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TMI Blog2019 (2) TMI 1612X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that correctness of claim of disallowance in return of income was not proved by the assessee. 2. Whether on the facts and in the circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 1,76,09,474/- on account of disallowance u/s 14A of the IT Act read with rule 8D, ignoring the fact that assessee failed to prove direct nexus between interest expenditure with taxable income and nontaxable income." The Revenue has raised following ground for A.Y. 2011-12 in ITANo.333/Ind/2017 "Whether on the facts and in the circumstances of the case, Ld. CIT(A) erred in deleting the addition of Rs. 65,73,689/- on account of disallowance u/s 14A of the IT Act." 2. As issues raised in both these appeals are common relating to disallowance u/s 14A of the Act deleted by the Ld. CIT(A), for the purpose of adjudication we will take the facts for A.Y. 2008-09. 3. Brief facts as culled out from the records are that the assessee is a non-banking financial company registered with Reserve Bank of India and is engaged in the activity of long term investments in shares, securities etc. and giving/taking loans from/to body corporate, and is in the category of a company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 673/-. Thereby making the total disallowance of Rs. 17,70,07,881/- (Rs.17,70,07,208/- + Rs. 673/-). The above action of the appellant of making disallowance of net interest has been upheld by following judicial authorities:- ~ Morgan Stanley India Securities Private Limited Vs ACIT, Circle 1 (2), Mumbai [ITA NO. 5072/ Mum/2005 dated 13.04.2011J (ASSESSMENT YEAR 2004-05) ~ DCIT Vs Trade Apartment Ltd. ITAT, Kolkata [ITA NO. 1277/ Kol/ 2011 dated 30.03.2012 (ASSESSMENT YEAR 2008-09) ~ ACIT Vs KESHA V SHARES & STOCKS LTD, ITAT, Delhi [ITA NO. 4394/Del/2011 dated 26.04.2013 (ASSESSMENT YEAR 2008-09) ~ ITO Vs KARNAVATI PERTOCHEM PRIVATE LIMITED, ITAT, Ahmedabad [ITA NO. 2228/Ahdl/2012 dated 05.07.2013 (ASSESSMENT YEAR 2008-09) ~ SAFAL REALITY PVT LTD. Vs A CIT, ITAT, Ahmedabad [ITA NO. 2334 & 1842/Ahdl/2012 dated 29.11.2013 (ASSESSMENT YEAR 2009-10 & 2010-11) In the appellant's own case the AO while completing the assessment pertaining to the assessment year 2004-05, the AO made the disallowance of net interest as adopted by the appellant. The CIT(A), Ujjain while deciding the appeal of the appellant pertaining to the assessment year 2004-05 upheld this method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leting the addition of Rs. 1,76,09,474/- made by the assessing officer on account of disallowance u/s 14A of the Act. 6. Ld. Departmental Representative (DR) vehemently argued supporting the order of the Ld. Assessing Officer. 7. Per contra Ld. counsel for the assessee relied on the finding of the Ld. CIT(A) as well as various decisions held in assessee own case in the preceding years. He also referred and relied following judgments taking the plea that Rule 8D of the IT Rules is not automatic and the assessing officer has to record objective satisfaction before invoking the Rule 8D and also pleaded that only net interest expenses should be considered while computing disallowance u/s 14A r.w.r. 8D: 1. Maxop Investment Ltd. vs. CIT (2018) 91 taxmann.com 154 (SC) 2. Godrej & Boyce Mfg. Co. ltd. vs. DCIT (328 ITR 81) (Bom) 3. Affirmed by Hon'ble Supreme Court in the case of Godrej & Boyce Mfg. Co. ltd. vs. DCIT (2017) 81 Taxmann.com 111 4. H.T. Media Ltd. vs. PCIT (2017) 85 Taxmann.com 113 (Del. HC) 5. CIT vs. I.P. Support Services Indid(P.) Ltd. (378 ITR 240) Del. HC) 6. Shapoorji Pallonji & Co. Ltd. vs. DCIT (2017) 164 ITD 42 (Mum. Trib) 7. Anshul Specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antum disallowance shall be determined by the assessing officer in accordance with the provisions of sub-section (2) and sub-section (3) of section 14A of the Act. In sub-section (2) & (3) of section 14A of the Act reference is given to the method provided in Rule 8D of the IT Rules which has following three limbs: (i) the amount of expenditure directly relating to income which does not form part of total income; (ii) Computing of disallowance of interest expenditure incurred during the year which is not directly attributable to any particular income or receipts; (iii) An amount equal to 0.5% of the annual average of the value of investment. 10. From perusal of the assessment order, we find that Ld. AO had not made any disallowance for the first limb (Rule 8D (2)(i)) of the IT, Rules. However, he made the interest disallowance of Rs. 19,37,39,516/- taking basis of interest paid at Rs. 21,85,75,704/-. From perusal of the records placed before us including the computation of income, audited balance sheet and the finding of Ld. CIT(A), we find that the gross interest and finance charges for the year amounted to Rs. 21,85,75,704/- and there is also an interest income on inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - was made u/s 14A vide order u/s 143(3) dated 15.12.2010, leaving behind an amount of Rs. 8,51,156/-. Certainly some expenditure should have been incurred by the assessee for its regular business activities apart from earning exempt income which the assessee has submitted to have been incurred at Rs. 65,025/- towards salary disallowance and Rs. 63,483/- on account of Statutory Auditors Remuneration. After giving the set off to the above referred expenses remaining amount is Rs. 7,22,648/-(Rs. 851156-65025-63483). Therefore, in the given facts and circumstances of the case the disallowance u/s 14A under the 3rd limb of Rule 8D(2)(iii) of the I.T. Rules stands confirmed at Rs. 7,22,648/- for A.Y. 2008-09. 12. In the result against the total addition made by the assessing officer at Rs. 1,76,09,474/-, we sustain the addition u/s 14A of the Act at Rs. 7,22,648/- of the Act and partly allow the revenue's appeal for A.Y. 2008-09. Now we take up Revenue's appeal for A.Y. 2011-12 13. As aggrieved by both the parties facts of the case for A.Y. 2011- 12 remains the same to that of A.Y. 2008-09. The issue relates to disallowance u/s 14A of the Act at Rs. 65,73,689/-. No disallowance by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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