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TMI Blog2020 (12) TMI 440X X X X Extracts X X X X X X X X Extracts X X X X ..... on the working under rule 8D. Ld. AO has given a long commentary of section 14A, rule 8D and other matters, but has not recorded her satisfaction in respect of the correctness of the suo-moto disallowance of Rs. 14,00,000/- with reference to the accounts of the Appellant. Since no proper satisfaction is recorded, addition of Rs. 47,07,953/- be deleted. c) That the Ld. CIT has erred while calculating disallowance under/rule 8D(2)(iii) of IT Rules. Securities generating or which shall generate taxable income are to be excluded under rule 8D (2)(iii). d) That non dividend paving securities are to be excluded for the working under rule 8D (2)(iii). e) That the suo-moto disallowance of Rs. 14,00,000/- is withdrawn. It is prayed that the total addition of Rs. 47,07,953/- be deleted. 3. a) That on the facts and circumstances of the case and in law the Ld. CIT has misdirected himself in confirming addition of Rs. 47,58,833/- towards irrecoverable amount from NSEL. b) That the loss suffered, is an allowable loss u/s. 28 read with section 36(2) of the IT Act, as the loss is suffered during the course of the appellant business, including money lending, carried on in the ordinary cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issatisfaction and the disallowances have been completed in accordance with the provisions of Rule 8D(2). He relied on the judgments in the case of Haryana Land Reclamation and Development Corporation 302 ITR 218 (P & H), Dhanuka & Sons 12 Taxmann 227 (Col.), Abhishek Industries 286 ITR 128 (P & H) 6. Rebutting the arguments of ld. DR, it was argued that most of the investments were made in the earlier year and from the assessee's own funds and in the absence of invocation of Section 14A(2), no further disallowance is called for. 7. Heard the arguments of both the parties and perused the material available on record. 8. We find that while the AO has disallowed Rs. 1.51 Cr. u/s. 14A. The ld. CIT(A) based on the judgment of the ITAT in the case of ACIT Vs. Vireet Investments Pvt. Ltd. (2017 TOIL 923 ITAT Del) has reduced the amount to Rs. 47.07 lacs by re-computing the average value of the investments yielding dividends. 9. We have also gone through the entire assessment order page nos. 3 to 13 and the commentary in the case laws quoted by the Assessing Officer. Infact, it is a treatise on the provisions of Section 14 which is well appreciable. However, the AO failed to follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, i.e. computation. For instance, what are taxable and in what proportion and the principles applicable are embedded in the statute in certain provisions, such as Sections 28 to 43 and Sections 80A to 80HHC when it comes to deductions. Instead of adopting that mode, the Parliament thought it appropriate to leave the mode to the rule making authority. In that sense, the rules are not merely procedural but are substantive and can be said to be engrafted in the statute, as is evident from the mandate of the first part of Section 14A(2). That apart, significantly, the question of applying the statutorily prescribed method would arise only and only if the AO expresses an opinion rejecting the assessee's methodology and the figure offered at the time of assessment. This is material because the jurisdiction to go into the method prescribed in the Rules arises only if the amounts the assessee offers does not have any realistic correlation with the tax exempt income. For instance, in a given case, if a tax exempt income is to the tune of Rs. 5 crores and the assessee is able to satisfy that expenditure relatable to that income or the reasonable nexus to such income is Rs. 25 lakhs, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld. CIT(A). The ld. CIT(A) has also not allowed the loss as capital loss on the grounds that there has not been any existence of a capital asset. 15. During the hearing before us, the ld. AR argued mainly that if the amount is not allowable u/s. 36(2)(ii), the same is still allowable u/s. 28 of the Act as the amount has been invested and lost in the same year. 16. The ld. DR argued that the primary intention of the assessee is investment and hence at the most it can be allowed as capital loss. 17. Heard the arguments of both the parties and perused the material available on record. 18. The issue involves deduction under two specific section namely Section 28 and Section 36 and 37. There is a subtle difference between the business loss and business expenditure while loss arises from regular operation of the business, business expenditure is conscious charge in an endeavor to earn income. Sections 30 to 36 deal specifically with expenditure allowable in computing the taxable income and Section 37 is a general provision for allowing the deductions of expenditure taking into consideration the business of the assessee. The exception being capital expenditure and personal expe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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