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TMI Blog2023 (11) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the year is only Rs. 18.00 lakhs and some percentage of directors remuneration/salary may be disallowed. We find merit in such submission of ld. AR of the assessee, therefore, we direct that apart from suo moto disallowance being 1.00 % of dividend income, direct expenses and 25% of director s remuneration would be sufficient to meet the end of justice, so far is disallowance under Rule 8D is concern. AO is directed accordingly. In view of the aforesaid factual and legal discussion, the ground no.1 and 2 of appeal are partly allowed. Disallowance u/s 80G for the want of registration certificate - HELD THAT:- Before ld. CIT(A), the assessee filed copy of receipt of donations as well as receipt of donation to both the trusts containing registration under section 80G along with their PAN. We find that copy of certificate under section 80G of both the trusts is placed on record along with the copy of receipt to both the trusts. We further find that the assessee claimed 50% deduction of donation to such trusts. CIT(A) on his satisfaction granted deduction under section 80G on verification of facts. In our view, the order of ld. CIT(A) is based on verification of facts, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Rules whereas the issue under consideration in the decision relied upon by the Ld. CIT(A) was the payment of interest and availability of interest free funds as per the provisions of Section 14A r.w. pre-amended Rule 8D of the I.T. Rules. (3) On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in restricting the disallowance of Rs. 39,75,000/- on account of excess claim of deduction under Sec.80G of the Act to Rs. 33,00,000/- and thereby giving a relief of Rs. 6,75,000/- by observing that the assessee has furnished receipts of donations, during the course of appellate proceeding as well as assessment proceedings, wherein the details of registration of the Trusts under Sec. 80G of the Act were available whereas no such details were furnished by the assessee or even by the Trusts despite issue notice under Sec. 133(6) of the Act by the AO during the course of assessment proceedings. (4) It is, therefore, prayed that the order the Ld. CIT(A)-4, Surat may be set aside and that of the AO may be restored to the above extent. (5) The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 crore. The dividend income was earned mainly from shares and mutual funds held by assessee for the purpose of investment only on which the assessee has already allowed 1.00 % of exempt income. Direct expenses incurred to earn income of Rs. 16,57,950/-, exempt income was already disallowed. The dividend or mutual funds and shares derived by assessee on investment which was made on its own funds and no cost in making such investment to associate such investment. The assessee has not made any borrowing for such investment. The assessee company has not incurred any expenses specifically for carrying out investment activities for reason that investment in shares and mutual funds were made through financial institutions /banks which were providing door step free services for investment relating activities. The necessary paper and other related facilities were provided free of cost. The question for making disallowance under section 14A arise only when assessee has incurred any expenditure in relation to income, which does not form part of total income under the Act or where Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of such expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dal and Rs. 2.50 lakh to Shri Saurashtra Patel Kelawani Mandal. The assessee was asked to furnish the details. The Assessing Officer noted that assessee has not produced 80G certificate issued by the Department to these trusts. The Assessing Officer issued notice under section 133(6) to Dudhiben Ambalal Gondalia Education Foundation Trust, for seeking copy of registration under section 80G. The Assessing Officer noted that Dudhiben Ambalal Gondalia Education Foundation Trust was received and they furnished a copy of registration under section 80G. The other two trust has not furnished any reply. The assessee furnished a copy of letter/confirmation from Shri Leuva Patel Pragati Mandal and Shri Saurashtra Patel Kelawani Mandal, but copy of 80G certificate was not furnished. Accordingly, claim of genuineness of transaction of Leuva Patel Pragati Mandal and Shri Saurashtra Patel Kelwani Mandal was not accepted. The Assessing Officer further recorded that in the revised computation, the assessee stated that donation made to these trust is eligible for 50% deduction only that is Rs. 26.25 lakhs against Dudhiben Ambalal Gondalia Education Foundation Trust and Rs. 6.75 lakhs against both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on distribution of profit after payment of tax and same cannot be termed as income under the exempt income in the hands of partners. The share of profit received by assessee is not from different person. Such income received on account of distribution of profit, cannot be put at par with the other income received on investment like mutual fund or equity share where the prayer is a different entity. However, in the case of firm, the income was not received from a different person. The assessee also relied on decision in assessee s own case for earlier years. On the issue of disallowance under section 80G, the assessee submitted that Saurashtra Patel Kelwani Mandal and Leuva Patel Pragati Mandal Trust contains the registration number under 80G, the assessee also furnished their receipt of donation and prayed that the assessee is eligible for 50% of deduction as their registration certificate under 80G were missing. 