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TMI Blog2016 (11) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... g to Assessment Year 2011-12. 2. Facts of the case, in brief, are that the assessee is a Private Limited Company engaged in the business of IT and ITES and sale and installation of networking and security system. It filed its return of income on 25-09-2012 declaring total loss at ₹ 2,65,979/-. During the course of assessment proceedings the AO noted that the assessee, in its computation of income, has claimed dividend income of ₹ 4,44,237/- as exempt. However, no expenses has been claimed against the said exempted income. He, therefore, asked the assessee to justify the same and asked him to explain as to why the provisions of section 14A r.w. Rule 8D of the I.T. Act and I.T. Rule should not be invoked. 3. The assessee submitted that the said provision has already taken into consideration by the assessee and the assessee has suomotu disallowed ₹ 85,823/- u/s.14A of the I.T. Act. The relevant submission of the assessee before the AO reads as under : Your Honour has asked our company to show cause as to why the addition of ₹ 13,27,400/- u/s.14A r.w. Rule 8D as per our Company s working. In this respect, it is submitted that your Honour has considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012) 138 ITD 323 (Mumbai), ACIT Vs. Bharat Hotels (2014) 42 CCD 0074 (Delhi), and M/s. Everest Canto Cylinder Ltd. Vs. ACIT in ITA No.550/Mum/2014. Disallowance u/s.14A is conceivable in respect of investment made in the shares of Domestic companies and not Foreign companies where dividend is taxable should not be included in rule 8D and this view is also supported by the above judicial pronouncement. Therefore, the amount of investment made in company incorporated outside India and dividend therefrom is taxable in India should not be considered for calculation of rule 8D. Accordingly, Ground No.1.2 of the appeal is allowed. The Appellant should furnish details of taxable dividend if any received and details of exempt dividend received by the appellant to the AO in order to give effect of the ground of appeal No.1.2. Ostensibly, appellant did not furnish details of dividends received and AO being not satisfied with expenses claim the exempt dividend income invoke rule 8D. Therefore, invocation of rule 8D is upheld and Ground No.1.1 of the appeal is dismissed. 6. Aggrieved with such order of the CIT(A) the assessee is in appeal before the Tribunal with the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of domestic company indicates that it applies only to Indian company and it is not applied to a foreign company. Therefore, disallowance u/s.14A is uncalled for. In any case the dividend income from the foreign company is taxable. Referring to page 18 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the investment of ₹ 25,73,17,371/- as per schedule 7. Referring to schedule 7, a copy of which is placed at page 22 of the paper book he submitted that the said investment includes an amount of ₹ 25,23,44,800/- being 37,85,000 shares of Euro one each in Kalyani Mauritius Pvt. Ltd., a joint venture company set up in the Republic of Mauritius. Referring to page 42 of the paper book he drew the attention of the Bench to the computation of disallowance u/s.14A r.w. Rule 8D as per the company vis- -vis as per the AO. Referring to the same he submitted that the AO while computing the working of investment has made addition of ₹ 25,23,44,800/- as investment in shares of Kalyani Mauritius Pvt. Ltd. which was not considered by the assessee. Referring to page 37 of the paper book he drew the attention of the Bench to the submissions made befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved dividend income of ₹ 4,44,237/- and has suomotu disallowed an amount of ₹ 85,823/- u/s.14A r.w. Rule 8D. The assessee while computing the disallowance u/s.14A r.w. Rule 8D has excluded the amount of ₹ 25,33,44,800/- invested by it in the shares of Kalyani Mauritius Pvt. Ltd. a company incorporated in Mauritius for the purpose of working average value of investment as per Rule 8D. I find the AO while computing the disallowance u/s.14A r.w. Rule 8D has considered the above investment of ₹ 25,33,44,800/- for the purpose of calculating the disallowance under Rule 8D. It is an admitted fact that no dividend has been received from the above Mauritius company as per the audited accounts. It is also an admitted fact that the dividend income of such foreign company is taxable in India. I find in appeal the Ld.CIT(A) while holding at the first para of 5.3 that amount of investment made in a company incorporated outside India the dividend income of which is taxable in India should not be considered for calculation of Rule8D, however, has upheld the action of the AO in making disallowance of ₹ 12,41,577/- on the ground that assessee did not furnish details of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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