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TMI Blog2016 (1) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A of the Act under Rule 8D(2)(iii) of the Act. 2. For that no expenses having been incurred for the purpose of earning the dividend income and there being no proximate and dominant nexus with the investment in shares of EIH Limited which was made in the earlier years and not in the year under consideration, the CIT(A) erred in confirming the disallowance as made by the AO. 3. For that the disallowance under Rule 8D(iii) of the Income Tax Rule 1962 (rules) at ½% of the average value of holding of investment is illegal, without jurisdiction and authority of law. The disallowance as confirmed by CIT(A) under Rule 8D(iii) of the Rules is beyond the disallowance permitted under section 14A of the Act and no such disallowance could be made on a notional basis which is not with reference to any expenditure incurred whether directly or indirectly." 3. Briefly stated facts are that the assessee claimed to have following exempted income: Share of profit in partnership firm Rs. 55,932/- Dividend from mutual funds Rs. 8,70,776/- Dividend on shares Rs.169,445,830/- Total Rs.170,372,538/- The assessee suo moto offered disallowance u/s. 14A of the Act read with Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO has simply given a finding that some expenditure might have been incurred for earning this exempted income thereby Rule 8D of the Rules was invoked. There is no satisfaction recorded by the AO for invoking Rule 8D of the Rules despite the fact that the assessee has disclosed huge expenditure for earning of exempted income and the same was disallowed himself, the correctness of which is not in doubt. The assessee has enclosed details of investment made in group concerns and subsidiary companies in its paper book at page 8 and details of dividend income earned at page 13. In view of the above facts and circumstances, we are of the view that the AO has not recorded any satisfaction about the correctness or otherwise of the accounts of the assessee wherein the assessee himself has made disallowance of expenses relatable to earning of exempted income and secondly, we are also of the view that the primary object of investment of assessee is for holding controlling stake in group concerns and not for earning of income out of that investment. In both the eventualities, no disallowance can made u/s. 14A of the Act read with Rule 8D of the Rules. Accordingly, this issue of assessee&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon'ble Supreme Court and decide the issue accordingly. This issue of assessee's appeal is remitted back to the file of AO and allowed for statistical purposes." On query from the bench, Ld. Sr. DR could not controvert the above submission of the assessee by producing any contrary material in this regard. Hence, following the decision cited supra, we set aside this issue to the file of AO to await the decision of Hon'ble Supreme court and decide the issue accordingly. Therefore, this issue of assessee's appeal is remitted back to the file of AO and allowed for statistical purposes. 7. The next common issue in both the appeals of assessee and revenue is as regards to proportionate disallowance of legal and professional fees and auditor's remuneration. For this, assessee has raised following ground nos. 5 and 6 and revenue has raised following ground no. 2: "Assessee's ground Nos. 5 & 6: 5. For that the CIT(A) erred in holding that the proportionate legal and professional fees and Auditor's remuneration should also be deducted while computing the income from foreign management fees received from Mena House Oberoi, Egypt. 6. For that the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items of expenditure have no nexus with the earning of foreign management fees from Mena House Oberoi, Egypt. Accordingly, I consider a part of the legal and professional fees and the auditor's remuneration and rework the proportionate expenditure relatable to foreign earning. A detailed working is provided in the Annexure-A to this order. Therefore, as per the detailed working, I direct the AO to consider the amount of Rs. 46,43,429/- as relatable to tax free foreign income from Egypt and add back Rs. 46,43,429/- to the business income of the appellant instead of Rs. 90,51,130/- as considered in the assessment order. Thus, this ground of appeal is partly allowed." Aggrieved, revenue is now in appeal before Tribunal. 9. We have heard rival submissions and gone through facts and circumstances of the case. Before us Ld. Counsel for the assessee only contested the expenses on account of legal and professional fee at Rs. 14,73,581/- and auditor's remuneration at Rs. 11.75 lac do not have any nexus with the earning of management fee from Mena House Oberoi Hotel, Egypt, URA. Accordingly, he urged that these two expenses should be allowed exclusively for the purpose of busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid company in term of the provisions of section 2(22)(e) of the Act but AO treated both the advances as deemed dividend u/s. 2(22)(e) of the act. Aggrieved assessee preferred appeal before CIT(A). The CIT(A) also confirmed the action of the AO exactly on similar facts. Aggrieved now, assessee is in second appeal before Tribunal. 12. At the time of hearing before us, Ld. Counsel for the assessee submitted that the issue is covered by the order of the Tribunal in assessee's own case for AY 2007-08 and 2008-09 vide order dated 15.10.2015, wherein the Tribunal vide para 14 to 16 has held as under: "14. We have heard rival submissions and gone through facts and circumstances of the case. We find from the findings of CIT(A) that he has admitted the additional evidence submitted before him in the shape of NBFC certificate of Oberoi Investment Pvt. Ltd. and remanded the matter back to the file of the AO. Now before us also Ld. Sr. counsel Shri R. N. Bajoria stated that the issue can be set aside to the file of AO, who will consider the certificate of NBFC of Oberoi Investment Pvt. Ltd. and also Memorandum of Association of the lender company explaining that one of the objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt issue in this appeal of revenue is against the order of CIT(A) in allowing ALV of the house property by rejecting the expected rent and accepting the actual rent received by the assessee. For this, revenue has raised following ground no. 1: "1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the assessee's appeal regarding the ALV of the house property by rejecting the expected rent and accepting the actual rent received by the assessee." 14. At the time of hearing before us, we find that the issue is covered by the order of the Tribunal in assessee's own case for AY 2007-08 and 2008-09 vide order dated 15.10.2015, wherein the Tribunal vide para 23 has held as under: "23. We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO erred in determining an arbitrary annual value of property by holding that Section 23 is a deeming provision and determination of annual value does not depend on actual realization of rent. The AO while applying clause (a) of Section 1 to Section 23 in the assessee case failed to appreciate that in the present case actually let out the property being ..... X X X X Extracts X X X X X X X X Extracts X X X X
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