9. The ld. CIT(A) on considering the submission of assessee simply relied on the decision of his predecessor in assessee s own case for earlier years in CIT(Appeal) No. CIT(A) Surat/4/10375/2018-19 dated 24.04.2019 and held that the assessee was having interest free f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance was made to avoid the penalty. The assessee itself accepted that they have incurred expenses to earn exempt income, so the applicability of section 14A is not in dispute, which is stand accepted while filing revised computation of income. The ld. CIT(A) submits that order of ld. CIT(A) is contrary to the law applicable for the assessment year under consideration. The ld. CIT(A) simply followed the order of his predecessor without application of mind. The ld. CIT-DR prayed that order of Assessing Officer may be restored by reversing the order of ld. CIT(A). 12. On ground no.2, which relates to disallowance under section 80G, the ld CIT-DR submits that ld. CIT(A) allowed relief to the assessee on the basis of registration number of trust were reflected on their receipt whereas no such details were furnished to the Assessing Officer, even by trust despite issue notice under section 133(6) to those trusts. The ld. CIT-DR submits that he supports the order of Assessing Officer. 13. On the other hand, ld. AR of the assessee supported the order of ld. CIT(A). The ld. AR for the assessee submits that even for invoking amending Rule 8D pertaining to AY.2017-18 and 2018-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of DCIT vs. Reliance Industries Ltd., in ITA Nos.2587 2588/Mum/2022, dated 18.10.2023 and in ACIT vs. Crompton Greaves Ltd. (2019) 111 taxmann.com 338 (Mumbai Trib.) 15. On the disallowance relating to 80G, the ld. AR of the assessee supported the order of ld. CIT(A). The ld. AR submits that all the details registration under 80G is duly reflected on the receipt of trust. Further, the copy of their approval/renewal letters from CIT(Exemption) under section 12AA as well as 80G(5) is also placed on record. The ld. CIT(A) on verification of facts, grant to relief to the assessee. 16. We have considered the rival submission of both the parties and have gone through the orders of lower authorities carefully. Ground No. 1 and 2 relates to disallowance under section 14A. As recorded above, the Assessing Officer while passing the assessment order made disallowance of Rs. 2.70 crore by invoking the provision of amending Rule 8D. The Assessing Officer considered the opening investment as on 31.03.2017 as well as closing investment on 31.03.2018 thereby worked out average value of investment at Rs. 254.27 crore and thereby made disallowance of 1.00 % of annual monthly average. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of investment or pay back is not expenditure incurred in term of Section 14A as has been held by Hon ble Delhi High Court in ACB India Limited Vs ACIT, 374 ITR 108. 18. The Hon ble Apex Court in Godrej and Boyce Manufacturing Company Limited vs. DCIT, 394 ITR 449 (SC) held that object of Section 14A is to widen the theory of apportionment of expenditure and allow only that part of expenditure with relates to income forming part of total income as a deduction. Rule 8D prescribed method to be adopted. Before 2008-09 when Rule 8D was not applicable, the Assessing Officer was required to adopt reasonable method in consistent with the facts and circumstances and material on record. We find that Hon ble Apex Court in Madras Co-Operative Central Land Mortgage Bank Limited vs. CIT, 67 ITR 89 (SC) also held that where the income of cooperative society from its trading activity was exempt from tax, the income of assessee from government securities was apportioned between income earned from investment for trading and non-trading purposes. Thus, we find that in absence of a statutory rule or a departmental instruction, the Hon ble Apex Court has applied the rule of apportioned as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find merit in such submission of ld. AR of the assessee, therefore, we direct that apart from suo moto disallowance which consist of Rs. 4,59,140/- being 1.00 % of dividend income, direct expenses of Rs. 16,57,950/-, and 25% of director s remuneration that is Rs. 4.00 lakhs would be sufficient to meet the end of justice, so far is disallowance under Rule 8D is concern. Thus, the total disallowance worked out, will be Rs. 25,17,090/-. The assessing officer is directed accordingly. In view of the aforesaid factual and legal discussion, the ground no.1 and 2 of appeal are partly allowed. 20. Ground No.3 relates to disallowance under section 80G. The Assessing Officer disallowed Rs. 39,75,000/- for the want of registration certificate under section 80G. We find that ld. CIT(A) while granting relief of Rs. 6,75,000/- out of disallowance of donation to Shri Saurashtra Patel Kelwani Mandal and Shri Leuva Patel Pragati Mandal. Before ld. CIT(A), the assessee filed copy of receipt of donations as well as receipt of donation to both the trusts containing registration under section 80G along with their PAN. We find that copy of certificate under section 80G of both the trusts is placed o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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