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TMI Blog2015 (8) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... nses including administrative expenses for earning tax free income. At the same time ld. CIT(A) has also presumed the spending of time and energy by the officials of the Assessee for running of the firms from which Assessee has earned tax free income. In view of the contrary submissions of both the parties before us and in the absence of any material on record, we are of the view that this aspect needs a factual verification and finding. We therefore remit the issue to the file of A.O to give a finding on the aforesaid and decide the issue afresh. - Decided partly in favour of assessee for statistical purposes. - I.T. A. No. 2756 /AHD/2011 - - - Dated:- 28-5-2015 - Shri Shailendra Kr. Yadav Shri Anil Chaturvedi, JJ. For the Petitioner : Shri Vijay Ranjan, A.R. For the Respondent : Shri Roopchand, Sr. D.R. ORDER PER SHRI ANIL CHATURVEDI,A.M. 1. This appeal filed by the Assessee is against the order of CIT(A)-I, Baroda dated 01.07.2011 for A.Y. 2007-08. 2. The relevant facts as culled out from the material on record are as under. 3. Assessee is a company stated to be engaged in the business of building contractor and developer of residential and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of borrowed funds and it has not incurred any expenditure for earning partnership income. The submission of the Assessee was not found acceptable to the A.O. He thereafter following the formula prescribed under Rule 8D of the I.T. Rules, worked out the disallowance u/s. 14A at ₹ 10,98,931/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who granted partial relief to the Assessee by holding as under:- 3.3 Decision: I have carefully perused the assessment order and the submissions given by the appellant. The A. O. has made the disallowance u/s. 14A by applying the Rule 8D. There are two components of disallowance. The disallowance out of interest and disallowance for administrative expenses. Regarding the disallowance out of interest, the appellant has submitted that it had sufficient interest free funds and the A. O. has not established any nexus between the funds invested for earning the interest free income and the interest bearing funds borrowed by the appellant. The submission of the appellant is not acceptable. The appellant has borrowed interest bearing funds on which an interest of ₹ 13,98,382/- has been paid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant has submitted that the A. O. has made an error in taking the value of average total assets at Rs.l7,53,77,832/-. The mistake has occurred as the A. O. has taken the values of net current assets. The A. O. should have taken the value of total assets in place of net assets. The A. O. has reduced the current liabilities from the total assets in the balance sheet. The submission of the appellant is correct. The formula provides for average total assets which means the total assets at the beginning of the Financial Year and at the end of the Financial Year should be taken. Therefore, the A. O. is directed to take the value of assets as per the balance sheet in the following manner. Total assets as on 31/03/2007 - ₹ 7,54,71,828/- Total assets as on 31/03/2008 - ₹ 28,12,64,006/- The appellant has submitted that the A. O. has also made mistake in considering the amount of investment for the purpose of Rule 8D. The appellant has submitted that the quantum of opening and closing investment taken by the A. O. include profit element received from respective partnership firm which should be excluded for the purpose The disallowance should be made taking into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O., is therefore, directed to work out the disallowance after taking the various figures as mentioned above . The appellant in his submission has also taken a stand that profit of the partnership firm are first taxed in the hands of the firm and thereafter divided amongst the partners according to profit sharing ratio and, therefore, the income of the partner of the firm had already suffered taxation. Accordingly, it has been claimed by the appellant that provisions of Section 14A cannot be applied for investment made in partnership firm. The submission made by the appellant is not acceptable as the partnership firm for the purpose of Income Tax Act is a separate assessable entity, partners vis-a-vis partnership firm would stand on the same footing as shareholders vis-a-vis company. Accordingly, the income charged in the hands of the partnership firm cannot be treated as being non - exempt income in the hands of the partners of such firm. Accordingly, the claim of the appellant that the provisions of Section 14A should not be applied is not accepted. The reliance is also placed on the decision of Mumbai ITAT in the case of Dharmasingh M. Popat Vs. ACIT [127 TTJ 61]. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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