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2014 (11) TMI 1041 - AT - Income TaxDisallowance u/s 14A - whether prescribed formula for allocating interest attributable to other income, based on proportionate investment, would apply? - Held that:- As we observe from the investment chart adduced, the source of funding of many an investment in shares is ‘ICD’, i.e., inter-corporate deposits, which only denotes borrowed capital. Further, even as observed during the course of hearing, with reference to the assessee’s balance-sheet (PB pgs.3-14), to of-course no repudiation by the ld. AR, the assessee’s entire capital of ₹ 8.36 crores, both at the beginning and the close of the year, stands completely wiped off; the debit balance of the profit and loss account as at the relevant dates being at ₹ 11.36 crores and ₹ 11.62 crores respectively. The assessee’s net worth being negative throughout the year, all its assets, including the tax-exempt investment in shares, stand financed from borrowed capital in the form of unsecured loans. Proportionate allocation, as advocated by r. 8D(2)(ii), statutorily prescribed per s. 14A, thus becomes even otherwise, i.e., having regard to the assessee’s accounts, the most appropriate method. The interest in respect of the said funds, since lost, would also stand to be allocated amongst the assessee’s assets. Qua this, we observe the interest (income) on advances to be much higher than on investments yielding dividend, so that the loss or deficiency on account of interest cost, which is the principal expenditure, is substantially, if not wholly, attributable to these investments. The proportionate method u/r. 8D(2)(ii) followed by the Revenue, according equal weight to all the assets, irrespective of the income generated by them, and therefore their contribution to the loss (of capital), thus, rather, favours the assessee in the facts of the case. We accordingly find no merit in the assessee’s case, and have no hesitation in upholding the impugned order qua this disallowance. - Decided against assessee Disallowance of book profit u/s.115JB - Held that:- No basis for not confirming the adjustment of the expenditure, as finally sustained for disallowance u/s. 14A(1), in computing the book profit u/s.115JB. - Decided against assessee
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