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TMI Blog2014 (6) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... .O u/s 14A of the Income-tax Act, 1956 (hereinafter also called `the Act). 3. Briefly stated the facts of this issue are that the assessee is engaged in the share broking. Certain investments were made in securities yielding exempt income and certain shares were also traded in by the assessee. Dividend of Rs. 13,96,839/- was earned by the assessee which was claimed as exempt. No disallowance u/s 14A was offered. On being called upon to explain the reason for not offering any disallowance, the assessee submitted that no expenditure was incurred for earning such exempt income. Rejecting the assessee's contention, the Assessing Officer invoked the provisions of sec. 14A and worked out disallowance of Rs. 7,25,956/- u/s 14A of the Act, compris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Shareholders' funds stand at Rs. 22.3 crore against Investment in shares amounting to Rs. 4.65 crore, which figure has been adopted by the Assessing Officer in para 3.2 of the order. Thus, it is evident that the amount invested in such securities is far in excess of the shareholders' funds. 7. The Hon'ble jurisdictional High Court in CIT VS. Tin Box Co. (2003) 260 ITR 637 (Del) has held that : `Where the capital and interestfree unsecured loan with the assessee far exceeded the interest-free amount advanced to the sister concern, disallowance of part of interest out of the total interest paid by the assessee to bank was not justified.' The Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. (2009) 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance amounting to Rs. 5,42,970/- under Rule 8D(2)(ii) because the Investment in securities is quite less than the shareholders' funds. 10. As regards the other component of disallowance of rule 8D, we find that the total expenses incurred by the assessee are much more than the disallowance and the incurring of expenses for earning exempt income is very much there. As such, the disallowance of Rs. 1,82,986/- as per the mandate of rule 8D(2)(iii) is held to have been rightly made and confirmed. The grounds taken by the assessee on this issue are therefore, partly allowed. 11. The only issue raised by the Revenue in its appeal through various grounds is against the deletion of disallowance of Rs. 1,19,05,785/- made by the A.O u/s 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .15 lacs was paid to Vikson Finance & Investment Pvt. Ltd. as sub-brokerage from 1.1.2008 to 31.1.2008. In the absence of any precise details furnished by the assessee of the sub-brokerage paid to Vikson Finance & Investment Pvt. Ltd. from 1.1.2008 to 22.1.2008, the Assessing Officer computed proportionate amount of sub-brokerage at Rs. 50.49 lacs. This resulted into total disallowance of Rs. 1.19 crore u/s 40(a)(ia) relating to subbrokerage paid from 1.12.2007 to 22.1.2008. The ld. CIT(A) deleted this disallowance by inter alia observing that there was no motive for the assessee company to indulge in manipulation of accounts as there was no credit for such sub-brokerage in the accounts for the year. He further emphasized on the point that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the subsequent year, if there is failure to deduct tax at source as per the relevant provisions. It is but natural that both the claim for deduction as well as disallowance go hand in hand in one year. Ergo, this view taken by the ld. CIT(A) cannot be accepted. 13. Apart from that, it can be seen from page 6 of the impugned order that the assessee raised an alternative ground before the ld. CIT(A) that it was not obliged to deduct tax at source u/s 194H of the Act. Such contention has not been adjudicated by the ld. CIT(A). The ld. AR submitted that this argument should be considered and decided in the present proceedings in favour of the assessee. We find that there is no reference to section 194H in the assessment order and further i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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