Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (12) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (12) TMI 501 - ITAT PUNEDisallowance u/s 14A - CIT(A) deleted part disallowance - Held that:- It is an admitted position that no expenses directly attributable to the earning of dividend income has been quantified as per Rule 8D(2)(i) of the Rules. Secondly, proportionate disallowance has been made towards interest expenses attributable to the average investments held by the assessee as per formula laid down in Rule 8D(2)(ii) of the Rules. The plea of the assessee is that non-interest bearing own funds as source far exceeds the corresponding application of funds toward investments. In the circumstances, the contention of the assessee that investment in shares cannot be said to be out of borrowed funds on which the interest expenditure has been incurred is well founded and deserves to be accepted. Mere utilization of OD / CC accounts for routing payment towards investment shares by itself has no consequence as such. The payment out of these overdrafts account is only a way of making payment. The overall position of interest-free funds, borrowed funds, etc. qua the corresponding investments yielding tax-free income is a relevant factor need to be borne in mind. It is not the case of the Revenue that any direct expenses including interest expenses have been incurred. in the case of CIT vs. HDFC Bank Ltd. reported in (2014 (8) TMI 119 - BOMBAY HIGH COURT), wherein the Hon'ble High Court categorically held that in-principle, if there are funds available both interest-free and interest bearing, then a presumption would arise that investment would be out of interest-free funds generated or available with the assessee, if the interest-free funds were sufficient to meet the investments. Hence,disallowance retained by the CIT(A) under Rule 8D(2)(ii) of the Rules is not sustained in law and is therefore directed to be deleted - Decided in favour of assessee. Disallowance carried out under Rule 8D(2)(iii) of the Rules - Held that:- We find that the assessee itself has made a disallowance of ₹ 35,007/- being one month salary of its Accountant towards estimated expenses attributable to the tax-free income. Thus, admittedly, certain expenditure is accepted to have been incurred by the assessee. It is the quantum of estimation which is subject matter of dispute. Statutory framework provides that Rule 8D(2)(iii) of the Rules will come into play when essentially there is certain amount of expenditure which can be said to have been incurred by the assessee for which quantification of exacting standards are not possible. Rule 8D(2)((iii) provides statutory formula for computation of disallowance to cover up probable indirect administrative expenses relatable to tax free income. The assessee has not given any scientific basis for arriving at its own estimation. Ostensibly therefore, preference need to be given to statutory formula over the ad-hoc estimation made by the assessee. The onus lay upon the assessee to prove the quantum of expenditure incurred in earning the taxfree income which remains un-discharged. Accordingly, we decline to interfere with the disallowance sustained by the CIT(A) under Rule 8D(2)(iii) of the Rules On facts, having regard to the colossal investments and dividend income, no cogent basis for disallowance of one month salary of an Accounts person is discernible. The assessee has failed to establish correctness of disallowance offered by it. The ingredients of prima facie satisfaction contemplated under S. 14A are thus present in the facts of the case. The mandate of Rule 8D will thus operate. Hence, the plea of the assessee is not sustainable. - Decided against assessee.
|