9911796707
TMI Blog2023 (12) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... in Mutual Funds is only ₹15.60 crores. Therefore, there cannot be any disallowance of interest expenditure under Rule 8D (2)(ii) of the Rules. Accordingly, interest disallowance made by the learned Assessing Officer for A.Y. 2016-17 of ₹21,92,534/- is not sustainable. Further, the administrative expenditure disallowed of ₹7,28,155/- is far more excess than the amount of exempt income earned by the assessee of ₹53,873/-. Therefore, we direct the learned Assessing Officer to restrict the disallowance u/s 14A of the Act for A.Y. 2016-17 to only ₹53,873/-. Coming to the A.Y. 2017-18, it apparent that assessee has earned exempt income of ₹7,59,432/-. Assessee has also issued suo moto disallowance of Demat charges and security transaction tax. However, the learned Assessing Officer computed annual average of monthly averages of the investment made at ₹11,09,38,464/- and therefore, disallowed at 1% thereof at ₹11,09,300/-.We direct the ld AO to compute the disallowance u/r 8 D considering only the on the investment which yielded exempt income during the year. Further, the computational error stated by the Ld AR also needs to be verified. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as Supreme Court without considering the fact that the assessee did not challenge the validity of Rule 8D but Rule 8D can be applied only when provisions of Section 14A(2) is applicable. 3. Ld. Commissioner of Income Tax (Appeals) has also erred in not considering the fact that investment in shares also includes short term investments which is taxable, hence he has erred in disallowing 1% of average investments including short term investments. 4. Ld. Commissioner of Income Tax (Appeals) has erred in just stating that the Finance Act, 2002 has against amended and inserted as Explanation to section 14A of the Act, to clarify that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where exempt income has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the previous year in relation to such exempt income claiming that the amendment has nullified several judgments as relied by the appellants wherein it was held that no disallowance u/s 14A of the Act could be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where exempt income has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such exempt income claiming that the amendment has nullified several judgments as relied by the appellant wherein it was held that no disallowance u/s 14A of the Act could be made in respect of any expenditure incurred in earning any exempt income, in the absence of any exempt income without considering the fact that amendment of Section 14A which is for removal of doubts cannot be presumed to be retrospective, even where such language is u 5 Ld. Commissioner of Income Tax (Appeals) has erred in confirming disallowances of Rs. 11,09,384 made by A.O without considering provisions of Section 14A(2) including amendment in Finance Act, 2022. 04. Brief facts as culled out from the assessment order for A.Y. 2016-17 shows that assessee is the company engaged in the business of trading in coal and providing services as coal handler. It filed its return of income on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income on 28th October, 2017, declaring total income of ₹14,25,45,560/-, wherein the assessment order passed resulted into disallowance under Section 14A of the Act of ₹11,09,384/, in the assessment order passed under Section 143(3) of the Act dated 18th December, 2019. Assessee has earned long term capital gain of ₹7,59,043/- being exempt income. The similar reasons were given by the assessee and similar reasons were shown by the learned Assessing Officer for making the addition. On appeal before the learned CIT (A) for the reasons given above in A.Y. 2016-17, the disallowance was confirmed. 09. Therefore, the assessee is in appeal before us. Assessee contested that the assessee has enough non-interest bearing funds available than the amount of investment made in exempt income earning investments. It was further stated that assessee has not incurred any expenditure for earning exempt income. He otherwise submitted that the exempt income earned by the assessee for A.Y. 2016-17, is only ₹53,873/- and similarly, for A.Y. 2017-18, assessee has earned long term capital gain of ₹7,59,043/-. Therefore, the disallowance cannot exceed the exempt income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n mutual funds such investment cannot be made without incurring any expenditure. Merely, the dividend income is received in the bank account of the assessee but the disallowance of investment also requires expenditure. In view of this, we find that the learned Assessing Officer has recorded satisfaction before invoking the provisions of Rule 8D of the Rules about the correctness of claim of the assessee. However, we agree with the assessee that the disallowance cannot be exceeded the exempt income earned by the assessee. In the present case, it is also claimed by the assessee that it has interest free funds available with it in the form of share capital and free reserve, which are far in excess of the amount of investment made in Mutual Fund. For A.Y. 2016-17, assessee has fund of ₹81 crores as share capital and free reserves whereas the investment in Mutual Funds is only ₹15.60 crores. Therefore, there cannot be any disallowance of interest expenditure under Rule 8D (2)(ii) of the Rules. Accordingly, interest disallowance made by the learned Assessing Officer for A.Y. 2016-17 of ₹21,92,534/- is not sustainable. Further, the administrative expenditure disallowed o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
