properly verified and examined as to the nature of expenditure and the nature of activities, rule 8D cannot be applied automatically. Reliance is placed on following judgments: (i) CIT vs Hero Cycles 323 ITR 158 (P H) - the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 (Kar.) cannot be considered as the assessee could not demonstrate as to which assessment year the judgment pertains. 3.2. Reliance is placed on ITAT Mumbai Bench order dated 29-8-2012 in the case of Esquire Pvt. Ltd. Vs. DCIT (Mum. ) (ITA no. 5688/Mum/2011) for A.Y. 2008-09, holding as under: 16. Further out of the total amount of "interest claimed which were shown interest at ~2,91,38,496/-, there seems to be no examination of interest claims and to whom it is paid. It is pertinent to note that the interest on borrowed funds used for trading activity is an allowable expenditure under section 36(1)(iii) and the same cannot be treated as expenditure for earning the dividend income. Further there is nothing on record to indicate whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to keep in mind the above working and determine the disallowances under section 14A accordingly. In case any amount is disallowed under section 14A, we make it clear that the amount also has to be disallowed under the provisions of section 11SJB. With these directions, the issue in Ground Nos. 3 4 is restored to the file of AO for fresh adjudication. Accordingly grounds considered allowed for statistical purposes." 3.3. Further reliance is placed on Kolkata Bench of the ITAT in the case of DCIT Vs. Gulshan Investment Co. Ltd. (2013) 142 ITR 89 (Kol.), wherein the ITAT after considering the facts and circumstances of the case upheld the similar view by following observations: "9. So far as the case before us is concerned, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect expenses is unfair or unreasonable. 10. In view of the above discussions, while uphold the conclusions arrived at by the learned CIT(A), we also make it clear that in our humble understanding, the provisions of Section 14A are indeed attracted whether or not the shares are held as stock in trade or as investments, even though the provisions of rule 8D(2)(ii) and (iii) cannot be invoked in such a case and even though the provisions of rule 8D(i) are much narrower in scope than the scope of Section 14A simplicitor, with these observations, we confirm the conclusions of the learned CIT(A) and decline to interfere in the matter." 3.4. Ld. Counsel for the assessee concedes that the ITAT judgment in the case of American Express Bank is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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