TMI Blog2014 (11) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act is warranted - the assessee rightly argued that the decision in Income-tax Officer, Ward 6(2) (2), Mumbai Versus Daga Capital Management (P.) Ltd. [2008 (10) TMI 383 - ITAT MUMBAI] has been overruled in Godrej & Boyce Mfg. Co. Ltd. vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Since the decision was not available before the AO, therefore the issue should be restored back to the file of the AO for adjudication of the issue afresh in the light of the decision of the Hon’ble Bombay High Court – thus, the order of the CIT(A) is remitted back to the AO for fresh adjudication for adjudicating the issue of disallowance of expenditure u/s. 14A – Decided in favour of assessee. - ITA Nos. 885/Ahd/2011 - - - Dated:- 17-10-2014 - Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submission dtd.25/11/2009. As sec. 14A of the I. T. Act is found to be clearly applicable in the case of the assessee, the assessee vide order entry dfd.27/11/2009 was asked to show cause why disallowance u/s. 14A should not be made in respect of holding of mutual funds and stock in trade of shares. Further the assessee must have incurred administrative expenses such as documentation, salaries of employees,, handling the investment port folio, administrative over heads like stationery, telephone, computer, office equipments, vehicles etc. every year, a part of which can be attributed to the investment port folio. The management is taking decisions whether to invest or disinvest in shares and staff is devoting time on executing such d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. case. It is however noted that the decision of M/s. Hero Cycles Ltd Vs CIT, is pertaining to AY 2004-05, whereas the subsection (2) and (3) of section 14A has been inserted by Finance Act 2006, w.e.f. 01.04.2007. Rule 8D itself was inserted by the IT (fifth amend) Rules, 2008 w.e.f. 24.03.2008. It is also to be noted that the various issues raised by the assessee have been extensively covered and decided in favour of the Revenue in the case of ITO vs. M/s. Daga Capital Management Pvt. Ltd. vide ITA No.8057/Mum/03 for AY.2001- 02, by Hon'ble Mumbai ITAT (SB). It is also to be noted that S.14A disallows expenditure in relation to income which does not form part of total income and in order for the expenditure to be disallowed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O. has to identify expenditure to earn fax free income. (ii) A.O. has to arrive at conclusion as to why he Is not satisfied with the claim of assessee, only then Rule 8D can be invoked, (7) Assessee has stated amount of Rs. J5954/- the interest paid to Bank as can be considered as disallowable u/s I4A. AO has not considered the same nor has given any reason for the same. (8) Working of Rule 8D (a) AO has worked disallowable @ ₹ 6,86,479/-. (b) Working of AO is not correct. (This is subject to the claim that Rule 8D is not applicable). 5. After going through the written submission of the assessee, the Commissioner of Income Tax (Appeals) held as under: 2.3 I have considered the facts of the case, assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. Assessing officer disallowed interest in proportion to average investment with total assets of the appellant company. This gave the correct working of interest expense relating to investment resulting in exempt income. Therefore the disallowance made by the assessing officer is justified. Even though rule 8D is not applicable but disallowance of interest expense relating to investment is to be made and the formula used by the assessing officer gives correct disallowance of interest. Accordingly interest disallowance is confirmed. As regards disallowance of other expenses, AO worked out @ .5% of average investment as per rule 8D. After going through the details of expenses on account of trading and administrative expenses it is seen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital Management Pvt. Ltd. in ITA No.8057/Mum/03 for AY.2001-02 has decided the issue in favour of the assessee. He, observing that u/s. 14A disallowance of expenditure has to be made in relation to income which does not form part of total income and in order for the expenditure to be disallowed actual income need not be earned, disallowed ₹ 6,86,479/-. 7. On appeal, the Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. 8. Before us, the Authorized Representative of the assessee argued that the decision in the case of M/s. Daga Capital Management Pvt. Ltd. (supra) has been overruled by the Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. vs. DCIT (2010) 234 CTR 1 (Bom). Since ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
