9911796707
TMI Blog2018 (7) TMI 2272X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchase and sale of investment.Therefore, we hold that the AO has rightly invoked the provision of Rule 8D for making the disallowance of expenditure in relation to dividend income.Thus, we are of the view that the disallowances made by the AO and subsequently confirmed by the Ld. CIT(A) are as per Rule 8D(2)(iii) of Income Tax Rule. Disallowance u/s 14A determining the profit u/s.115JB - assessee before the ld. CIT(A) submitted that the disallowances made under the provisions of Section 14A of the Act could not be applied while determining the profit u/s 115JB - HELD THAT:- We hold that the 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 of CIT Vs. Jayshree Tea Industries Ltd. [ 2014 (11) TMI 1169 - CALCUTTA HIGH COURT] - AO needs to work out the disallowances in terms of the clause (f) to Explanation-1 of Sec. 115JB of the Act independently after considering the expenses debited in the profit loss account as mandated under the provisions of law. Therefore we are inclined to restore this issue to the file of AO for fresh adjudication by law and in the light of above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad challenged the very levy of interest u/s. 234B, 234C and 234D of the IT. Act. 4. The respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of cross objections either before or during the course of hearing of the same." 4. The issue raised by the Revenue in its appeal and the first issue raised by the assessee in its ground of CO is common, and therefore we are clubbing them together for adjudication. 5. The issue raised by the Revenue in this appeal is that ld. CIT(A) erred in deleting the addition made by the AO for Rs. 39,29,249/- u/s 14A r.w.r. 8D(ii) of the Income Tax Rule. The assessee is against the confirmation of the addition made by the ld. CIT(A) for Rs. 8,00,154/- u/s 14A r.w.r. 8D(iii) of the Income Tax Rule. 6. Briefly stated facts are that the assessee in the present case is a Limited Company and engaged in the business of transmission of electricity. The assessee during the year has earned dividend income for Rs.13,12,976/-, which was claimed as exempted income u/s 10(34) of the Act. However, the assessee has not made any disallowance of the expenses incurred in relation to such exempted income. The assessee during the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned, it is observed that such interest is paid on Term Loan taken for project purpose and this facts were also explained before Assessing Officer which is not found to be incorrect. Considering these facts, interest paid on such loan cannot be considered for computing proportionate disallowance of interest as per Rule 8D(ii). The Hon'ble Chennai ITAT in the case of ACIT V/s Best & Crompton Engineering Limited (ITA no 36 taxman.com 555 has held as under. "II. Section 14A of the Income-tax Act, 1961, read with rule 8D of the Income-tax Rules. 1962 - Expenditure incurred in relation to income not chargeable to tax [Bank interest] - Assessment year 2009-10 - Assessing Officer while computing disallowance under section 14A read with rule 8D, included bank interest and interest on term loan - Commissioner (Appeals) excluded said interest from calculation of disallowance as assessee had utilized both loans for purpose of purchase of machineries and for expansion of projects and these loans were specifically sanctioned for these projects - Whether Commissioner (Appeals) had rightly excluded such interest from purview of computation of disallowance under rule 8D(2) - Held, yes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al confirmed the view of the CIT(A) making following observations: "33. We have heard the rival contentions and perused the material on record, The undisputed facts are that during the year the assessee has earned interest of Rs. 17.45 crore on tax free bond and debentures as against which the assessee had suo motu disallowed Rs. 5.53 crore being the interest expenses u/s. 14A as against which the AO has worked out the disallowance of Rs. 32.76 crore. After giving the credit of disallowance of Rs. 5.53 crore made by the Assessee, the AO disallowed Rs. 27.23 crore u/s. 14A. As on 31st March, 2003, the interest free funds available with the assessee was to the tune of Rs. 3404 crore (comprising of share capital of Rs. 230 crore Reserves of Rs. 689 crores and interest free demand deposits and Rs. 2485 crores) as against which the tax free investments were to the tune of Rs. 589 crore. Thus the interest free funds were far in excess of the investments. CIT(A) has given a finding that the facts in AY 2003-04 are identical to the facts of the case in AY 2002-03 and accordingly he has followed the decision of CIT(A) for AY 2002-03. These facts have not been controverted by the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove, we conclude that there is no question of making the disallowance on account of interest expenses under Rule 8D (2)(ii) in the given facts and circumstances. Thus the ground of appeal of the Revenue is dismissed. 