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TMI Blog2019 (1) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... ully conscious of the fact that the Assessing Officer is bound by the directions issued by the DRP under Section 144C of the Act. Nevertheless after the order passed by the DRP, the order has been tested before the Tribunal and it is before us and therefore we will be well within our jurisdiction to remand the matter to the Assessing to take an independent decision on the issues raised before us as pointed out in the preceding paragraphs. AO is required to decide as to whether it was correct for disallowing the interest on debenture under Section 14A when the assessee's case is that the interest expenditure was incurred on debenture issued in the financial year 2008-09 for the specific purpose of acquiring the Company in the past and not for investment in future. AO has to consider the submission of the assessee that the interest incurred by the assessee is specifically towards acquisition of shares in M/s.Glamouroom Taps Pvt. Ltd. which Company subsequently stood amalgamated with the assessee Company and such amalgamation has been approved by the Court with effect from 01.04.2008. AO shall take an independent decision in the matter without being any manner influenced with the obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer passed the assessment order dated 24.10.2016 as he is mandated to do so by following the order passed by the DRP. Aggrieved by the same, the assessee filed an appeal before the Tribunal contending that an interest of ₹ 3,35,62,633/- out of ₹ 3,47,63,663/- was in relation to a loan specific for investment made in M/s.Glamouroom Taps Pvt. Ltd. and therefore, there can be no disallowance under Section 14A of the Act r/w. Rule 8D of the Rules. The Tribunal did not agree with the assessee and dismissed the appeal by an order dated 15.03.2017 which is impugned before us. 4.We have heard Mr.N.V.Balaji, learned counsel for the appellant and M/s.R.Hemalatha, learned Senior Standing Counsel for the respondent/revenue. 5.Before the DRP, while filing objections the following contentions were raised by the assessee against the draft assessment order relating to addition proposed by the Assessing Officer. The objections are contained in paragraph 3.10 and the objections are under two heads, namely, (A) Non-applicability of Section 14A of the Act; and (B) No nexus between the borrowed capital and investment made by the Company. 6.M/s.R.Hemalatha, learned Senior S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee, on the first day and the last day of the previous year." 8.In terms of the above rule, the expenditure in relation to income which does not form part of the total income shall be the aggregate of the amount of expenditure directly relating to income which does not form part of the total income. The other contingency is where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, then, the formula stipulated in Rule 8D(2)(ii) should be applied. The assessee's case before the DRP as well as before the Tribunal was that the assessee has incurred expenditure by way of interest during the previous year which is directly attributable to a particular income or receipt. For better appreciation, the objection filed by the assessee before the DRP is quoted herein before: B.No nexus between the borrowed capital and investment made by the Company In the Draft Order, the AO has not substantiated the fact that there is a nexus between the borrowed funds and the investment which is a pre-requisite for application of Sec.14A of the Act read with Rule 8D. During the FY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-interest bearing funds in making the said investments and therefore, disallowance under Section 14A of the Act cannot be made. 10.The DRP took note of the objections filed and the discussion starts from paragraph 4 of its order dated 31.08.2016. In this appeal we are not concerned about the discussion which has been made from paragraph 4.1 to 4.4 as the assessee is not on appeal against those findings, but what would be relevant will be from paragraph 4.7 to 4.10. The DRP has stated that the Assessing Officer has recorded his satisfaction and the matter has become final, thereafter they have quoted Section 14A of the Act, referred to the decision in the case of Maxopp Investment Ltd. vs. Commissioner of Income Tax, New Delhi reported in (2018) 402 ITR 640 (SC), quoted Rule 8D of the Rules and we find that the order passed by the DRP confirming the draft assessment order is contained in paragraph 4.10 which reads as follows: "4.10..........There is no exception for not considering any income which is exempt from tax, be it the main or incidental. We have deliberated on this matter and it is our considered opinion that the action of the AO is as per law and is being uphel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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