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TMI Blog2023 (2) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... led its return for income for A.Y. 2011-12 on 21.11.2011 declaring total income at Rs.358,47,29,328/- under normal provisions and book profit of Rs.431,48,93,079/- under section (u/s) 115JB of the I.T. Act. The return was processed u/s 143(1) of the Act on 23.03.2012. The case was selected for scrutiny and notice u/s 143(2) of the I.T. Act 1961 was issued to the assessee on 01.08.2012. The AO made various additions/disallowances - which includes disallowances u/s.14A r.w. Rule 8D amount to Rs.5,11,85,000/- The AO completed assessment vide order dated 03.03.2014. 3. Being aggrieved by order dated 03.03.2014, the assessee company filed an appeal before the CIT(A). 4. The Ld. CIT (A) by his order dated 17.04.2015 partly allowed the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestments that yielded exempt. d. Whether on law and in the facts of the instant case, was the Tribunal justified in not considering interest expenses while calculating disallowance u/s.14A r.w. Rule 8D although assessee has not maintained separate account for the investment related to exempt income. 8. Mr. Suresh Kumar the learned counsel for the appellant submitted that the Assessing Officer (AO) had clearly mentioned in paragraph no.5 of the assessment order that setting-off interest costs of dividend income against other taxable income is against matching concept of income and expenditure. He submitted that there was no need to rely on any presumption of own funds on account of the changed law that came into force from 2007-08 fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 14A of the Act. Sections 14A(2) and (3) of the Act were introduced by the Finance Act 2006 with effect from April 1, 2007. The findings of the Bombay High Court in the impugned order that sub-sections (2) and (3) of section 14A is retrospective has been challenged by the Revenue in another appeal which is presently pending before this court. The said question, therefore, need not and cannot be gone into. Nevertheless, irrespective of the aforesaid question, what cannot be denied is that the requirement for attracting the provisions of section 14A(1) of the Act is proof of the fact that the expenditure sought to be disallowed / deducted had actually been incurred in earning the dividend income. Insofar as the appellant-assessee is conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er such determination is to be made on application of the formula prescribed under rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of section 14A(2) and (3) read with rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. 38. In the present case, we do not find any mention of the reasons which had prevailed upon the Assessing Officer, while dealing with the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting such a proposition, it would be helpful to refer to the decision of the Bombay High Court in Pr. CIT v. Bombay Dyeing & Mfg. Co. Ltd. [IT Appeal No. 1225 of 2015, dated 28-11-2017], where the answer was in favour of the assessee on the question, whether the Tribunal was justified in deleting the disallowance under section 80M of the Act on the presumption that when the funds available to the assessee were both interest free and loans, the investment made would be out of the interest free funds available with the assessee, provided the interest free funds were sufficient to meet the investments. The resultant SLP of the Revenue challenging the Bombay High Court judgment was dismissed both on merit and on delay by this Court." 11. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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