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TMI Blog2019 (11) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) TMI 1263 - BOMBAY HIGH COURT] - ITA No. 5673/MUM/2018 - - - Dated:- 7-11-2019 - Shri Mahavir Prasad (JM) And Shri S. Rifaur Rahman (AM) For the Assessee : Shri Nitesh Joshi For the Revenue : Shri S. Michael Jerald (DR) ORDER PER MAHAVIR PRASAD, JM This appeal has been preferred by the assessee against the order of Ld. CIT(A)-9/Cir.4/193/2014-15 dated 16.07.2018 arising out of assessment order dated 24.03.2014 and assessee has taken following grounds of appeal:- 1. (a) The learned Commissioner of Income-tax (Appeals) erred in law in upholding the action of the Additional Commissioner of Income Tax, Range 4(1). Mumbai (hereinafter referred as the Assessing Officer) of disallowing a sum of Rs,23,08,920/- as against to suo-moto disallowance made by the appellant of a sum of ₹ 2,58,264/- by applying provision of section 14A of the income Tax Act, 1961 (the Act) read with Rule 8D(2)(iii) of The Income Tax Rules, 1962 (the Rules). (b) The appellant submits that the action of the Assessing Officer in invoking the provisions of Rule 8D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance to Rs,2,58,264/- under section 14A of the Act; (iii) Without prejudice to what is stated in (i) and (ii) above, to not to consider the stock-in-trade while computing disallowance under Rule 8D of the Rules; (iv) Without prejudice to what is stated in (i), (ii) and (iii) above, to consider investment generating exempt income only while computing disallowance under Rule 8D(2)(iii) of the Rules; (v) to not consider the disallowance made under section 14A of the Act read with Rule 8D of the Rules, while computing book profit under section 115JB of the Act. and to modify the assessment in accordance with the provisions of the Act. 7. Each of the above grounds of appeal ate independent and without prejudice to each other. 8. The appellant craves liberty to add, to alter and /or amend the grounds of appeal as and when given. 2. Assessee has taken multiple grounds with alternative plea but the crux of the ground is that lower authorities had disallowed sum of ₹ 23,08,920/- as against to suo-mto disallowance made by the appellant of a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts India Limited (supra), we confirm the order of CIT(A) allowing the claim of the assessee and dismiss this issue of Revenue s appeal. Revenue s appeal is dismissed. 9. Coming to assessee s appeals in ITA No. ITA Nos. 6249/Mum/2012,6250/Mum/2012,1794/Mum/2014,1096/Mum/2015 for A.Y. 2008-09, 2009-10, 2010-11,2011-12. The only common issue in all these four years is as regards to the disallowance of expenses relatable to exempt income by the AO and confirmed by CIT(A) by invoking the provisions of section 14A of the Act read with rule 8D of the Income Tax Rules, 1962 (the rules). Briefly stated facts are that the AO noted, the assessee has received dividend income of ₹ 43,26,298/- in AY 2008-09, ₹ 45,55,366/- in AY 2009-10, ₹ 47,70,620/- in AY 2010-11 and ₹ 1,47,57,441/- in AY 2011-12. The assessee claimed these dividend incomes has exempt under section 10(34) of the Act in all the years. The assessee suo moto disallowed a sum of ₹ 6,48,945/- (which was revised before CIT(A) vide computation at ₹ 3,81,528/-) for AY 2008-09, a sum of ₹ 3,29,296/- for AY 2009-10, a sum of ₹ 3,24,441/- for AY 2010-11, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted partly to the exempt income, and partly to the taxable income, but the intention of the legislature to allow the expenses only to the extent they are relatable to the earning of taxable income. It has been clarified unambiguously that in computing the total income, no deduction shall be allowed in respect of expenditure incurred by the assessee against the income which is claimed as exempt from tax. Circular No.14 of 2001 dated 22.11.2001, and Circular No.8 of 2002 dated 27.8.2002 have also explained the provisions wherein it has been clarified that no expenses relatable to an income exempt from tax would be allowed as a deduction. 6.7 The explanation filed by the assessee is carefully perused and the same is not acceptable, in view of the above referred decisions, and decision of the i1on'ble ITA'F. Special Bench. Mumbai in the case of Daga Capital Management Pvt. Ltd. The assessee has incurred expenses for earning dividend income which is evident from the fact that the assessee itself has disallowed a sum of lts.6,48945/ on estimated basis. Since the expenses related to earning exempt income have been incurred, the same arc disallowed as per provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claims of the Assessee that no expenditure was incurred to earn the dividend income cannot be accepted and why the orders of the Tribunal for the earlier Assessment Years were not acceptable to the Assessing Officer, particularly, in the absence of any new fact or change of circumstances. Neither any basis has been disclosed establishing a reasonable nexus between the expenditure disallowed and the dividend income received. That any part of the borrowings of the assessee had been diverted to earn tax free income despite the availability of surplus or interest free funds available (₹ 270.51 crores as on 1.4.2001 and ₹ 280.64 crores as on 31.3.2002) remains unproved by any material whatsoever. While it is true that the principle of res judicata would not apply to assessment proceedings under the Act, the need for consistency and certainty and existence of strong and compelling reasons for a departure from a settled position has to be spelt out which conspicuously is absent in the present case. In this regard we may remind ourselves of what has been observed by this Court in Radhasoami Satsang v. CIT [1992] 193 ITR 321/60 Taxman 248 (SC). 13. From the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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