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TMI Blog2014 (2) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... and as such these rules are illegal and invalid. (iii) That there being no dispute or finding that there is a case of any expenses other than claim of interest to the extent of Rs.14,82,540/- relating to issue of dividend income, and as such the CIT (A) was not justified in restoring the matter back to the Assessing Officer to consider any such disallowance in terms of sec.14A or rule 8D. 2 (i) That on the facts and circumstances of the case, the lower authorities are not justified in not accepting claim of depreciation to the extent of Rs.44,80,000/- in respect of property being used for the purpose of business. (ii) That finding of the CIT (A) that the property was not in possession and use of assessee is incorrect and without proper appreciation of facts." 4. In ITA No.5791/Del/2010, the department has raised the following grounds:- "1. The order of the learned CIT (Appeals) is erroneous & contrary to facts & law. 2. On the facts and in the circumstances of the case and in law, the learned CIT (Appeals), New Delhi has erred in directing the A.O. to treat income of Rs.4,04,382/- as capital loss as against business loss treated by the A.O. 2.1 The Ld. CIT (A) ignored the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. There is also no dispute with respect to the disallowance of Rs.1482540, as the ld. Counsel himself admits that the same was directly and exclusively relatable to the investment activities of the appellant company. Now the issue to be decided is as to whether any disallowance is called for in relation to the borrowed funds which have been utilized by the appellant company for its regular business activities and the investment activities. The A.O. has made a detailed and elaborate discussion about the source of funds and utilization thereof and thereafter only has come to the conclusion that the borrowed funds have been mixed up and utilized for common purposes. Thus, the issue is as to how to determine and element of interest and indirect expenses which may be relating to the investment activities and earning of exempt income. According to the A.O., rule 8D provides one of the methods for determining the element relating to the investment yielding exempt income, particularly, in situations where the funds are mixed up and pooled together. In my view, this option has to be kept in view even if the provisions of rule 8D are to take effect from a future date. Further, I find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not pointed out any defect in such working of the assessee. In view of these facts and in the light of judgement in the case of Godjrej Boyce Manu. Co. Ltd. and Hero Cycles Ltd. (supra) we see no justification to further increase the amount of disallowance u/s 14A without pointing out any valid basis for such further disallowance. In view thereof the grounds raised by the assessee's appeal is allowed." 8. Thus, the Tribunal has held Rule 8D of the IT Rules to be prospective in nature. 9. The ld. Counsel for the assessee has further pointed out that for Assessment Year 2007-08, a total disallowance of Rs. 1,47,34,064/- was made u/s 14A by the Assessing Officer vide assessment order dated 30.12.2009 (APB 61-62). It has been stated that vide order dated 10.01.2011 (APB 63- 65), the Ld. CIT (A) sustained the disallowance to the extent of Rs. 53,00,505/-. The ld. Counsel has pointed out that vide order dated 29.02.2012 (APB 66- 71), the Tribunal, for Assessment Year 2007-08, has dismissed the appeal filed by the department, observing as follows:- "5. We have duly considered the rival contentions and gone through the record carefully. The assessee has claimed dividend of Rs.5683951/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own case, Ground No.1 raised by the assessee is accepted. 13. In Ground No.2 of its appeal, the assessee contends that the assessee's claim of depreciation of Rs. 44,80,000/- in respect of property being used for business purposes, was wrongly rejected by the Assessing Officer and the CIT (A) wrongly upheld the same, erroneously holding that the property was not in the possession and use of the assessee. 14. The assessee claimed the depreciation qua the property situated at 62, Friends Colony, New Delhi. As per the record, the assessee had purchased the said building for a total consideration of Rs. 17.90 crores, vide a written Agreement to Sell, dated 01.01.2006. The Assessing Officer found that the property had not been registered in the name of the assessee company till the end of the year under consideration and that apart from the Agreement to Sell and an affidavit filed by the vendor, there was no evidence of the assessee company having taken actual possession of the building during the year under consideration. The Assessing Officer also held that there was no evidence of the use of the building for any business purpose of the assessee company during the year