TMI Blog2012 (6) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been reopened under sec. 147 nor the settled issues have been intended to be upset u/s 154 - the AO was justified in disallowing the claim of interest u/s 14A - against assessee. - IT APPEAL NO. 4149 (DELHI) OF 2002 - - - Dated:- 17-2-2012 - I.P. BANSAL, K.D. RANJAN, JJ. Ajay Vohra and Gaurav Jain for the Appellant. Raj Tandon for the Respondent. ORDER K.D. Ranjan, Accountant Member This appeal by the assessee for Assessment Year 1999-2000 arises out of the order of the Commissioner of Income-tax (Appeals)-VIII, New Delhi. The ground of appeal raised by the assessee is reproduced as under:- "On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in upholding the disallowance of interest of Rs. 24,441,238 in the computation of 'Income from Business' as claimed by the Assessee Company." 2. During the course of hearing the learned Authorized Representative of the assessee during the course of hearing filed the following additional ground:- "2. Without prejudice, the CIT (Appeals) erred on facts and in law in not directing the assessing officer to allow set-off of brought forward losses agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) has not adjudicated upon this ground of appeal though the same was specifically raised,, it will be appropriate to set aside the matter to the file of the learned CIT(A) with the directions to decide this ground of appeal in accordance with law. We order accordingly. 4. The remaining issue for consideration relates to upholding the disallowance of interest under sec. 14A in respect of exempt income from dividends. The facts of the case stated in brief are that the assessee received dividend from Max India Ltd. amounting to Rs. 10.18,57,783/-. During the relevant period the assessee had total trading assets of Rs. 24,70,31,783/- out of which shares of M/s. Max India Ltd. were of Rs. 19,61,43,,895/-. The assessee had debited an amount of Rs. 3,28,14,797/- to profit loss account on account of interest paid. On a query being raised, it was explained by the assessee that out of total interest paid, interest of Rs. 7,80,188/- relates to loans taken for acquiring capital assets and the same was added back in computing the total income. Balance amount of Rs. 3,20,34,829/- related to the loans taken for acquiring trading assets and loans given. In view of these fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. We have heard both the parties and perused the material available on record. Section 14A was inserted in the Statute by the Finance Act, 2001 with retrospective effect from 1.04.1962 and reads as under:- "14A. Expenditure incurred in relation to income not includible in total income For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act." Proviso to sec. 14A was inserted by the Finance Act, 2002 with retrospective effect from 11.05.2001 and reads as under:- "Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001." CBDT Circular No.14 of 2001 dated 12th December, 2001 explained the scope and effect of the new provision. It has been explained that new sec. 14A has been inserted so as to clarify the intention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sec. 143(1). Thereafter, the AO vide notice dated 27th March, 2008 reopened the assessment under sec. 147/148 inasmuch as he was of the view that the dividend income for which exemption was claimed by the assessee, proportionate expenses should have been disallowed under sec. 14A of the Act. As mentioned above, the facts of the case are distinguishable as in the case of assessee no proceedings under sec. 147/148 have been initiated. 11. In the case of EWS Finance Investment Ltd. ( supra ) the AO initiated proceedings under sec. 148 for the purpose of disallowance of interest relatable to exempted income under sec. 10(33) of the Act. In this case Assessment Years involved were 1999-2000 and 2000-01 i.e. prior to insertion of sec. 14A of the Act. It was held that the proceedings which have become final before 1.4.2001, should not be re-opened u/s 147 of the Act. The facts of this case are also not applicable to the facts of the assessee's case as in the case of assessee the AO had issued notice under sec. 143(2) for the purpose of verification of claim made by the assessee in the return of income. If the contention of the assessee is accepted to be correct, it would me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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