9911796707
TMI Blog2014 (12) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... dication – Decided in favour of revenue. - I.T.A No. 1050/Kol/2012 - - - Dated:- 9-12-2014 - Shri Mahavir Singh, JM Shri Shamim Yahya, AM,JJ. For the Appellant: Shri Rama Prasad Nag, JCIT For the Respondent: Shri Dilip Kumar Patni, CA ORDER Per Shri Mahavir Singh, JM : This appeal by Revenue is arising out of order of CIT(A)-VIII, Kolkata in Appeal No. 121/CIT(A)-VIII/Kol/10-11 dated 03.05.2012. Assessment was framed by ITO, Ward-9(2), Kolkata u/s. 144(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year 2008-09 vide his order dated 27-12-2010. 2. The only issue in this appeal of Revenue is against the order of CIT(A) restricting the disallowance at ₹ 46,33,084/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is a non-banking finance company registered with Reserve Bank of India as NBFC. The assessee is engaged in the business on loan financing and investing fund in shares on security out of own fund and also borrowed funds. During the year under consideration the assessee earned interest income of ₹ 2,03,79,379/- from granting to loan to different parties and also paid interest to the extent of ₹ 1,97,50,600/- to different lenders. The assessee admitted in its statement of facts that borrowed funds have been utilized for granting of loans and also making investment in shares and securities. The assessee has earned dividend to the extent of ₹ 50,71,126/-. The assessee made disallowance of proportionate expenses to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance in terms of Rule 8D(2) of the IT Rules and submitted the computation as under:- Again, the assessee comp8uted the expenditure to be disallowed in terms of Rule 8D as under:- 1) Direct expenditure interest (as per sheet attached) 64,04,548.00 2) Interest expenditure Nil 3) % of average value of investment income from which is tax free = 0.5% {(37,18,54,571.90 + 6,80,53,900)/2} = 10,99,771/- As the indirect expenditure of the company is only 4,92,253 so this amount is restricted to actual indirect expense 4,92,253.00 Total expenditure to be disallowed 68,96,801.00 In term of the above, assessee itself has recalculated the disallowance at ₹ 68,96,801/- but the AO not satisfied by the computation of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04,548/- has been incurred by the appellant in respect of investment made in tax free securities. However, the AO by applying the provision of Rule 8D (2)(ii) of Income Tax Rules, 1962 has held that a sum of ₹ 1,00,37,632/- is disallowable as interest. iii) The AO has not pointed out any discrepancy in the amount of ₹ 68,69,801/- worked out as disallowable out of interest by the appellant but has applied the provision of Rule 8D of Income Tax Rule, 1962. iv) That the sub-section (2) of section1n 14A provides as under:- (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-) offered for disallowance under section 14A of the Act, by the appellant, hence the AO was not justified in applying the formula provided in Rule 8D(2)(ii) of the Income Tax Rules, 1962 in the case of appellant and working out the amount of ₹ 1,10,37,632/- as disallowable under section 14A. Accordingly the AO is directed to restrict the disallowance of interest to ₹ 64,04,548/- thus the appellant gets relief of ₹ 46,33,084/- on account of interest disallowed under section 14A. viii) The AO has disallowed a sum of ₹ 10,99,771/- by applying Rule 8D(2)(iii) of the Income Tax Rules, 1962 whereas as mentioned in the assessment order the appellant total indirect expense is ₹ 4,92,253/- only. I am of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cannot exceed the total amount of expenditure incurred by the company. Therefore, total disallowance u/s 14A computed in accordance with Rule 8D of the Income Tax Rule 1962 should be ₹ 74,06,707/- (Rs.69,14,454/- towards interest and ₹ 4,92,253/- towards indirect expenses) instead of ₹ 1,11,37,403/-. Ld. DR stated that neither the assessee nor AO is clear how much is to be disallowed for the reason that the details are not properly analyzed. In view of the above ground, Ld. DR further stated that assessee itself admitted the disallowance vide above ground should be made at ₹ 74,06,707/-. Ld. DR in term of the above which stated that let this issue be examined by AO afresh after perusing the evidences. On this w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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