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TMI Blog2016 (2) TMI 1187X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act amounting to Rs. 53,54,056/- and Rs. 1,29,52,621/- for AYs 2008-09 and 11-12 respectively. 3.1 Brief facts are assessee, Om Metals Infra-Projects Ltd. is a listed Company, engaged in the business activities of Hydro-mechanical dam gates as its main business and also business activities like hotel, multiplex, housing projects etc. In both the years assessee had earned dividend from old share holdings amounting to Rs. 1,14,77,297/- & Rs. 1,19645/- respectively. Original assessment for AY 2008-09 was completed u/s 143(3) where no such disallowance was made u/s 14A, the impugned addition in AY 2008-09 was made by reopening assessment u/s 147. and for AY 2011-12 has framed u/s 143(3). During the course of these proceedings ld. AO asked f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and judicial citations. The Ld. CIT(A) gave the relief in question by mainly holding that: (i) Ld. AO has not considered the financial breakup, working and judicial citation contended by the assessee. In AY 2008-09 the correct investment in JV shares and mutual funds was to the tune of Rs. 21,06,71,000/- and not Rs. 37,55,36,330/- as held by AO. The major share investment made in JV shares to hold controlling interest was a business necessity to promote its business and cannot be termed an investment to earn exempt income. (ii) Total share capital and reserves available with assessee were to the tune of Rs. 378.00 crores. It has been admitted by ld. AO that investment in shares is made by the assessee out of its own funds. The reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as incurred any expenditure in relation to income which does not form part of the total income and if so to quantify the expenditure of disallowance. The AO has not brought on record any fact or material to show that any expenditure has been incurred on the activity of non taxable income. (vii) In AY 2008-09, assessee incurred expenditure of interest amounting to Rs. 3,26,05,191/- the break thereof is as under:- a. Term loan used for particular assets Rs. 2,35,26,803/- b. Working capital used for business Rs. 90,78,388/- Rs. 3,26,05,191/- Thus there was no nexus between the interest expenses incurred and exempt income. Similar was the position for AY 2011-12. 3.3 Aggrieved revenue is in appeals. Ld. DR relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such satisfaction recorded by the Assessing Officer before he invoked subrule (2) of rule 8D and made the computation. The Assessing Officer has to reject the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, in relation to exempt income; the Assessing Officer would have to indicate cogent reasons for the same. We do not find any such satisfaction recorded in the present case by the Assessing Officer before he invoked sub-rule (2) of rule 8D of the Rules and made the re-computation. Therefore the respondent assessee would succeed.'' (2) CIT V TAIKISHA ENG. 2014-TIOL-2239-DEL-IT 9 (Delhi HC) :- ''18. It is in this context we feel that the findings recorded by the CIT(A) and the Tribunal ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case.'' (4) REGENT AUTO. PVT. ITA/684/DEL/2014 (DEL ITAT) DTD 18-6-15 :- ''Delhi ITAT after considering its own judgment in the case of Holicim India Pvt. Ltd. and Hon'ble Delhi High Court in Joint Investments (supra) reiterated the view that the disallowance u/s 14A cannot the exempt income. 3.5 It is admitted by ld. AO himself that the investments in JV equity and mutual funds was made by the assessee out of own capital and reserves. The disallowance is made not on consideration of assessee's reply and merits of its contention but merely by mechanically applying rule 8D. These unambiguous observations on the part of ld. AO clearly clinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - was incurred as under: (a) Term loan used for particular assets Rs. 2,35,26,803/- (b) Working capital used for business Rs. 90,78,388/- Rs. 3,26,05,191/- Thus there was no nexus between the interest expenses and exempt income. Similar position for AY 2011-12 also is not disputed. (iii) Ld. AO invoked sub-rule (2) without demonstrating why the assessee's explanation was unreasonable and unsatisfactory. On one hand it is admitted that impugned investments are not out of borrowed funds and they were out of assessee's own resources. On the other hand a self contradictory stand is adopted by AO in the guise of mechanical rule and these interest free own funds are included as borrowed funds. This is impermissible and and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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