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TMI Blog2020 (1) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... lat rate claimed to have been incurred relating to dividend or exempt income invoking the provisions of section 14A r.w.r.8D. b) The Id. CIT(A) failed to appreciate that having regard to the accounts there is no reason and basis in reaching to dis-satisfaction with the correctness of the claim of the Appellant that no expenditure was incurred in relation to dividend or exempt income which does not form part of the total income. c) In reaching to the conclusion and confirming and enhancing such addition, the Id. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. d) In any case the disallowance u/s. 14A r.w.r. 8D as worked out by the Id. AO and the Id. CIT(A) is excessive and unreasonable. 2.a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition of Z 6,00,40,820/- made by the AO to the book profit of the Appellant and further erred in enhancing the addition by Rs. 24,08,94,387/- (correct amount Rs. 27,63,67,637/-) working out such disallowance to t 33,64,08,457/- by way of adding back disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative of the assessee has argued that the assessee's own funds is more than investment, therefore, in the said circumstances, no disallowance is required in view of the decision of Hon'ble Bombay High Court in the case of CIT Vs. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom). It is also argued that the no disallowance is required in view of the provisions u/s 36(1)(iii) in respect of investment in view of the decision of Hon'ble Bombay High Court in the case of CIT-III Pune Vs. Sharda Erectors P. Ltd. (2016) 76 taxmann.com 107 (Bom) and in view of the decision of Hon'ble ITAT in ITA. No.837/Chd/2018 titled as M/s. Vardhman Polytex Ltd. Vs. DCIT dated 21.06.2019. However, on the other hand, the Ld. Representative of the revenue has refuted the said contentions and strongly relied upon the decision of the CIT(A) in question. In the instant case, it is observed that the assessee has earned the dividend income in sum of Rs. 94,00,147/-. The assessee invested surplus fund in the share of group company and the closing balance in respect of such investment as on 31.03.2013 was of Rs. 80,518.90 lacs. Undoubtedly, the investment generating the exempt income was to the tune of Rs. 801,92,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(iii) interest has been disallowed for the reason that the expenses were not found to have been incurred for the purpose of business of the assessee. In both the cases, however, interest expenditure incurred for making the investment has been disallowed. 28. Since we have held that no interest is to be disallowed u/s 14A of the Act, in the light of the fact that sufficient own funds were available with the assessee which raise the presumption that these interest free funds were used for making the investments, there remains no basis for making disallowance of interest expenses incurred for making the very same investments in any other section, which in the present case is section 36(1)(iii) of the Act. The order of the Ld. CIT(A) deleting the disallowance of interest u/s 36(1)(iii) amounting to Rs. 9.74 crores is therefore upheld. Ground of appeal no.2 raised by the revenue is therefore, dismissed." 5. Therefore, taking into account all the facts and circumstances above and also relying upon the law mentioned above, we are of the view that the no disallowance is required in view of the provisions u/s 14A r.w. Rule 8D(2) of the Act. So far as the disallowance in view of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mate relationship of expenditure with the exempt income for the purpose of making disallowance u/s 14A of the Act. This decision was followed by the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. CIT 328 ITR 81 . 4.10. He further referred to the decision of Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. 347 ITR 272, wherein it has been held that no disallowance could be made under the said section where no expenditure had 'actually' been incurred by the assessee in relation to earning of the exempt income. The Hon'ble Delhi High Court approved the contention raised by the assessee that the term 'expenditure incurred' appearing in Sec. 14A(1) of the Act would mean actual expenditure incurred. Thus, the provisions of sec. 14A of the Act would be applicable only when the assessee had actually incurred certain expenditure which had proximate nexus with earning of exempt income. 4.11. Ld. counsel pointed out that the contention of Revenue that disallowance calculated u/s 14A read with Rule 8D of the I.T. Rules should be ipso facto incorporated in clause (f) of Explanation 1 of section 115JB of the Act on the ground that the scope of both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Great Eastern Exports v. CIT 332 ITR 14, wherein also it has been held that if the language of the statute is plain and capable of one and only one meaning, that obvious meaning is to be given to the said provision. 4.17. Accordingly, ld. counsel submitted that applicability of provisions of sec. 14A is confined to computation of tax liability under the five heads of income enumerated in sec. 14 under normal provisions contained in Chapter IV of the act. The said section 14A cannot be extended and read into section 115JB, falling under Chapter XII-B of the Act. 4.18. Ld. counsel further submitted that scope of section 14A and section 115JB of the act are entirely different. He submitted that u/s 14A of the Act disallowance is made of expenditure in relation to the earning of income not forming part of the total income. Thus, section 14A takes within its sweep both direct and indirect expenditure having proximate connection with earning of exempt income. However, under clause (f) of Explanation 1 to section 115JB of the Act, only those expenditure debited to the profit and loss amount, which are relatable to earning of income exempt u/s 10 (excluding section 10(38) or sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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