10. Now coming to assessee's ground raised in the CO: The ld. Counsel for the assessee before us submitted that the addition has been made merely on estimated basis. Therefore, the same cannot be sustained. The ld. Counsel for the assessee submitted that the investment made by it represents less than 10% of its interest-free owned capital. Consequently, it is a minor investment and therefore no deduction of administrative expense u/s 14A r.w.r 8D is required to be made. Ld. AR in support of his claim relied on the judgment of Hon'ble Gujarat High Court of India in the case of PCIT vs. Sintex Industries Ltd. reported in 82 taxmann.com 171, wherein, it was held as under: "Considering the aforesaid facts and circumstances, more particularly the fact that the assessee was already having its own surplus fund and that too to the extent of Rs. 2319.17 crores against which investment was made of Rs. 111.09 crores, there was no question of making any disallowance of exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and purchase of investment as evident from schedule 6 of the Financial Statement, placed on page 37 of the PB. The relevant extract of schedule 6 is reproduced as under: Schedule - '6' Investment (AT cost) As at 31st March, 2011 As at 31st March, 2010 Current Investment (Non-Trade) in Units (Unquoted) No of Units Rs. No. of Units Rs. Kotak Floater Long Term Plan - Daily Dividend - - 9,923,121 100,023,075 HDFC Cash Management Fund - Treasury Advantage Plan - - 3,988,546 40,011,100 Birla Sun Life Savings Fund - Institutional - Daily Dividend - - 4,998,104 50,015,025 Birla Sun Life Cash Plus -Institutional Premium -Growth 5,109,666 80,000,000 - - ICICI Prudential Flexible Income Plan - Daily Dividend - - 473,001 50,012,753 80,000,000 240,061,953 Year ended 31st March, 2011 Year ended 31st March, 2010 Current Investments Purchased and sold during the year: No of Units Rs. No. of Units Rs. Kotak Liquid (Institutional Premium) - Daily Dividend - - 8,178,781 100,010,950 HDFC Liquid Fund - Daily Dividend 3,922,607 40,003,530 3,922,645 40,003,922 Birla Sun Life Cash Plus - Institutional - Daily Dividend 1,851,590 20,001,433 4,629,18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n hand. Therefore we are reluctant to take any guidance and support from such a case, i.e. Gulshan Investment company Limited (Supra). Thus, we are of the view that the disallowances made by the AO and subsequently confirmed by the Ld. CIT(A) are as per Rule 8D(2)(iii) of Income Tax Rule. Thus, the ground raised by the assessee in its CO is dismissed. 12. Now coming to Cross Objection No.61/Ahd/2015: The issue raised by the assessee in its cross objection is that ld. CIT(A) erred in confirming the disallowance made by the AO for Rs.47,29,403/- while determining the profit u/s.115JB of the Act. The AO during the assessment proceedings has made the disallowance of Rs.47,29,403/- under the provision of Section 14A r.w.r. 8D of Income Tax Rule. The disallowances made by the AO were accordingly added in the books of profit while determining the profit u/s 115JB of the Act. 13. Aggrieved, assessee preferred an appeal to ld. CIT(A). The assessee before the ld. CIT(A) submitted that the disallowances made under the provisions of Section 14A of the Act could not be applied while determining the profit u/s 115JB of the Act. However, the ld. CIT(A) disregarded the contention of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (MAT) under section 115JB of the Act. The disallowance made under the normal computation of Income under section 14A r.w.r. 8D of Income Tax Rule for Rs. 47,29,403/- was added in determining the profit u/s 115JB of the Act. However, we note that in the recent judgment of Special Bench of Hon'ble Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 Taxmann.com 415 that the disallowances made u/s 14A r.w.r. 8D cannot be the subject matter of disallowances while determining the net profit u/s 115JB of the Act. The relevant portion of the said order is reproduced below: "In view of above discussion, the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to the computation as contemplated under section 14A, read with rule 8D of the Income-tax Rules, 1962." The ratio laid down by the Hon'ble Tribunal is squarely applicable to the facts of the case. Thus it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot resort while determining the expenses as mentioned under clause (f) to explanation 1 to section 115JB of the Act. However, it is also clear that the disallowance needs to be m ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
