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TMI Blog2012 (3) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... ome earned by assessee. This is one way of arriving at a reasonable amount for disallowance under section 14A which cannot be faulted. AO had determined the business income at ₹ 14.76 crores and allowed carry forward of losses to be set of thereby determining the business income at Nil. The short term capital gain of ₹ 5.76 crores was to be taxed at 10%. The assessee also had suffered tax on book profit under section 115JB and the Assessing Officer determined the total book profit at ₹ 45.53 crores on which the tax payable at ₹ 7.50 crores worked out at ₹ 3.41 crores. AO had given a finding that the tax payable on book profit is more than the tax payable on the regular income and, therefore, book profit unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s completed on 30.9.2008 under section 143(3). 2. The Assessing Officer inquired about the assessee s investment and other details and noticed that the assessee had exempt income by way of dividend to the tune of ₹ 24,34,301/- and after considering the assessee s explanation, he disallowed the amount of ₹ 2,14,242/- on the ratio of exempt income by total income vis- -vis expenditure of ₹ 4.43 crores. A disallowance under section 14A was accordingly made of ₹ 2,14,242/-. 3. On noticing that Assessing Officer has not correctly made the disallowance and not based on proper analysis and appreciation of the facts resulting in lower disallowance and under assessment of income, the CIT issued notice under section 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substitution of the opinion of the CIT under section 263 is not permitted. b) the CIT s observations that the assessee had investment in the shares which calls for disallowance of investment under section 14A was not correct on the reason that the assessee had (a) own funds and there are no borrowals during the year and (b) that the assessee had both investment in shares as well as trading shares and that the assessee had offered short term capital gain on sale of investment shares which was also taxed. c) assessee had trading in shares which accepted as business income. d) out of the dividend income of ₹ 24,34,301/- dividend income of ₹ 23,03,783/- was received in respect of shares held as stock in trade and only an am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned Departmental Representative however, in his reply referred to the order of the CIT to submit that the Assessing Officer s order was not correct as there was under assessment and the Assessing Officer should have disallowed more amount when the assessee had invested in shares and the CIT has given an opportunity to the assessee and accordingly enhanced the disallowance. He further referred to Rule 8D and submitted that there are 3 aspects of Rule 8D and the CIT has considered only one aspect and gone by the investment and not by the total income. The submission was that CIT has not followed Rule 8D and since the assessee had investments which earned exempt income, the interest paid by the assessee was to be disallowed under Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same would have otherwise allowable while calculating the capital gain or income from other sources as the case may be but the entire disallowance of interest claim on borrowings under section 14A may not result in the given facts of the case. Be that as it may, we would not have to examine this part of erroneous nature of the order at all considering that there is no prejudice caused to the Revenue by order of the assessment under section 143(3). 8. The Assessing Officer had determined the business income at ₹ 14.76 crores and allowed carry forward of losses to be set of thereby determining the business income at Nil. The short term capital gain of ₹ 5.76 crores was to be taxed at 10%. The assessee also had suffered tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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