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TMI Blog2021 (6) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... for earning exempt income, therefore, the assessee prayed since the same being on higher side, a reasonable disallowance be made. ld.CIT(A) has determined the administrative same on adhoc basis, and no nexus has been made between the expenditure incurred and the exempt income. Therefore, to meet the ends of justice, we restrict the disallowance to ₹ 1,50,000/- in each assessment year under appeal. This ground is accordingly allowed. - ITA No.1124 and 1125/Ahd/2018, ITA No.1435 and 1436/Ahd/2018 - - - Dated:- 4-6-2021 - Shri Rajpal Yadav, Vice-President And Shri Amarjit Sinh, Accountant Member For the Assessee : Written submissions For the Revenue : Shri R.R. Makwana, Sr.DR. ORDER PER RAJPAL YADAV, VICE-PRESIDENT: The above four appeals are cross-appeals by the Revenue and the assessee directed against orders of the ld.CIT(A)-7, Ahmedabad of even dated i.e. 12.02.2018 for the above two assessment years. All these four appeals are disposed of by this common order for the sake of convenience. 2. Before dealing with the issues on merit, it is pertinent to mention here that these are recalled matters. The appeals of the Revenue were d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared ₹ 755910 as income u/s 115JB of the act. Assessment was completed u/s 153A rws 143(3) of the act. Later on case was reopened u/s 147 of the act While finalizing the assessment u/s 143(3) rws 147, the assessing officer has made addition of ₹ 24,03,566/- U/s 14A of the Act The disallowance is worked out as per rule 8D of Income Tax Rules. 3. Assessing Officer has erred in making the assessment u/s 147 of the act Assessment order passed u/s 143(3) rws. 147 of the act is untenable in law. Assessment was already finalized u/s 153A rws 143(3) of the act. Assessing officer cannot said to have reason to believe that disallowance should be made u/s 14Aoftheact 4. Therefore order passed u/s 143(3) rws 147 of the act needs to be quashed. Without prejudice to this, we make our submission on merit as below: 5. The details of facts of the case is as under: Particulars Amount Share Capital 11668860 Security Premium 84787500 Capital reserve 1000000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt income. In case of dividend no tax is to be paid by recipient only if dividend distribution tax is paid by company. It means that on sum distributed as dividend, tax is paid but as per legal provision the tax is paid by payer instead of receiver. Therefore it cannot be say that dividend income is totally exempt income. Therefore the provision of section 14(a) should not be applied. 10. The appellant further refers and relies on Guj, HC judgment in the case of Pr. Commissioner of Income Tax-4 vs. Syntex Industries Ltd. Tax appeal no. 268 of 2017. The honorable Gujarat HC has held that when interest free funds are more than investments in shares, no disallowance can be made U/s. 14A of the Act. 11. The appellant also relies on the order of Honorable CITA(A)-12 in the case of Pravinchandra K. Shah ITA no. 106 to 108 dated 28.03.2016. The Id. CITA(A) has deleted addition U/s. 14A of the Act. 12. The appellant therefore submits that the disallowance of ₹ 2403566/- be deleted. 3.2 I have carefully considered the assessment order, facts of the case and the submissions made by the appellant. It is seen from the same that the appellant has furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of interest expenditure. Assessee relied on the proposition that when there is net interest income, then no disallowance can take place under Rule 8D, as held in Nirma Credit Capital Ltd., 300 CTR 286, and that it is the difference between the interest paid and the interest earned which should be considered as assessee s interest expenditure for working out formula prescribed under rule 8D. In other words, for computation of disallowance under Rule 8D, not the gross interest payment, but the net interest payment would be considered. As far as ad-hoc disallowance of administrative expenses at the rate of 0.5% restricted by the ld.CIT(A) as per Rule 8D(iii), this being an adhoc expenses, the assessee prayed to restrict the same to a lumpsum disallowance of ₹ 1,50,000/- in each assessment year. 8. We have heard the ld.DR and gone through the submissions filed by the assessee and also orders of the Revenue authorities and other material available on record. So far as disallowance under section 14A r.w. Rule 8D(2)(ii) are concerned, we have noted that the ld. CIT(A) deleted the disallowances by following the order of ITAT, Ahmedabad ITO Vs. Karnavati Petrochem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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