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TMI Blog2015 (9) TMI 1110X X X X Extracts X X X X X X X X Extracts X X X X ..... quatters allowed in assessment years 2004-05 on accrual basis - Held that:- On identical ground for A.Y. 2007-08 the finding of the Tribunal concluded In regard to the issue of disallowance of interest on the loans outstanding from M/s DCM Employees Welfare Trust, it is noticed that the issue is squarely covered by the decision of the Coordinate Bench of this Tribunal in the assessee’s own case for the A.Y. 2003-04 and consequently respectfully following the decision of the Coordinate Bench of this Tribunal in the assessee’s own case for the A.Y. 2003-04, the findings of the ld. CIT(A) on this issue stand upheld. - Decided against revenue. Addition in respect of Sec.14A disallowance - Held that:- In the facts of the present case before us, the assessee has suo mote disallowed expenses under section 14A of the Act. Ld. CIT(A) has not compensated for the deficiency by the A.O in recording proper satisfaction. The ld. CIT(A) has restricted the disallowance to an extent of ₹ 9.79 lacs. The ld. CIT(A) fails to appreciate the reasonableness of expenditure that has been disallowed viz-a-viz the exempt income. In the light of the judgment of Maxopp Investments Ltd. vs. CIT (2011 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) erred in upholding the initiation of penalty proceedings u/s 271(1)(c) of the Act in the facts and circumstances of the appellant. 6. That the order passed by the AO and upheld by CIT(A) is bad in law. 7. That the Appellant Company craves leave to alter, amend, vary and/or add any of the grounds of appeal at any time herein after. Grounds of Assessee s appeal are as under: 1. Whether the ld. CIT(A) on the facts and circumstances of the case and in law is correct in deleting the deduction of ₹ 2,94,81,000/- on account of interest payable on accrual basis to MCD? 2. Whether the ld. CIT(A) on the facts and circumstances of the case and in law is correct in deleting the disallowance of ₹ 22,32,000/- made by the AO on account of interest on interest free loans? 3. Whether the ld. CIT(A) on the facts and circumstances of the case and in law is correct in restricting the disallowance to ₹ 9,79,000/- as against ₹ 1,66,18,000/- made by the AO u/s 14A of the IT Act? 4. Whether the ld. CIT(A) on the facts and circumstances of the case and in law is correct in restricted the adjustment u/s 115JB of the I T Act, 1961, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noticed that for the assessment year 1993-94 to 1996-97 the revenue has included the income on the sale of property rights on the entering into agreement with the buyers and the expenses on account of land and development incurred by the assessee has been allowed in proportion to the area sold but applying the matching principle. It is also noticed that in the later years, the assessee has accepted the stand of the revenue and has also been following the same practice. For the relevant assessment year, it is noticed that the AO has changed his stand just because the assessee has transferred the complete rights in the project as a whole to M/s Purearth Infrastructure Ltd. When a particular method of computation of income of the assessee has been followed and has been accepted and is also followed by the revenue and the assessee, just because the total rights in the project has been transferred, such method cannot be changed as by the change of the method, the expenses otherwise allowable to the assessee, is now being denied which is not a permissible act. In these circumstances, we are of the view that the action of the CIT(A) in directing the AO to allow the deduction of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round no. 1 2 of the Revenue s appeal. As we have dismissed the ground no. 1 2 of the Revenue s appeal, ground no. 1 2 of the assessee s appeal stand infructuous. 14. The only issue left for adjudication is addition in respect of Sec.14A disallowance. Both the Assessee as well as Revenue is in appeal (being ground no.3 ) before us on this issue. Facts germane to deal with this issue are as under: 15. On perusal of assessment records it is observed that the assessee had made certain investments, and it had received dividend income of ₹ 60,088/- during the year under consideration which was claimed as exempt u/s 10(34) of the Act. The assessee in its computation of income had suo moto disallowed an amount of ₹ 10,23,000/- as per Rule 8D, calculations of the same has been submitted by the assessee before ld. AO. The AO worked out the disallowance at ₹ 166.18 lacs u/s 14A of the Act. The AO had made the disallowances u/s 14A as under: Clause Particulars Amount (in lacs) i. Expenditure directly related to exempt income 751.21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and above the interest expenses. 18. On the other hand, the ld. DR present supported the stand of the CIT (A) on the issue. The Ld. D.R. placed reliance on the decision of coordinate bench in the case of T T Motors Ltd., in ITA no. 6490/Del/2010 for assessment year 2009-10. 19. We have verified the above submissions and perused the Statement of accounts submitted by the assessee in paper book. As per the computation the assessee has offered disallowance on account of interest amounting to ₹ 8.23 lacs and has further offered disallowance on account of administrative expenses to an extent of ₹ 2 lacs. Thus, the total disallowance u/s 14A as offered by the assessee amount to ₹ 10.23 lacs. 20. It is further observed that as per the scheme of restructuring and arrangement approved by the Hon ble Delhi High Court, the assets and liabilities(including loans) were transferred to a new company and shares were allotted against the same(clause 3, 11 of the Schedule to the Accounts). In respect of administrative expenses, we find that the assessee has not made any purchase or sale of investment in the relevant year under consideration. Still to cover up, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce u/s.14A cannot exceed the amount of exempt income. Ths Delhi High Court in the case of Holcim India Pvt.Ltd., reported in (2014) 272 CTR 282(Del), has held that there can be no disallowance u/s. 14A in the absence of any exempt income. The rationales behind these judgments are that, the amount of disallowance should not exceed the exempt income. 25. In view of the aforesaid discussion and on the basis of material and evidence on record, to meet the ends of justice, we find no perversity in the calculation of 14 A, disallowance by the assessee. This ground no.3 in the assessee s is allowed and that of Revenue is dismissed. 26. Ground no 4:This ground raised by the assessee is in respect of inclusion of the addition u/s.14A made by the ld. A.O in determining the book profits u/s115JB. As the addition made by the A.O u/s.14A stands deleated in view of the aforesaid reasoning, this ground no.4 of the assessee s appeal becomes consequential in nature. 27. Ground no.5: This ground is in respect of initiation of penalty proceedings u/s.271(1) ( c) of the Act. Since has been allowed relief on account of disallowance u/s.14 A, penalty proceedings u/s.271(1) ( c) of the Act becom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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