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TMI Blog2017 (12) TMI 1415X X X X Extracts X X X X X X X X Extracts X X X X ..... as envisaged under the provision of Section 14A of the Act. We also find that in similar facts and circumstance, the Hon'ble Co-ordinate Bench of this Tribunal in assessee’s own case in immediate preceding AY 2010-11 has deleted the addition Disallowance on account of no business activity - Held that:- At the outset, it was observed that assessee has claimed total income business expenses in its profit and loss account for ₹41,49,216/- only and , total expenses disallowed by AO comes to ₹41,48,587/-. Thus, in our considered view further disallowance of ₹15,00,632/- will lead to the double addition in the hands of assessee. Moreover, the amount of disallowance cannot exceed the actual expense claimed by assessee in its income tax return. In this view of the above matter, we do not find any infirmity in the order of Ld. CIT(A). We uphold the same Addition under the head house property - Held that:- It is undisputed fact that impugned properties are commercial properties and the assessee conceded the addition made by the Ld. CIT(A) for ₹4.20 lacs as the addition of the same has not been challenged. Therefore, we dismiss the plea of Ld. AR that no additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer for ₹ 74,75,470/- u/s 14A r.w.r. Rule 8D of the Income Tax Rule, 1962. 3. Briefly stated facts are that assessee is an individual derived her income from investment in shares, debentures, government securities etc. The assessee during the year has earned dividend income and interest on Public Provident Fund for ₹1,69,53,044.23 and ₹4,77,417/- which are exempted income. The assessee in relation to such income has made the disallowance suo-motu for ₹ 15 lakh under the provision of Section 14A of the Act. However, the AO observed that the disallowance have not been made in pursuance to the provision of Rule 8D of the IT Rule, 1962. Accordingly, AO worked out the disallowance as under:- 1) Rule 8D(2)(ii) on account of interest of Int. exp. ₹ 63,26,883/- 2) Rule 8D(2)(iii) on account of administrative expenses ₹ 26,48,587/- ₹ 89,75,470/- As the assessee has already made disallowance ₹15 lacs then the AO disallowed the remaining expenses of ₹74,75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of investment made in equity shares as well as in Public PF fund. He in support of assessee s claim drew our attention on the audited balance-sheet of assessee which is placed on page 29 of the paper book. Ld. AR further stated that the investment in equity shares and PPF was made in earlier year. It was also submitted that no satisfaction has been recorded by the AO while invoking the provision of u/s. 14A of the Act. The ld. AR also submitted that no investment has been made during the year. In the similar facts and circumstances the Hon'ble ITAT in assessee s own case in ITA No.2216/Kol/2014 for A.Y. 2010-11 dated 16.08.2017 has deleted the addition made by AO. The relevant operative portion of this order is reproduced below:- 7. With regard to disallowance made towards administrative expenses under Rule 8D(2)(iii), we find that the assessee had not given any satisfaction as to how the said disallowance made by the assessee is incorrect having regard to the accounts of the assessee in terms of ection14A(2) read with Rule 8D(1) of the Rule. In our considered opinion, without doing the same, the Ld. AO cannot mechanically resort to Rule 8D of the Rules and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee for acquiring those old shares. In the absence of any such materials placed by the assessee/ in our opinion/ the authorities total income and the income from the exempt source. In the absence of any material the assessee, the assessing authority took a most reasonable approach in assessment. There is no presumption- provided in the Income tax Act,. 1961 that if the assessee has that the exempt income is out of its own funds. Rule 8D(2)(ii) of the I.T. Rules, 1962 income or receipt then the interest has to be calculated as per formula provided therein. Now, the law has provided a specific method of calculation in Rule 8D(2)(ii) of I.T. Rules, 1961 relating to interest expenditure on exempted income from A.Y.2008-09 and it is applicable directly in the case of the assessee. From the above judgment, we note that it is the duty of assessee to justify the source of investment mad by the assessee in the investment / PPF irrespective of fact that the own fund of assessee exceeds the impugned investment in the light of above judgment of Hon'ble jurisdictional High Court (supra). We find that the issue of disallowance of interest will accordingly be decided after verifying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for statistical purposes. 8. Next issue raised by Revenue in Ground No. (ii) in this appeal is that Ld. CIT(A) erred in deleting the disallowance made by the AO for ₹15,00,632/- on account of no business activity. 9. The assessee, during the year has shown interest income under the head business . The assessee against such business income has claimed an expense of ₹41,49,219/- only. However, the AO was of the view that interest income of the assessee should be classified under the head income from other source . Therefore, no such business expenses should be allowed in view of the fact that no business activity is carried out by the assessee during the year under consideration. 9.1 The AO further observed that the disallowance of ₹26,48,587/- has already been made under the provision of Rule 8D(2)(iii) of IT Rules, 1962. Therefore the balance amount of ₹15,00,632/- (4149219 26485587) needs to be disallowed. Accordingly, the Assessing Officer made the disallowance of ₹15,00,632/- and added to the income of assessee. 10. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the addition made by the AO by observing as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estricting the addition made by the AO for ₹8.40 lakh to ₹4.20 lakh only. 14. During the course of assessment proceedings, AO observed that assessee was the owner of five shops but no rental income was shown in respect of such properties under the head income from house property . Thus, the AO deputed an Inspector of Department to ascertain the market value of rent of this property who in turn submitted that the fair market value of rent is ₹20,000 per month per shop. Thus, the AO determined the fair market value of rent of all the shops for ₹12 lakh per annum. The AO against the fair market value of rent has allowed deduction as envisaged u/s 24(1) of the Act for ₹3.60 lacs and added the balance of ₹8.40 lacs to the total income of assessee under the head house property . 15. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who granted relief in part to the assessee by observing as under:- 6.2 In my view the shop is to be taken as House Property for the purpose of Sec. 22 of IT Act and the annual value in terms of Sec. 23 of IT Act has to be charged to tax. determined in terms of Sec. 23(1)(a) of the IT Act, which equates ..... X X X X Extracts X X X X X X X X Extracts X X X X
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