Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (6) TMI 777 - AT - Income TaxDisallowance made u/s 14A r.w. Rule 8D of the Act – Voluntary disallowance of expenses by the company – Held that:- Rule 8D is mandatory - The legislature has prescribed Rule 8D with effect from 24th March, 2008 as the method for determination of amount of expenditure incurred in relation to exempt income - by using the word "shall" in sub-section (2) of Section 14A, the legislature has made it mandatory for the AO to determine the amount of expenditure incurred in relation to exempt income as per the method - the legislature has provided in Rules the method for apportionment of the expenditure between the exempt income and taxable income - the AO as well as the other statutory authorities under the Income-tax Act are also required to determine the amount of expenditure in relation to exempt income as per the method prescribed in the Rules – Relying upon Bharat Hari Singhania Vs. CWT – [1994 (2) TMI 55 - SUPREME Court] – Decided against Assessee. Computation of disallowance made by the AO – Held that:- The AO noted that the assessee has received substantial exempt income and the disallowance u/s 14A r.w Rule 8D is called for - the disallowance has three components and aggregate of all the three components is the amount which is to be disallowed - assessee has considered only the first component i.e., the amount of expenditure directly relating to exempt income. He has not considered Part (ii) and (iii) of Rule 8D(2) – thus, the computation made by the assessee for disallowance u/s 14A(2) was not in accordance with Rule 8D and the AO has duly noted it in the assessment order and thereafter proceeded to compute the disallowance as per Rule 8D. The expenses which assessee claimed to have been not incurred for earning of exempt income have not been considered by the AO at all - the disallowance itself is ₹ 65,36,743 - assessee has not disputed the value of investment as taken by the AO for the purpose of computing the disallowance at half per cent as provided by Rule 8D(2)(iii) - whether the working of the disallowance of interest as per Rule 8D(2)(ii) is correct or not is of academic interest – thus, the disallowance worked out by the AO which was the aggregate of three components as prescribed under Rule 8D(2) was ₹ 99,45,325 - finally, the AO restricted the disallowance to ₹ 52,56,197 – thus, no relief is due to the assessee from the disallowance made by the AO at ₹ 52,56,197 – Decided against Assessee.
|