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TMI Blog2020 (10) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... iture incurred as attributable to earning such exempt income, had to the disallowed u/s 14A r.w.r. 8D (ii) "On the facts and circumstances of the case and in law the Ld CIT(A)erred in deleting the disallowance under section 14A of the Act of Rs. 31,79,51,492/-. relying on the decision of Bombay High court in the case of India Ac/vantage Securities Ltd. (1131 of 2013) dated 13.04.2015, even though the Hon,ble Supreme in its judgment dated 12.02.2018 in Civil Appeal Nos. 104-109 of 2015, in the case of Maxopp Investment Ltd. vs. Commissioner of income-tax New Delhi, has held that the dominant purpose for which shares were held was not relevant for applicability of section 14A. (iii) "On the facts and circumstances of the case and in law the Ld C/T(A) erred in deleting the disallowance under section 14A of the Act of Rs. 31,79,51,492/-, relying on the decision of Bombay High Court in the case of India Advantage Securities Ltd. (1131 of 2013) dated 13.04.2015, even though the Hon'ble Supreme in its judgment dated 12.02.2018 in Civil Appeal Nos. 104-109 of 2015, in the case of Maxopp Investment Ltd. vs. Commissioner of income-tax New Delhi, has held that irrespective of the objectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence, is liable to be set aside. It is also argued that CIT(A) has ought to relied upon the case titled as Maxopp Investemnt Ltd. CIT 2018 (91 taxmann.com 154) in the interest of justice. However, on the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deem it necessary to advert the finding of the CIT(A) on record.:- "6.1 This is a recurring issue in the case of the appellant and similar disallowance have been made by the AO for the preceding assessment years i.e. AY 2012-13 and 2013-14. In fact the language of the AO in all the three years while making the disallowance is the same. For assessment years 2012-13 and 2013-14, the assessee filed appeal with the CIT(A) who had deleted the disallowance made by the AO. On further appeal to ITAT by the department, the Hon'ble ITAT upheld the order of the Ld. CIT(A) and decided the issue in favour of the assessee. While deciding the issue, the Hon'ble ITAT held as under; "13. We have heard rival contentions and perused the record. The undisputed facts remain that the assessee is a trader in shares and securities and the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correctness of working of disallowance made by the assessee, having regard to the accounts of the assessee, the AO is not entitled to determine the disallowance in accordance with Rule 8D of I.T Rules. 14. The assessee has placed Its reliance on various case laws to support the above said proposition. For the sake of convenience, we extract below the relevant observations made by Hon'ble Supreme Court, Hon'ble jurisdictional Bombay High Court and other High Courts, on which the assessee had placed reliance'. (a) Extract from the judgment of Hon'ble Supreme Court in the case of Godrej & Boyce Manufacturing Company Limited 394 ITR 449 (SC) "Nevertheless, irrespective of the aforesaid question, what cannot be denied is that the requirement for attracting the provisions of Section 14A(1) of the Act is proof of the fact that the expenditure sought to be disallowed/deducted had actually been incurred in earning the dividend income." "Sub-sections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Delhi High Court in the case of Hero Management Services Limited 360ITR 68 (Del.) "Further to invoke Rule 8D, the Assessing Officer has to first record a finding that he was not satisfied with the correctness of the claim for expenditure made by the assessee in relation to income, which did not form part of die total income under the Act No such satisfaction has been recorded by the Assessing Officer. In view of die aforesaid discussion, we do riot find any reason to interfere with the impugned order. The appeal has no merit and is dismissed in limine". (d) Extract from the judgment of Hon'ble Punjab & Haryana High Court in the case of Hero Cycles Ltd. 323 1TR 518 (P & H.) 'In view of finding reproduced above, it is clear that the expenditure on interest was set off against the income from interest and the investment in the share and funds were out of the dividend proceeds. In view of this finding of fact, disallowance under section I4A was not sustainable. Whether, in a given situation, any expenditure axis incurred, which was to be disallowed, is a question of fact. The contention of the revenue that directly or indirectly some expenditure is always i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stent with the observations made by High Courts. (a) First of all, the assessee does not hold any security as its investment, whereas the AO has proceeded to make observations on sources of funds for making investments. This fact shows that the AO has not understood the facts correctly. (b) Secondly, the AO has taken the view that the borrowed funds should be considered as used for making investments, which Is against the principles laid down by Hon tile Bombay High Court in the case of HDFC Bank Ltd (366 ITR 505). (c) Thirdly, the AO has expressed the view that- making of investments and earning of exempt income requires efforts. This is contrary to the following observations made by Hon'ble Supreme Court in the case of Maxopp Investment Ltd (supra):- "40 It is to be kept in mind that in those cases where shares are held as stock in trade as business proposition. Whether dividend is earned or not becomes immaterial. In fact, it would be a quirk of fate that when the investee company declared dividend, those shares are held by the assessee, though the assessee has to ultimately trade those shares by selling them to earn profits." (d) Fourthly, the AO has observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has decided the issue on the basis of the decision of Hon'ble ITAT in the assessee's own case for the A.Y. 2012-13 & 2013-14. It is specifically mentioned that the AO had recorded the similar reason while disallowing the expenditure to earn the exempt income in all the three years. The assessee filed an appeal before the CIT(A) who confirmed the order of the AO but the assessee filed an appeal before the Hon'ble ITAT in which the expenditure was restricted to the extent of expenditure which has been declared by assessee. The CIT(A) has reproduced the judgment of the Hon'ble ITAT in his order. The CIT(A) has also discussed the several law including the India Advantage Securities Ltd (supra) and Maxopp Investment Ltd. (supra). The facts are not distinguishable at this stage. Needless to say that the AO nowhere recorded the satisfaction to arrive at this conclusion of reasonable expenditure incurred to earn the exempt income. No books of accounts were examined in this regard. We nowhere found any illegality and infirmity in the order passed by the CIT(A) in question. Accordingly, no interference was warranted on the part of us. We uphold the finding of the CIT(A) on this issue and d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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