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2023 (12) TMI 349 - DELHI HIGH COURTDisallowance u/s 14A r.w.r. 8D - assessee had made a suo motu disallowance - HELD THAT:- In a series of judgments it has been held that the disallowance u/s 14A r.w.r. 8D of the Rules cannot exceed the exempt income. Therefore, to our minds, the addition made by the AO, which was sustained by the CIT(A), was wholly unsustainable and thus, according to us, the Tribunal correctly deleted the addition. Disallowance of interest expenses - Utilization of loan for purchase of shares - ITAT deleted the additions - Counsel for respondent / assessee contended that, Revenue, at the fag end of the proceedings came up with the argument that the CIT(A) had taken recourse to an alternate rationale based on the provisions of Section 36(1)(iii) - Revenue contention that although the AO was right in holding that in the balance sheet for FY in issue i.e., FY 2007-08, a part of the shares bought concerning Reliance Industries Ltd. (RIL) was shown as long term investment, they were sold and the profit earned therefrom was offered for imposition of tax. Mr Jain, thus, went on to state that the profit on the sale of all the shares mentioned in Table- II above, which included shares of RIL (except Reliance Liquid Fund) was Rs. 7,10,34,493/-, which as indicated above, was offered for levy of tax. Therefore, the argument advanced by Mr Jain was that notwithstanding the depictions in the balance sheet, once the appellant/revenue has accepted the transaction as one concerning the sale of shares held as stock-in-trade, neither the CIT(A) nor the AO could have made an addition qua interest paid on loan availed by the respondent/assessee. We tend to agree revenue. The borrowings were for the purpose of business. The shares bought from borrowed funds were sold and this profit earned was offered for levy of tax, which was accepted by the appellant/revenue. It is perhaps for this reason that the question proposed by the appellant/revenue does not raise the issue concerning the application of borrowed funds for long-term investment, and hence unavailability of deductions qua interest accrued on it [See Section 36(1)(iii)]. The question, as proposed, is confined to the disallowance made under Section 14A of the Act read with Rule 8D of the Rules. In any event, the well-established principle is that the manner of treatment of an item concerning expenditure and income in the books of accounts or financial statement does not determine its liability under the Act [See Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income Tax, (Central), Calcutta [1971 (8) TMI 10 - SUPREME COURT] At this juncture, the appellant/revenue cannot spring upon the respondent/assessee a new case which is not articulated in the appeal preferred before us. Thus as the exempt income was only Rs. 35,347/-, the disallowance ordered by the AO amounting to Rs. 5,06,73,874/- could not have been made in view of the position in law
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