9911796707
TMI Blog2016 (7) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be attracted even under a situation where the assessee claimed that no expenditure at all was incurred in relation to earning of non-taxable income. In our considered view, it was necessary for the AO to arrive at applying the provision of the Act 14A of the Act to record the ‘satisfaction’ after having regard to its books of account. - Decided in favour of assessee - ITA No. 2028-2029/Kol/2013 - - - Dated:- 15-7-2016 - Shri Waseem Ahmed, Accountant Member And Shri S. S. Viswanethra Ravi, Judicial Member For the Assessee Shri S.M.Surana, AR Shri Sunil Surana, AR For the Respondent Amitabha Roy, JCIT-DR ORDER Per Waseem Ahmed, Accountant Member Both appeals by the assessee are directed against the different orders of Commissioner of Income Tax (Appeals)-XII, Kolkata of dated 12.03.2013 14.03.2013. Assessments were framed by DCIT, Circle-11, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his orders dated 30.08.2010 17.01.2011 for assessment years 2008-09 2009- 10 respectively. 2. Both the appeals are heard together and are being disposed of by way of common order for the sake of convenience. Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Rule is very much attracted. Accordingly, disallowance was worked out under clause Rule 8D(2)(ii) of ₹ 79,219/-. With regard to disallowance under Rule 8D(2)(iii), the AO observed that assessee has not objected on the disallowance of the expenditure and assessee agreed for making the disallowance vide its reply dated 10.08.2010 for ₹ 17,31,535/-. Accordingly, AO disallowed the total sum of ₹ 18,10,754/- and added back to the total income of assessee. 5. Aggrieved, assessee preferred an appeal before Ld. CIT(A), where assessee submitted that no part of expenditure is directly attributable to earn exempt income and dividend earned during the year have directly been electronically credited in the accounts of assessee by the companies paying the dividend. The borrowings have been utilized for the purpose of making loans in the ordinary course of assessee s business. Assessee further submitted that it was necessary to provide the segment reporting in terms of Accounting Standard 18 Notified under the Rule, 2006. Accordingly, the company has identified two segments namely granting of loan and trading in share / security / derivative. Out of total expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat since the interest receipt was more than interest outgo, therefore, no disallowance was to be computed under rule 8D(2)(ii). During the assessment proceeding the AR suo moto filed a computation of disallowance under rule 8D(2)(ii) at ₹ 1731535/- which was fund to be correct calculation by the AO and the AO accepted it. The appeal has been filed for addition of ₹ 79219/- made y the AO on the basis of expenditure calculated by the AO u/s8D(2)(ii) and also 2007 the word used in Sec. 14A(2) is the assessing officer shall determine the amount of expenditure.... . thus, in my opinion the AO has no option but to calculate the expenses for earning the exempt income under rule 8D read with Sec. 14A of the IT Act, 1961 w.e.f. 01-04-2007. Therefore, the AO is justified in making additions under rule 8D(2)(ii) and 8D(2)(iii) read with Sec. 14A of the IT Act 1961 in order to earn the exempted income. Accordingly, assessee s appeal on ground no. 1 is dismissed. Being aggrieved by this order of L d CIT(A) assessee preferred second appeal before us. 7. Before us Ld AR reiterated the submission made before the lower authorities that no satisfaction was recorded in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 14A r.w.s. Rule 8D of the IT Rule has not recorded the satisfaction as required under the Sec. 14A(2) of the Act. At this juncture, we find it pertinent to reproduce the same:- [14A. Expenditure incurred in relation to income not includible in total income. [(1)].... ... [(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 be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. From a bare reading of the said Section we find that AO has to record the satisfaction having regard to its books of account. In our view AO has not recorded the requisite satisfaction before making the disallowance u/s. 14A(2) of the Act. We also find that from the Memorandum Explaining the provision of Finance Bill, 2006 and CBDT in its Circular dated 28 of 2006 states that since the existing provision of Sec. 14A did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is s. 38(2) which gives the power to the AO to restrict certain deductions under ss. 30, 31 and 32 to a fair proportionate part thereof which the AO may determine having regard to the user of such building, machinery, plant or furniture for the purposes of the business or profession . Another such instance is of s. 40A(2)(a) which gives power to the AO to determine, based on his own opinion, as to how much expenditure incurred by the assessee in respect of which payment is made to closely related persons or concerns, is excessive or unreasonable having regard to the fair market value of goods, services or facilities for which the payment is made or the legitimate needs of the business or the benefit derived by the assessee from the expenditure. But, when s. 14A has not given such specific power to the AO, he has no authority to estimate the expenditure which the assessee would have, in the opinion of the AO, incurred in relation to the exempted income. The words in relation to income which is exempt under the Act, no doubt, appear to be broad at first impression, but on deeper examination, and read in conjunction with the word incurred , it seems that these are restrictive w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (2005) 92 TTJ (Del) 987 : (2005) 92 ITD 119 (Del) relied on. Expenditure which the AO seeks to disallow under s. 14A should be actually incurred; there being no material with the AO to show that any expenditure was incurred in earning dividend income, nothing could be disallowed under s. 14A on estimate basis. Respectfully following the proposition laid down in the aforesaid judgments and in the facts and circumstances of the present case, we are inclined to reverse the impugned orders of Authorities Below and to the contrary ground raised by assessee is allowed. 9. In the result, assessee s appeal is allowed. Coming to ITA 2029/Kol/2013 for AY 09-10. 10. Assessee has raised following ground per its appeal, which reproduced below:- 1. For that on the facts and in relation to the circumstances of the case the Ld. Commissioner of income (Appeals)-XII was not justified in confirming the disallowance of ₹ 18,18,898/- u/s 14A by applying Rule 8D(2)(iii) which is in the nature of deemed expenses and not out of specific expenditure incurred. 11. The facts of the case in the year under appeal are identical to the facts for AY 09-10 except the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
