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TMI Blog2020 (8) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... apprehension of interest expenditure incurred, from the statement of accounts and the books of accounts produced by the assessee before them. Since, the assessee company has claimed that it had invested in its 100% subsidiary company out of its non-interest bearing funds and has not incurred any expenditure towards such investment earning exempt income, We are of the considered view that these factual aspects must be examined by the Ld. AO and if the submission of the assessee company is found to be correct, then delete the addition made by invoking the provisions of section 14A r.w. Rule 8D of the Rules, and if found otherwise pass appropriate order in accordance with law and merit. Disallowance u/s 40(a)(ia) - assessee in default u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is appeal is filed by the assessee against the order of the Ld. CIT (A)-1, Hyderabad in appeal No. 0022/CIT (A)-1, Hyd/2016-17/2018-19, dated 23/08/2018 passed U/s. 143(3) r.w.s 250(6) of the Act for the AY 2013-14. 2. The assessee has raised 17 grounds in its appeal however, the cruxes of the issues are as follows: - (i) the Ld. CIT (A) has erred in confirming the order of the ld. AO who had fallibly invoked the provisions of section 14A of the Act and thereby made an addition of ₹ 1,28,31,825/-. (ii) the Ld. CIT (A) has erred in confirming the order of the Ld. AO who had wrongly invoked the provisions of section 40(a)(ia) of the Act towards payment made on account of interest without deducting tax at source. 3. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant FY is not related to investment made in shares but it was towards improvement of the business activities of the assessee company. (iii) The assessee company had not claimed deduction U/s. 10 of the Act towards the dividend income earned by it for ₹ 55,35,534/- from the investment in shares 4.1 However, the Ld. AO relying on the decision in the case of Godrej Boyce Mfg. Co. Ltd vs. DCIT reported in 328 ITR 81 and Board Circular No. 5/2014 dated 11/2/2014 invoked Rule 8D of the IT Rules r.w.s 14A of the Act and thereby computed the disallowance of expenditure as ₹ 1,28,31,825/-. On appeal, the Ld. CIT (A) confirmed the order of the Ld. AO by agreeing with his views and by further observing as follows: - (i) Fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val submissions and carefully perused the materials on record. On the first instance, the Ld. AR has submitted that the assessee had not claimed deduction U/s. 10 of the Act towards the dividend income of ₹ 55,35,534/- earned by it and therefore the provisions of section 14A cannot be invoked. We do not find this submission of the assessee to be appropriate. Provisions of section 10 of the Act mandates that any income falling in any of the clauses mentioned U/s 10 of the Act shall not be included in computing the total income of a previous year of any person. Therefore, the assessee cannot insist for including such income while computing the total income when the Act itself provides otherwise. It is pertinent to mention that tax canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are met out by the newly formed company itself out of its capital and not by the individual or the assessee company who promotes such subsidiary company. Further, the Ld. Revenue Authorities have not pointed out any expenditure incurred by the assessee company towards such investment other than the apprehension of interest expenditure incurred, from the statement of accounts and the books of accounts produced by the assessee before them. Since, the assessee company has claimed that it had invested in its 100% subsidiary company out of its non-interest bearing funds and has not incurred any expenditure towards such investment earning exempt income, We are of the considered view that these factual aspects must be examined by the Ld. AO and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to in the said proviso . On perusing the facts of the case, we find that the Ld. AO has not verified that the assessee is treated as an assessee in default U/s. 201 of the Act or otherwise. Hence, We hereby remit this issue also back to the file of the Ld. AO to decide the matter in accordance with the provisos of section 40(a)(ia) of the Act cited herein above. 9. Before parting, it is worthwhile to mention that this order is pronounced after 90 days of hearing the appeal, which is though against the usual norms, We find it appropriate, taking into consideration of the extra-ordinary situation in the light of the lock-down due to Covid-19 pandemic. While doing so, We have relied in the decision of Mumbai Bench of the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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