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TMI Blog2019 (6) TMI 1109X X X X Extracts X X X X X X X X Extracts X X X X ..... irect the AO to restrict the disallowance u/s. 14A in each of these three years to the extent of exempt income earned by the assessee in each of these 3 years and such total disallowance to be made to the extent of exempt income should be inclusive of disallowance made by the assessee suo moto. On this issue, the ground of assessee is partly allowed for statistical purposes. Disallowance of professional charges - allowable business expenditure - HELD THAT:- Categorical finding is given by CIT(A) that assessee is not able to substantiate the claim made and demonstrate that these payments were indeed made for the purpose of business. In spite of this categorical finding of CIT (A), nothing has been brought on record before us to establish that these payments were made for the purpose of business. As per the assessment order for Assessment Year 2009-10, it is seen that it is noted by the AO that year that AR was asked to specifically explain the actual services rendered by these parties and also provide necessary evidence to prove that the services rendered by these parties is of relevance to the business of trading. But assessee failed to explain the same despite giving sufficie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt income earned if any is required to be recorded for invoking the provision of section 14A of the act and in the absence of any such satisfaction no disallowance can be made U/s.14A of the act. 5. The learned Commissioner of Income Tax (Appeals) erred in ignoring the fact that, the appellant earned dividend of ₹ 1, 66, 143/- only and against such income a disallowance of ₹ 70, 29, 354/- under rule 8D(2)(iii) r.w.s 14A of the act cannot be made in as much as this has resulted in illogical, absurd and highly unreasonable disallowance. 6. The learned Commissioner of Income Tax (Appeals) erred in ignoring the position of law as laid down by ITAT, Mumbai-Trib in the case of Sajjan India Ltd V. Additional Commissioner of Income Tax, Range-7(2), Mumbai (2018) 89 Taxmann.com 21 (Mumbai-Trib), wherein it is held that only those instruments and securities which yielded exempt income during the previous year is to be considered for disallowance, thereby the investments which did not yield any exempt income cannot be considered for disallowance at all. 7. The learned Commissioner of Income Tax (Appeals) erred in ignoring t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The learned Commissioner of Income Tax (Appeals) erred in ignoring the position oflaw as laid down by ITAT, Mumbai-Trib in the case of Sajjan India Ltd V. Additional Commissioner of Income Tax, Range-7(2), Mumbai (2018) 89 Taxmann.com 21(Mumbai- Trib), wherein it is held that only those instruments and securities which yielded exempt income during the previous year is to be considered fordisallowance, thereby the investments which did not yield any exempt income cannot be considered for disallowance at all. 7. The learned Commissioner of Income Tax (Appeals) erred in ignoring the fact that, all the expenditure claimed by the appellant was for the purpose of business activity carried on by it and under the circumstances there was no case for disallowance ofany portion of the expenditure. 8. The learned Commissioner of Income Tax (Appeals) erred in ignoring the fact that, the total operative and administrative expenses claimed by the appellant was ₹ 1, 26, 99, 361/- and out of this expenditure there could not have been disallowance to the extent of ₹ 1, 14, 68, 338/- which is highly unreasonable and absurd. 9. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax, Range-7(2), Mumbai (2018) 89 Taxmann.com 21(Mumbai-Trib), wherein it is held that only those instruments and securities which yielded exempt income during the previous year is to be considered for disallowance, thereby the investments which did not yield any exempt income cannot be considered for disallowance at all. 8. The learned Commissioner of Income Tax (Appeals) erred in quantifying a disallowance of ₹ 8, 63, 17, 806/- being portion of interest expenses not directly attributable to any income under Rule 8D(2)(ii) r.w.s 14A of the act, ignoring the factthat, the total interest expenses claimed by the appellant in the statement of assessable income was ₹ 1, 44, 86, 902/- and there could not have been more is allowance than the expenditure claimed itself. 9. The learned Commissioner of Income Tax (Appeals) erred in ignoring the fact that, all the expenditure claimed by the appellant was for the purpose of business activity carried on by it and under the circumstances there was no case for disallowance ofany portion of the expenditure by invoking provisions of Rule 8D(2)(iii) r.w.s 14A of the act. 10. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if the dividend was earned in course of holding of shares for business purpose. Thereafter, the ld. AR of assessee raised the second contention that even if disallowance has to be made, the same should not exceed the amount of exempt income earned in each of these years. In support of his contention, he placed reliance on the Tribunal order rendered in the case of M/s. Way2wealth Securities (P) Ltd. vs. DCIT in ITA No. 1679/Bang/2017 dated 01.06.2018. He submitted a copy of this Tribunal order. Our attention was drawn to Para 8 of this Tribunal order and it was pointed out that in this case, the Tribunal has followed the judgment of Hon ble Delhi High Court rendered in the case of Joint Investments (P) Ltd. vs. CIT as reported in 372 ITR 694 wherein it was held that the disallowance u/s. 14A of IT Act cannot exceed the exempt income. He further pointed out that the Tribunal has considered one more judgment of Hon ble Delhi High Court rendered in the case of CIT vs. Holcim India Pvt. Ltd. as reported in 272 CTR 282 (Del) in addition to the Tribunal order of Mumbai Bench rendered in the case of Future Corporate Resources Ltd. vs. ACIT in ITA No. 4658/Mum/2015 dated 26.07.2017. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Resources Ltd v. ACIT, ITA No.4658/Mum/2015 dated 26.07.2017 relating to AY 2011-12 and it was held by the Tribunal Mumbai Bench that disallowance u/s. 14A ofthe Act cannot exceed the exempt income. Following the aforesaid decisions, we hold that disallowance u/s. 14A of the Act in the present case should be restricted to the exempt income earned by the assessee. We hold and direct accordingly. 4. Respectfully following this Tribunal order, we direct the AO to restrict the disallowance u/s. 14A in each of these three years to the extent of exempt income earned by the assessee in each of these 3 years and such total disallowance to be made to the extent of exempt income should be inclusive of disallowance made by the assessee suo moto. On this issue, the ground of assessee is partly allowed for statistical purposes. 5. Now we take up the second issue regarding disallowance of ₹ 13 Lakhs out of professional charges in Assessment Year 2009-10 raised by assessee in this year as per ground no. 8. In this regard, the ld. AR of assessee reiterated the same contentions which were raised before CIT(A). The ld. DR of revenue supported the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) is that, the appellant has not been able to substantiate that, the payment was made indeed for the purpose of the business. We submit that, the expenditure has been incurred genuinely and is in the business interest of the company. In view of this, the expenditure is allowable as revenue in the hands of the company. Copy of the invoice raised by M/s.KKR Holdings Mauritius which was submitted to the Assessing Officer and also the CIT(A) are enclosed. Copy of the certificate issued by M/s. Manjunath Associates, Chartered Accountants confirming the fact of the company M/s.Coffee day Resorts (P) Ltd raising US $ 200 millions (INR 960 crs) towards equity is alsoen closed. It is owing to the services rendered by M/s.KKR Holding Mauritius, that thecompany was in a position to raise such funds. With this investment the net worth of the company M/s.Coffeeday Resorts (P) Ltd increased substantially and since the appellant company had substantial holdings in the said company, the net worth of the appellant company also increased. Under these circumstances, the expenditure was claimed as revenue by the appellant company. In view of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in this company i.e. M/s. Coffeeday Resorts Pvt. Ltd. is around ₹ 170.97 Crores. Even if the shares of that company i.e. Coffeeday Resorts Pvt. Ltd. has been issued at very high premium and because of that, if the market value of assessee s investment in that company has gone up, it cannot be said that any expenditure incurred in this regard is business expenditure of the assessee company because the shares are held by the assessee as an investment. 11. This issue in Assessment Year 2011-12 was decided by the ld. CIT (A) as per Para 9 of his order which is reproduced hereinbelow for ready reference. 9. The Appellant has questioned the disallowance of ₹ 4, 68, 00, 000/- paid as professional charges toone KKR Holdings Mauritius. The Appellant has not been able to substantiate the claim made and demonstrate that this payment was indeed made for the purpose of business. This payment appearsto be payment out of Capital, unrelated to business. The addition made. is sustained. 12. As per above Para reproduced from the order of CIT(A), it is seen that a categorical finding is given by CIT(A) that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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