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TMI Blog2021 (6) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... on this issue. Disallowance u/s 14A - HELD THAT:- It is a settled position that disallowance of expenditure u/s. 14A read with Rule 8D shall not exceed exempt income earned for the year as per case law Joint Investment Pvt. Ltd.[ 2015 (3) TMI 155 - DELHI HIGH COURT] . The assessee earned exempt income of 42,35,977/- as per computation of income. Therefore, we direct the AO to restrict the disallowance u/s 14A rwr 8D to 42,35,977/-. Disallowance u/s 14A rwr 8D(2)(ii) and (iii) - value of investments should be considered only on the investments from which the assessee has earned exempt income - HELD THAT:- As relying on TRANSPORT CORPORATION OF INDIA LTD. [ 2016 (11) TMI 245 - ITAT HYDERABAD] We direct the AO to recalculate the disallowance as per rule 8D as per the above guidance. We further direct the AO if the disallowance u/s 14A is higher in the recalculation made by the AO, the same shall be restricted to the extent of exempt income earned by the assessee as per the case law Joint Investment Pvt. Ltd[ 2015 (3) TMI 155 - DELHI HIGH COURT] Dividend income should be treated as income from other sources is also not correct - Assessing Officer himself has treated it as a dividend in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure incurred in relation to investment in its subsidiaries without appreciating the fact that investment in subsidiaries was for the purpose of acquiring controlling take in the companies and not for the purpose of earning exempt income . The Appellant therefore prays that the Ld. AO be directed to delete the disallowance of expenditure of ₹ 2,66,66,650/- made under section 14A of the Act. 4. Without prejudice to Ground no. 2 and 3, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not adjudicating the ground that the Ld. AO erred in making disallowance under section 14A of ₹ 3,02,91,857/- which was more than the exempt income of ₹ 42,35,977/- received by the Appellant. The Appellant therefore prays that disallowance under section 14A, if any, should be restricted to the amount of exempt income received by the Appellant. 5. On the facts and in circumstances of the case, the Ld. AO erred in initiating penalty proceedings under section 271(1)(C) of the Act. _. . _ The Appellant therefore prays that the action of the Ld. AO in initiating penalty proceedings be quashed. That the Appellant reserves its right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the captioned case is covered on merits by the ITAT order for AY 2010-11 in ITA No. 2146/Hyd/2017 and AY 2012-13 in ITA No. 988/Hyd/2017 and hence prayed that the addition should be deleted. However, your Honour's asked the AR to file a note / clarification on certain points raised during the course of hearing for the purpose of completeness. For the sake of reference, the relevant ground is re-produced herein below: For the sake of reference, the relevant ground is re-produced herein below: "1. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) - IV ("Ld. CIT(A)"] erred in confirming the action of Deputy Commissioner of Income Tax, Circle 16(1), Hyderabad ("Ld. AO") in restricting the claim of deduction under section 80IA of the Act only to the extent of income from business and profession and thereby not allowing deduction to the extent of ₹ 15,07,380/- from the gross total income. The Appellant therefore prays that the Ld. AO be directed to allow the claim of deduction under section 80IA of the Act against the gross total income." In this regard, we most humbly submit th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground Nos. 2 to 4 are pertaining to disallowance u/s 14A of the Act. Ground No. 5 is relating to initiation of penalty proceedings u/s 271(1)(c), which is premature in nature and assessee does not want to press this ground also. 4. Briefly, the facts of the case are that the assessee filed its return of income for the AY 2011-12 on 30/09/2011 declaring 'Nil' income after claiming deduction under Chapter VI-A and book profits u/s 115JB at ₹ 2,17,47,553/-. The return was processed u/s 143(1) of the Act and subsequently, the case was selected for scrutiny. Accordingly, statutory notices were issued to the assessee, against which, the assessee filed the information as called for. 4.1 During the course of assessment proceedings, with regard to disallowance of interest expenditure u/s 14A, the Assessing Officer observed that the assessee is in receipt of dividend Income to the tune of ₹ 42,35,977/- from Mutual funds during the previous year relevant to assessment year under consideration and claimed the same as exempt, but, no expenditure in this regard had been disallowed u/s 14A. The Assessing Officer further observed that as per the provisions of section 14A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to claim of exempt dividend income which is in contravention to the provisions of Rule 46A of the Income Tax Rules. 5. Any other ground that may be raised at the time of hearing." 9. Briefly the facts of the case are that the assessee filed its return of income for the Asst. Year 2012-13 on 30.09.2012 admitting NIL income after claiming deduction u/s 80IA amounting to ₹ 21,67,91,677/- and book profits u/s 115JB at ₹ 13,78,32,670/-. The return was processed u/s 143(1) on 07.02.2012. Later, the appellant has filed a revised return on 05.10.2012 admitting NIL income after claiming deduction u/s 80IA amounting to ₹ 21,67,91,677/-. Further, it had again filed revised return on 21.11.2012 admitting NIL income after claiming deduction u/s 80IA amounting to ₹ 21,35,54,327/-. The completed the assessment u/s 143(3) of the Act on 31/07/2015 by determining the assessed income of the assessee at ₹ 7,00,54,372/- by making the following disallowances: 1. Disallowance u/s 14A of the Act - ₹ 12,73,86,991/- 2. Daily dividend treated as other sources of income - ₹ 57,60,121/-. 10. When the assessee preferred an appeal before the CIT(A), the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end or withdraw all or any of the Grounds of Appeal and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing." 12. As regards the CO No. 09/Hyd/2020 filed by the assessee, we notice at the outset that assessee's CO suffers from 398 days delay in filing. To this effect, the assessee filed petition for condonation of the said delay stated therein that due to the bonafide belief that the revenue's appeal decided by the CIT(A) is in favour of the assessee caused the impugned delay in filing of the instant appeal. Case law Collector Land Acquisition vs Mst. Katiji & Ors, 1987 AIR 1353 (SC) and University of Delhi Vs. Union of India, Civil Appeal No. 9488 & 9489/2019 dated 17 December, 2019, hold that such a delay; supported by cogent reasons, deserves to be condoned so as to make way for the cause of substantial justice. We accordingly hold that assessee's impugned delay of 398 days is neither intentional nor deliberate but due to the circumstances beyond its control. The same stands condoned. Case is now taken up for adjudication on merits. 13. With regard to ground Nos. 1, 2 & 3 raised by the revenue, the CIT(A) direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment which are exempt from tax. In the present case, it is difficult to identify the funds utilization considering the complicated structure of the business. To address this issue, the legislature has introduced Rule 8D for calculation of disallowance relating to direct expenses associated with the exempt income, interest relating to the investment and administrative expenses. 11.1 While carefully reading the rule 8D(2)(ii), the formula given are: A X B/C Where A = amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year: B = the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year; C = the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year; In particular, the notes for 'B' clearly states that the average value of investment, income from which does not or shall not form part of the total income. It is clear that we have to include those investments whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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