2015 (12) TMI 197

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..... rsity in the findings of fact recorded by the Tribunal, it is not possible to state that the impugned order of the Tribunal gives rise to any question of law - Decided against revenue Disallowance of expenditure covered under section 40A(2)(a) - Held that:- Having heard the learned counsel for the appellant, the court is of the view that the matter requires consideration. Hence, ADMIT. The following substantial question of law arises for consideration: "Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in upholding the order passed by the Commissioner of Income Tax (Appeals) deleting the disallowance of expenditure of ₹ 30,73,341/- covered under section 40A(2)(a) of the I .....

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..... pt income and had not maintained separate account in that regard. The Assessing Officer did not accept the submission of the assessee that there are sufficient interest free funds for investment in tax free securities as in his opinion such investments reduce the availability of liquid funds with the company, which many a times creates the need for borrowed funds. According to the Assessing Officer if such funds had not been diverted for such investment, the need for interest bearing funds would have been much less. Moreover, the management and maintenance of such investments always entail certain administrative expenditure such as telephone expenses, etc. He, accordingly, rejected the claim of the assessee that no expenditure had been incu .....

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..... curred any direct expenditure for earning the exempt income. The Commissioner (Appeals) was, however, of the view that there would be some indirect administrative expenses incurred by the assessee for managing such investments. He, therefore, thought it reasonable to restrict the disallowance under section 14A of the Act to 0.5% of the value of investments amounting to ₹ 42,423/- considering the same to be reasonable expenditure incurred for earning exempt income. The Tribunal in revenue s appeal has concurred with the findings recorded by the Commissioner (Appeals) and, accordingly, confirmed the restriction of disallowance to ₹ 42,423/-. 5. Thus, the Commissioner (Appeals), after appreciating the evidence on record, has fou .....

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