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TMI Blog2014 (12) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... was neither dividend income nor any claim of exempt income of the assessee. Thus issue was considered by the Hon’ble Gujarat High Court in the case of CIT vs. Corrtech Energy (P) Ltd.(2014 (3) TMI 856 - GUJARAT HIGH COURT) and after following the judgment of Hon’ble P & H High Court in the case of CIT v. Winsome Textile Inds. Ltd.(2009 (8) TMI 220 - PUNJAB AND HARYANA HIGH COURT) it was held that when the assessee did not claim of any exempt income, section 14A has no application. The Coordinate Bench of this Tribunal in case of Garware Wall Ropes Ltd. v. ACIT (2015 (2) TMI 628 - ITAT MUMBAI) has taken a view that no disallowance can be made u/s.14A in the case of investment in the subsidiaries for the purpose of holding the controlling stack and not for earning dividend income. - Decided in favour of assessee. Disallowance as u/s.40(a)(ia) for Short deduction of TDS - Held that:- the assessee deducted the tax under the belief that the rate of tax provided under the specific provision of chapter XVII applicable in the case of the assessee which was not accepted by the AO, therefore, the provisions of section 40(a)(ia) cannot be applied of Short deduction of TDS due to the bon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as per Rule 8D. II. The Ld. CIT(A) has erred on facts and in law in deleting the disallowance of short deduction of TDS u/s.40(a)(ia) of ₹ 4,88,500/-, without properly appreciating the factual and legal matrix of the case as clearly brought out by the Assessing Officer in the Assessment Order. IV. The Ld. CIT(A) has erred on facts and in law in deleting the disallowance of short deduction of TDS u/s.40(a)(ia) of ₹ 4,88,500/-, without appreciating the fact, that the assessee who has not deducted TDS at prescribed rate cannot be said to have complied with the provision of TDS as required under section 40(a)(ia). 2. The Ld. CIT(A) s order is perverse in law and on facts and deserves to be set aside. 3. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the AO restored. The appellant craves leave to amend or alter any ground or add a new ground that may be necessary. 3. Ground Nos. 1 2 regarding disallowance u/s.14A, the assessee was holding investments of ₹ 8,32,79,820/-. The opening and closing balance of investments were same which means the investments were made in the earlier years and there was no new/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, in view of the decisions of Hon ble Gujarat High court in the case of Corrtech Energy (P) Ltd. (223 Taxman 130), the judgment of P H High Court in the case of Winsome Textile Inds. Ltd. (319 ITR 204), and the judgment of Hon ble P H High Court Lakhani Marketing Ind. (226 Taxman 45) no disallowance u/s.14A can be made. The Ld. AR has also relied upon the decisions of this Tribunal in case of Garware Wall Ropes Ltd. v. ACIT 65 SOT 86) JM Financial Ltd. v. ACIT (Mum). The Ld. AR has referred the assessment order and submitted that assessee has explained before the AO that assessee s own interest free fund is more than sufficient for investment in question. 5. We have considered rival submissions as well as relevant material on record. There is no dispute that there is fresh investment during the year by the assessee and the investment of ₹ 8,32,79,820/- was made in the earlier years that too in the subsidiary of the assessee. The assessing officer did not disallow the interest expenditure u/s.14A, in the Assessment years 2006-07 2007-08. It is pertinent to note that the use of borrowed fund has to be examined in the year of investment and if the AO has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier also in IT Appeal No.504 of 2008, CIT v. Winsome Textile Industries Limited, decided on 25th August, 2009 wherein it was observed as under:- '6. The contention raised on behalf of the revenue is that even if the assessee had made investment in shares out of its own funds, the assessee had taken loans on which interest was paid and all the money available with the assessee was in common kitty, as held by this Court in CITy. Abhishek Industries Ltd. [2006] 205 CTR (P H) 304 [2006j 286 ITR I (P H) and therefore, disallowance under section l4A was justified. 7. We do not find any merit in this submission. Judgment of this Court in Abhishek Industries (supra) was on the issue of allowability of interest paid on loans given to sister concerns, without interest. It was held that deduction for interest was permissible when loan was taken for business purpose and not for diverting the same to sister concern without having nexus with the business. Observations made therein have to be read in that context. In the present case, admittedly, the assessee did not make any claim for exemption. In such a situation, section 14A could have no application. 12.As a result, the substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Accordingly, the AO disallowed the proportionate expenditure. u/s.40(a)(ia) of the Income Tax Act. The assessee challenged the action of the AO before CIT(A) and relied upon the decisions of this Tribunal wherein it has been held that due to short fall of deduction, the provisions of section 40(a)(ia) cannot be applied. Accordingly, the CIT(A) has deleted the disallowance u/s.40(a)(ia) in para 3.3. as under; I have considered the facts of the case . In the case under consideration, the Appellant has deducted tax at rate lower than prescribed under the Act/Rules. Thus, it is not a case where no TDS was deducted at all. In the following case, i t has been held that the provisions of Sec.40a(ia) are applicable only where no TDS has been made and the provisions are not applicable where TDS has been made though at a lower rate. - Chandabhoy Jassobhay (49 SOT 448), ITAT Mumbai - S.K Tekriwal (15 taxman.com 289), Calcutta (HC) -ACIT Vs. Quality Cine Labs Pvt Ltd , (2012) 31 CCH 053 Mum Tribunal order dated 29/3/2012. Since in the case under consideration, the Appellant has deducted TDS though at a lower rate, therefore provisions of Sec.40a(ia) was not applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fact s and in law in deleting the disallowance of Short deduction of TDS u/s.40(a)(ia) of assessee who has not deducted TDS at prescribed rat e cannot be said to have complied with the provision of TDS as required under section 40(a)(ia). 11. The grounds are identical to the grounds for the assessment year 2008-09. In view of our finding for the assessment year 2008-09 ground no.1 2 of the revenue appeal are dismissed. Whereas ground no.3 and 4 are set aside to the record of the CIT(A) with identical directions. 12. For the Assessment Year 2010-11, the Revenue has raised following effective grounds in this appeal. i)The Learned CIT(A) has erred on facts and in law in deleting the disallowance u/s.14A as per Rule 8D amounting the ₹ 23,88,124/- being interest of ₹ 19,71,825/- and the expenses of ₹ 4,16,399/- calculated @ 0.5% of Average Investments, without properly appreciating the factual and legal matrix of the case as clearly brought out by the Assessing Officer in the Assessment Order. ii)The Learned CIT(A) has erred on facts and in law in deleting the disallowance u / s .1 4A as Rul e 8D amounting to ₹ 23,88,124/- being interest of S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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