TMI Blog2012 (4) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.5,00,00,000/- in bonds of ICICI Bank had not resulted in tax-free income - It is clear from the observations made by the Assessing Officer, in the assessment order, that his intention was to segregate and compute the disallowance to be made of expenses under Section 14A - Held that: the disallowance, if any, to be made by the Assessing Officer will not exceed the disallowance which was made in the original assessment order as reduced by the CIT(Appeals) - Decided in favor of the assessee by way of remand to AO - ITA 92/2011 - - - Dated:- 28-2-2012 - MR. JUSTICE SANJIV KHANNA, MR. JUSTICE R.V. EASWAR, JJ. For Appellant: Mr. Sanjeev Sabharwal, sr. standing counsel For Respondent: Dr. Rakesh Gupta with Ms. Rani Kiyala, Advs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,83,562 5. Investment in Mutual Funds. 1999-00 5,72,50,000 Capital gain on sale of Business invested u/s 54EA for exemption from capital gain tax. 50,01,671 -- Total Investment 18,57,50,000 1,12,89,548 59,83,562 3. At the outset, we may note that the interest earned on bonds issued by the ICICI Bank were taxable and therefore in respect of the said bonds, Section 14A was not applicable. The aforesaid findings recorded by the CIT(Appeals), were not challenged by the Revenue before the Income Tax Appellate Tribunal ( tribunal‟, for short). Therefore, we are concerned only with the items at serial nos.1 to 3 and 5 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come is not out of borrowed funds. The plea of the assessee that it is an old investment cannot discharge the onus cast upon assessee. If the funds invested in various assets can not be identified by the assessee the only other alternative is to apportion these in the ratio of investments. Assessee has not discharged the onus to identify fund invested in assets yielding exempt income. XXXXXXXXXXX The provisions of sec. 14A have been placed after section 14 classifying various heads of income and in the chapter-iv relating to computation of total income. This means that provisions of section 14-A are clearly applicable to all heads of income mentioned in section 14 under chapter IV including Business Income. The reply of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of funds Investment in Dividend yielding Investments Rs.18,57,50,000/- Disallowance: 185750000 x 12540940 = 45,05,724 517004404 (Addition: Rs.45,05,724/-) Accordingly, this addition/disallowance of Rs.45,05,724/- was made by the Assessing Officer. 5. The CIT(Appeals), as observed above, held that the investment with reference to the applicability of section 14A should be taken as Rs.13,57,50,000/- and not as Rs.18,57,50,000/- after inter alia holding that the investment of Rs.5,00,00,000/- in bonds of ICICI Bank had not resulted in tax-free income. Accordingly, the disallowance was proportionately reduced. 6. However, the Tribunal in the impugned order has completely deleted the disallowance. In the case of Maxopp Investment Ltd. Vs. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethod. 42. Thus, the fact that we have held that sub-sections (2) (3) of section 14A and Rule 8D would operate prospectively (and, not retrospectively) does not mean that the assessing officer is not to satisfy himself with the correctness of the claim of the assessee with regard to such expenditure. If he is satisfied that the assessee has correctly reflected the amount of such expenditure, he has to do nothing further. On the other hand, if he is satisfied on an objective analysis and for cogent reasons that the amount of such expenditure as claimed by the assessee is not correct, he is required to determine the amount of such expenditure on the basis of a reasonable and acceptable method of apportionment. It would be appropriate to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of expenditure incurred in relation to income which does not form part of the total income under the said Act. He is required to do so on the basis of a reasonable and acceptable method of apportionment. 7. In spite of the said directions, Dr. Rakesh Gupta, ld. counsel for the assessee, has submitted that there is no need to remit the matter to the Assessing Officer as the Assessing Officer had not made any disallowance under Section 14A, except in respect of interest expenditure. He further says that the contention now raised by the revenue does not emanate from the order of the Tribunal. We are not inclined to accept the said contention. We have noted the observations made by the Assessing Officer while making disallowance under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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