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TMI Blog2021 (7) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... calculation of the disallowance u/s. 14A of the Act. Needless to say that reasonable opportunity of being given to the assessee and the assessee is also directed not to seek unnecessary adjournments. Accordingly this ground is allowed for statistical purposes. Disallowance of differed employee compensation - CIT(A) has dismissed by holding that for want of details were not provided by the assessee - HELD THAT:- The assessee has filed a paper book and has submitted that benefit received by the employee has been added in their income as a prerequisite and properly TDS has been made and in support he has submitted Form No.16 issued to the employees and computation of income. CIT(A) observed that the assessee did not file any details of perquisites paid to the employees to which the CIT(A) has narrated in para No.9.2 in his order - we remit this issue to the file of Assessing Officer for further verification and the assessee is directed to produce all the documents in support of his claim of the expenditure and the Assessing Officer is directed to provide reasonable opportunity of hearing to the assessee. The assessee is directed not to seek unnecessary adjustments. Therefore t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d consequentially the levy of interest on the erroneous demand for taxes thus raised pending the adjudication of this matter. 7. The Appellant craves leave to add to amend, or alter any or all of the aforesaid ground of appeals 2. At the outset, during the course of hearing the ld. AR submitted that the Ground No.5 is not pressed therefore this ground is dismissed as not pressed. 3. The brief facts of the case are that the assessee filed Return of Income on 27.09.2012 declaring total income of ₹ 11,44,45,780. The case was selected for scrutiny and statutory notices were issued to the assessee. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee has debited in the profit and loss account under the head preliminary expenses and claimed deduction u/s.35D of the Act but the Assessing Officer disallowed by holding that payment to ROC for increase in capital is a capital expenditure and added to the total income of the assessee. The Assessing Officer further noticed that the assessee has received dividend of ₹ 6.35 lakhs and claimed the same as exempt income u/s. 10(34) of the Income Tax Act, 1961 ('the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of payment of tax on perquisites and stated that the matter may be sent back to the Assessing Officer for further verification for proof of payment of tax on the deferred employee compensation by the employees. 5. On the other hand, the learned departmental representative relied on the order of the authorities below. He submitted that in respect of ROC expenses, the ld. CIT(A) has relied on the decision of Brookbond India Limited Vs. CIT 225 ITR 798 (SC) is squarely applicable in the present case. Therefore, the Assessing Officer has rightly treat it as a capital expenditure. Further in respect of disallowance made u/s. 14A of the Act, the authorities below have rightly decided this issue, the assessee has received dividend income during the year and in respect of differed employee compensation, he relied on the order of the CIT(A). He further submitted in this regard the assessee could not file any details as well as documents from the SEBI. 6. After hearing both the sides and perusal of the record, the assessee has claimed ROC expenses in the profit and loss account u/s. 35D of ₹ 58,500. This issue has rightly been decided by the CIT(A) on relying on the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee has sufficient own funds which are interest free to make investment. He also relied on various decisions, in particular, Reliance Utilities Power Ltd. (supra). We cannot take this argument further because there exist interest bearing funds and it is difficult to identify the utilization of the funds in the business unless the assessee brings proper records to show that the specific interest free funds were utilized to acquire the 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 bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have restricted the disallowance to the extent of exempt earned by the assessee or less than the exempt income, whichever is lower and the same amount cannot be taxed as income from other source, which amounts double taxation in the hands of the assessee. The dividend amount received by the assessee is exempt as per section 10(35) of the IT Act. The assessee has relied on the following case law, which support the case of the assessee: 1. PCIT Vs. Caraf Builders Constructions (P) Ltd. (ITA No. 1260 of 2018) (Delhi HC) 2. PCIT Vs. McDonalds India Pvt. Ltd., (ITA 725/2018 (Delhi HC) 3. DCIT Vs. Pitti Electrical Equipment Pvt. Ltd. ITA No. 735/Hyd/2018. 4. Vanni Potluri Vs. DCIT, ITA No. 2263/Hyd/2017 5. Mylan Laboratories Ltd. Vs. DCIT, 180 ITD 558. The assessee is unable to demonstrate that on the date of investments he had sufficient own funds available. While calculating the disallowance u/s. 14A, only those investments should be considered which has yielded exempt income. Respectfully following the above decisions of the co-ordinate bench of the Tribunal, we are sending back to the file of Assessing Officer for recalculation of the disallowance u/s. 14A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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