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TMI Blog2019 (3) TMI 1857X X X X Extracts X X X X X X X X Extracts X X X X ..... s challenged the order passed by the Ld. CIT(A) in restricting the disallowance of Rs. 91,25,846/- to Rs. 19,311/- made u/s. 14A of the Act. The assessee company has filed his return of income on 26.09.2014 declaring total income at Rs. 49,69,50,500/- followed by revised return of income filed on 31.03.2016 declaring total income at Rs. 49,62,23,790/- which was processed u/s. 143(1) of the Act. Under scrutiny notice u/s. 143(2) of the Act was issued on 31.08.2015 followed by a further notice dated 10.06.2016 u/s. 143(2) r.w.s 129 of the Act due to change in incumbent. A further notice u/s. 143(1) of the Act dated 26.04.2016 and 07.07.2016 were issued and served upon the issue along with the questionnaire. 3. During the course of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Increase in Investments Excess of total income over increase in investments 1 2008-09 129940463 20000000 109940463 2 2009-10 105724893 69844692 35880201 3 2010-11 200946099 0 200946099 4 2011-12 266826770 0* 266826770 5 2012-13 252258200 17500000 234758200 6 2013-14 392183560 0 392183560 7 2014-15 496275794 0 496275794 4. However, the submissions that the assessee is in possession of ample interest free fund in the form of capital, free reserve and accumulated profit which is substantially higher than the investment was not found acceptable by the Ld. AO. He, therefore, applying the provision u/s. 14A read with rule 8D disallowed Rs. 91,25,846/- and added to the total income of the assessee b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied upon certain decisions / judgments. 3.5. It has been claimed by the appellant that it has interest free fund of Rs. 85,68,38,722/- in form of share capital and reserves and surplus against the investment of Rs. 10,83,31,128/-. Therefore, appellant had sufficient interest free fund to make investment. The appellant has further submitted that investment has been made in the subsidiary company MAS Rural Mortgage and Housing Finance Limited as strategic investment and has received dividend income amounting to Rs. 19,311/- which was exempt. Therefore no disallowance u/s. 14A is called for and in any case, the disallowance cannot exceed to the exempt income of dividend as has been held by Hon'ble ITAT, Ahmedabad in the case of Chudgar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble High Court has held as under:- "9. In the present case, the AO has not firstly disclosed why the appellant/assessee's claim for attributing Rs. 2,97,440/- as a disallowance under section 14A had to be rejected. Taikisha says that the jurisdiction to produced further and determine amounts is derived after examination of the accounts and rejection if any of the assessee's claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the AO - an aspect which is completely unnoticed by the CIT(A) and the ITAT. The third, and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs. 48,90,000/-, the disallowance ultimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that appellant had only exempt income of Rs. 19,311/-. It has been held by Hon'ble ITAT, Ahmedabad in the case of Chudgar Racnhhodlal Jethalal Vs. DCIT in ITA No. 245/Ahd/2013 (supra), that the disallowance cannot exceed to the exempt income of dividend. 3.7. Reliance is also placed on the decisions of jurisdictional ITAT, Ahmedabad in the following cases;- (i) M/s. Shree Laxmi Bidi Trading Co. Vs. DCIT[CO No.315&316/Ahd/2014 dt. 30/03/2015] (ii) Jivraj Tea Limited Vs. DCIT Circle - 1, Surat [ITA No. 866/Ahd/2012 dated 28/08/2014 (Ahmedabad Tribunal) (iii) Wladhusudan Industries Ltd. Vs. ITO [ITA No. 1715/Ahd/2011 dated 13/02/2015 (Ahmedabad Tribunal) (iv) M/s. K. Ratanchand & Co. vs. Income Tax Officer, Ward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,846/- is restricted to Rs. 19,311/-. Relief is granted for the balance disallowance." 6. At the time of hearing of the instant appeal the Ld. Advocate appearing for the assessee submitted before us that the disallowance u/s. 14A cannot be made more than the tax free income. In this particular case since the appellant had only exempt income of Rs. 19,311/- such disallowance of Rs. 91,25,846/- exceeding the exempt income not sustainable. He, therefore, relied upon the order passed by the Ld. CIT(A) in restricting the disallowance to the dividend income of Rs. 19,311/-. He also relied upon the judgment passed in the case of Jivraj Tea Ltd. vs. DCIT Circle-1 by the Surat Bench in ITA No. 866/Ahd/2012 dated 28.08.2014 of the Hon'ble Ahmedabad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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