under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer, ignoring the fact that the main business of the assessee was trading in shares and securities. The Assessing Officer observed that during Assessment Year 2005-06, the assessee company has changed its method of accounting, adversely affecting its profitability. The Assessing Officer observed that the assessee company had a consistent policy of trading the stock of shares as trading assets. The same had been regularly shown as stock-in-trade. However, during Assessment Year 2005-06, the stock-in-trade have been shown as investment. The Assessing Officer rejected the change, observing it to be prejudicial to the interests of the revenue. The assessment for Assessment Year 2005-06 was completed accordingly. For the year under consideration also, the Assessing Officer treated the inventory of shares as stock-in-trade. The loss of Rs. 4,04,382/-, arising on sale of shares was treated as business loss as against capital loss shown by the assessee. 21. The CIT (A), following the CIT (A)'s order for Assessment Year 2005-06, directed the Assessing Officer to treat the loss as capital loss and not business loss. 22. The Ld. DR has contended that despite the fact that the main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation did not find favour with the Assessing Officer and addition of Rs. 4,91,02,321/- was made observing that the assessee had failed to substantiate the receipt of money from the Hotline CPT Ltd. beyond reasonable doubt; that the statement of Hotline CPT Ltd. that they did not have any direct transaction with the assessee company during the year, was significant and raised doubts about the genuineness of the receipt from them; that the narration in the bank book furnished by the assessee mentioned receipt of money only from Hotline CPT Ltd. and not from any related party, either Shivalik Bimetal Controls Ltd. or Intel Electron Devices Ltd.; and that therefore, the deposits received by the assessee from Hotline CPT Ltd. were being unexplained and added back to the income of the assessee, as 'income from other sources.' 29. By virtue of the impugned order, the Ld. CIT (A) accepted the additional evidence filed by the assessee, holding that such filing of additional evidence was justified, since the Assessing Officer had allowed time of only three days to submit the necessary explanation, which was not adequate and sufficient opportunity. The addition made was deleted on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal Electron Ltd only. In support of the aforesaid, the appellant company has filed certificate issued by HDFC Bank Ltd stating that a sum of Rs 49102322 was credited to the a/c of the appellant company on account of receipt of cheque nos. 191846, 47,48,66,67,68, 70, 71, 72 and 166736, 164578, 164875 and 164876. It is further clarified that all the cheques have been paid by M/s Hotline CPT Ltd. However, as the AO still had certain reservations about the fact that the money in question was actually received from M/s Hotline CPT Ltd, a hearing was fixed on 30-8-2010 so as to discuss this issue with him in the presence of Sh. RS Singhvi, ld. Counsel for the appellant company. After hearing both sides, it was decided that the issue could be sort out if Hotline CPT Ltd furnishes a clear certificate stating that the cheques in question were issued to the appellant company in satisfaction of outstanding dues in the accounts of M/s Shivalik Bimetals Control Ltd and International Electron Ltd. It was also directed that if felt necessary, the AO would issue summons U/S 131 of the IT Act so as to facilitate calling for of information from M/s Hotline CPT Ltd. 8.9 As per the reply submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. was discounting the bills of the above mentioned companies only and as such the company does not have any direct account of them. However, the accounts of M/s International electron Devices & M/s Shivalik Bimetal Controls Ltd are enclosed for your reference." 8.10 In view of the above, there remains no doubt that the money in question was received by the appellant company from M/s Hotline CPT Ltd and there was no justification for treating the same as unexplained cash credit u/s 68 of the IT Act, 1961. What appears to me is that the whole confusion has been created because of the manner in which the letter/reply was submitted by M/s Hotline CPT Ltd in compliance to notice u/s 133(6) of the IT Act, 1961. Now that the position has been clarified by M/s Hotline CPT Ltd in terms of its letter dated 06-9-2010, there remains no reason for sustaining the addition in question. Accordingly, the addition of Rs 49102322 is being deleted." 34. From a perusal of the impugned order, it is clear that Hotline CPT Ltd. made certain purchases from Shivalik Bimetal Controls Ltd. and Intel Electron Devices Ltd. The bills issued by these two companies were discounted by the assessee company. Payme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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