9911796707
TMI Blog2021 (7) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... has been recorded by the AO before making disallowance u/s 14A - after perusal of the information on record filed by the assessee we observe that assessee has made investment in equity share of listed company's debentures, bond units of mutual fund etc. and all these have been made through portfolio management consultant who has provided full fledge services in that respect - assessee had suo-motu disallowed an amount u/s 14A - looking to the quantum of exempt income and investment made by the assessee it will be appropriate to restrict the disallowance out of administrative expenditure to the amount - Therefore, appeal of the assessee is partly allowed. Disallowance as per the clause (f) to Explanation-1 of Sec. 115JB for addition u/s 14A r.w.r. 8D - HELD THAT:- Disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction in the case of CIT Vs. Jayshree Tea Industries Ltd. [ 2014 (11) TMI 1169 - CALCUTTA HIGH COURT] . As independently. In this regard, we note that there is no mechanism/ manner given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to worko ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) has erred both in law and on the facts of the case in not following the binding decisions of Hon'ble Gujarat High Court allowing credit of owned funds while computing the disallowance u/s 14A of the Act r.w. Rule 8D of the Income-tax Rules, 1962. 5. The learned CIT(A) has erred both in law and on the facts of the case in confirming that disallowance u/s.14A is to be made while calculating book profit u/s. 115JB. 6. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 7. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld.AO in levying interest u/s.234A/B/C of the Act. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment is ₹ 11,35,49,611/- as against ₹ 41,92,66,874/-. As per appellant the disallowance under Rule 8D(2)(iii) would be ₹ 10,25,016/- The AO is directed to verify the table submitted by the appellant and allow the claim as per Rule 8D(2)(iii). The ground of appeal is accordingly partly allowed. 5. Being aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us. 6. The Ld. A.R before us filed a paper book running from pages 1 to 76 and contented that the assessee has already made suo moto disallowance of ₹ 42,89,298/- against such exempted income besides the disallowance made u/s 14A of the Act for ₹ 67,416/- 7. For this purpose Ld. AR drew our attention on page 72 of the paper book. Accordingly the Ld. AR submitted that further disallowance under the provision of section 14A r.w Rule 8D will be gross injustice to the assessee. 7.1 On the contrary the Ld. DR before us submitted that the assessee has not made the disallowance in pursuance to the provision of section 14A r.w Rule 8D against exempted income. As such the assessee failed to furnish the details of the expenses qua the exempted income. Furthermore, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses cannot be said to have been incurred for the purpose of the business. Furthermore, the revenue has also accepted that the above expenditure of ₹ 42,89,298/- were incurred in connection with the capital gain income. Thus the contention of the learned AR that the assessee has made the disallowance of the aforesaid expenses under the provisions of section 14 A of the Act does not appear to be true. 8.3 Now the 2nd question arises for our adjudication so as to whether the disallowance in the given facts and circumstances is required to be made under the provisions of section 14-A read with rule 8D of Income Tax Rules. The provisions of section 14A of the Act mandates to make the disallowance of the expenditure incurred in connection with the exempted income. The next step is to determine such expenditure i.e. incurred in connection with such exempted income. The onus lies upon the assessee to determine such expenditure. Admittedly, the assessee has made the disallowance under the provisions of section 14A for ₹ 67,416/- only. The sum of ₹ 67,416/- represents the payment made to the consultant who was looking after the investments. As such the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has made the disallowance after recording the satisfaction as mandated under the provisions of section 14A read with rule 8D of Income Tax Rule. 8.7 Before parting we also find that the tribunal in the own case of the assessee for the assessment year 2013-14 and 2014-15 in ITA No. 2524 and 2525/AHD/2017 involving identical facts and circumstances has restricted the disallowance to the tune of ₹ 3 Lacs only vide order dated 31/07/2019. The relevant finding of the order of the ITAT bearing ITA No. 2524/AHD/2017 for the assessment year 2013-14 reads as under: We have heard the rival contention and perused the material on record. The AO has computed the disallowance under Sec. 14A to the amount of ₹ 12,62,7707-. However, the Ld. CIT(A) has confirmed the disallowance to the extent of ₹ 10,28,1417- after excluding investment in the nature of mutual fund etc. With regard to the issue in appeal that AO has not recorded any satisfaction for making disallowance under Sec. 14A of the Act, we noticed that AO at Page 5 of the assessment order has clearly stated that assessee has not maintained any record to demonstrate that no administrative expenditure has been incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) partly confirmed the order of the AO. 11. Being aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us. 12. The Ld. AR before us submitted that there cannot be disallowance on the amount made under the provision of section 14A r.w. Rule 8D while computing book profit under the provision of section 115JB of the Act. 13. On the other hand Ld. DR vehemently supported the order of the Ld.CIT(A) 14. We have heard the rival contentions of both the parties and perused the materials available on record. The AO in the instant case has made the disallowance u/s 14A r.w.r. 8D of the Income Tax Rules for ₹ 20,96,334/- while determining the income under normal computation of income. Further, the AO while determining the income under Minimum Alternate Tax (MAT) as per the provisions of section 115JB of the Act, has added the disallowance made under the normal computation of Income under section 14A r.w.r. 8D of Income Tax Rule for ₹ 20,96,334/- in pursuance to the clause (f) of explanation 1 to section 115JB of the Act. 14.1 However, we note that in the recent judgment of Special Bench of Hon ble Delhi Tribunal in the case of ACIT vs. Vir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. In this regard, we note that there is no mechanism/ manner given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income. Therefore in the given facts circumstances, we feel that adhoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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