Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2022 (2) TMI 488

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... by the Special bench in the case of Vireet Investments P Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] Disallowance u/s 14A of the Act to be imported in sec.115JB - The issue urged by the assessee is a legal issue and the same has since been settled by the Special bench in the case of Vireet Investments (P) Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] wherein it was held that the disallowance made u/s 14A of the Act cannot be imported in sec.115JB of the Act, meaning thereby, the disallowance required to be made under clause (f) of Explanation 1 to sec.115JB should be computed separately without having regard to Rule 8D of IT Rules. Even though the AO has not computed the total income u/s 115JB of the Act, yet there is merit in the contention of Ld A.R that the correct legal principles should have been followed. Accordingly, we restore this issue to the file of AO with the direction to compute the addition to be made under clause (f) of Explanation 1 to sec.115JB of the Act independently on the basis of financial statements of the assessee - ITA Nos.1704/Bang/2017 And ITA Nos.1740/Bang/2017 And C.O. No.110/Bang/2017 (Arising out of ITA No.1740/Bang/2017) - - - Dated:- 7-2-2022 - Shri .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ss, we find that this analysis made by the AO has never been put to the assessee. AO did not call for explanation with regard to his finding that the investments included loans/advances given to subsidiary companies. In addition the AO also not recorded the satisfaction with regard to the claim of the assessee that own funds were sufficient to meet the increase of investments. Decision of the Co-ordinate Bench in the case of Reliance Utilities Power Ltd. (supra) would definitely come to the aid of the assessee. Nevertheless, whether such own funds were sufficient to cover the additional investments when aggregated with the advances given to subsidiary companies, and whether the latter could be considered is investments giving rise to tax free income requires a fresh look by the AO. Similarly, whether Rule 8D has to be applied with regard to the claim of indirect expenditure also requires a fresh look by the AO. We therefore, set aside the orders of the authorities below and remit the issue regarding disallowance u/s 14A of the Act, back to the file of the AO for consideration afresh in accordance with law. 3. The assessee had earned exempt income of ₹ 75,13,12,159/- .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 5240.44 Investment in securities which yield taxable income 26.96 3 Depreciation reserves 1.03 Sub total (I) 4780.31 Loans to Subsidiary 85.89 Advance for investments 1054.16 Sub Total (II) 1140.05 Total 5605.60 Grand Total 5920.36 He noticed that the loans to subsidiaries amounting to ₹ 85.89 crores and Advance for investments (share application money) amounting to ₹ 1054.16 crores do not give rise to any tax free income. In the case of Aban Investments (P) Ltd vs. DCIT (22 taxmann.com 44)(Chennai- Trib), it has been held that the amount of share application money, till the time allotment is made, is in the nature of debt and hence, the same cannot be considered for purpo .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... lowance of interest expenses enhanced by the AO is set aside. Accordingly, we reject the appeal filed by the revenue. 7. In the cross objection, the assessee has raised five grounds. We found that these grounds are not related to any specific view. The Ld A.R, however, submitted that the assessee s prayer through these grounds is that the disallowance u/s 14A is not warranted. He submitted that, since the interest disallowance u/r 8D(2)(ii) of I T Rules is being considered in the appeal of the revenue, he will confine himself in the Cross Objection with the disallowance of expenses made u/r 8D(2)(iii) of I T Rules. 8. We heard the parties on the issue of disallowance made u/r 8D(2)(iii) of IT Rules. We noticed earlier that the assessee had made disallowance of ₹ 25 lakhs, while the AO determined the disallowance at ₹ 15,31,08,546/-. At the time of hearing, the Ld A.R took us to the various types of expenses incurred by the assessee and submitted that most of the expenses are not related to the earning of exempt income. When the bench proposed that this issue may be restored to the file of the AO to re-determine the disallowance by excluding the value of invest .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates