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TMI Blog2016 (5) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... d in this appeal is as to whether disallowance u/s. 14A of the Act could be made in the facts and circumstances of the case. 3. Brief facts of this issue are that the AO observed that assessee had earned dividend income to the tune of Rs. 13,83,515/-. The position of own capital, unsecured loans and investments as on 31.03.2008 as under: 31.03.2008 (Rs. In crore) Own fund (capital & Reserve) 19.20 Unsecured Loans 31.26 Investments 68.71 It is, therefore, apparent that the unsecured loans have been utilized for investment in shares. Accordingly, Sec. 14A of the Act is attracted in the instant case and the expense relatable to exempt income is liable to be disallowed. The assessee company in its computation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest on 10076160/- @ 11% for 158 days during 31.03.2007 amounted to 479291/-. Interest on LTCG of Haryana to be Disallowed: 279291 x 32.91% = 157895/- ........................... (A) INTEREST RELATABLE TO EXEMPT DIVIDEND INCOME Total interest (Dr.) as per Profit & Loss Account - Rs. 93,26,183/- Allocation of interest on different source of income Income Amount in (Rs.) Ratio Interest Allocation Dividend 13,83,515/- 13.12% 12,02,564/- (9168288x13.12%) Other Taxable Income 91,64,335/- 86.88% 79,65,724/- Total 1,05,47,850/- 100.00% 91,68,288/- Interest on LTCG as above 1,57,895/- Total 93,26,183/- Interest Relatabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T. V. Champion Commercial Co. Ltd. 139 ITD 108 (Kol)." 4. The Ld. AR argued that no satisfaction was recorded by the Ld. AO having regard to the accounts of the assessee in terms of Rule 8D(1) of the Rules and accordingly, objected to invoking the provision of Rule 8D(2) of the rules. In support of his contention, he placed reliance on the decision of the Coordinate Bench of this Tribunal in the case of Luccas Estates Pvt. Ltd. in CO No. 65/Kol/2014 in ITA No. 721/Kol/2014 dated 11.05.2016. He also placed reliance on the decision of this Tribunal in the case of REI Agro ltd. Vs. DCIT in ITA No. 1331/Kol/2011 dated 19.06.2013, which was approved by Hon'ble Calcutta High Court. He also placed reliance on the decision of Bangalore ITAT in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the Special Bench decision of Delhi Tribunal in the case of Cheminvest reported in 121 ITD 318. 6. The Ld. AR in defence argued that the decision relied on by the ld. DR in the case of Chem Invest of Delhi Special Bench has been reversed by Hon'ble Delhi High court in the same case reported in 378 ITR 33. 7. We have heard rival submissions and perused the material available on record and the case laws cited by both the parties. We find that the issue on the argument of non-recording of satisfaction deserves to be dismissed as from the perusal of the assessment order it could be seen that the Ld. AO had clearly recorded his satisfaction that interest relatable to all investment income from which does not or shall not form part of total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jab and Haryana High Court in Commissioner of Income Tax, Faridabad Vs. M/s. Lakhani Marketing Incl., ITA No. 970/2008, decided on 02.04.2014, made reference to two earlier decisions of the same Court in CIT Vs. Hero Cycles Limited, [2010] 323 ITR 518 and CIT Vs. Winsome Textile Industries Limited, [2009] 319 ITR 204 to hold that Section 14A cannot be invoked when no exempt income was earned. The second decision is of the Gujarat High Court in Commissioner of Income Tax-I Vs. Corrtecb Energy (P.) Ltd. [2014] 223 Taxmann 130 (Guj .). The third decision is of the AlIahabad High Court in Income Tax Appeal No. 88 of 2014, Commissioner of Income Tax (Ii) Kanpur, Vs. M/s. Shivam Motors (P) Ltd. decided on 05.05.2014. In the said decision it has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an undisputed position that respondent assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private placement etc. cannot be ruled out and is not an improbability. Dividend may or may not be declared. Dividend is declared by the company and strictly in legal sense, a shareholder has no control and cannot insist on payment of dividend. When declared, it is subjected to dividend distribution tax. 16. What is also noticeable is that the entire or whole expenditure has been disallowed as if there was no expenditure incurred by the respondent-assessee for conducting business. The CTT(A) has positively held that the business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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