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TMI Blog2012 (7) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... which the appellant has earned exempt income, in computing disallowance u/s 14A as per Rule 8D. 2. That on the facts and in the circumstances of the case, the CIT(A) was not justified and grossly erred in confirming the disallowance of donation of Rs.4,30,000/- made for the purpose of the business. 3. That on the facts and in the circumstances of the case, the CIT(A) was not justified and grossly erred in denying the claim of allowability of leave encashment on provision basis, amounting to Rs.16,09,215/-, as claimed by the appellant. 4. That on the facts and in the circumstances of the case, the CIT(A) was not justified and grossly erred in not directing the Assessing Officer for allowing TDS credit of Rs.1,35,31,105/-, as claimed by the appellant. 5. That on the facts and in the circumstances of the case, on disposal of the appeal, material adjustments would be required in computing total income and tax (including interest, if any, payable by and/or to the appellant) for the assessment year under reference and accordingly necessary directions may please be given. 6. That the appellant craves leave to add, to amend, modify, rescind, supplement or alter any of the grounds stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant has relied on Punjab & Haryana High Court decision in the case of Hero Cycles reported in 323 ITR 518 (2010) (P&H). However, the AO had distinguished this case in the assessment order itself and had stated clearly that the various cases quoted by the; appellant including the Punjab & Haryana decision relates to disallowance of expenditure incurred for interest payments while in the case of the appellant the issue is Rule 80(1)(iii) which relates to investments and not Rule 8D(1)(ii) which relates to interest expenses. Further, the AO had relied on the decision of Hon'ble Mumbai high Court in the case of Godrej and Boyce Mfg. Ltd. reported in 328 ITR 81 2010 Bom) which in turn is based on the Hon'ble Supreme Court's decision in the case of CIT vs. Walfort Shares & Stock Brokers reported in 326 ITR 1 (2010) (SC). The Hon'ble Bombay H1gh Court in the case of Godrej and Boyce Mfg. co. Ltd. has held as under: "The following principles would emerge from section 14A and the decision in CIT v. Walfort Share and Stock Brokers P. Ltd. [2010] 326 ITR 1 (SC): (a) the mandate of section 14A is to prevent claims for deduction of expenditure in relation to income which does not form part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Vs. Income-tax Officer in I.T.A. No.3047/Del./2011; Technopack Advisors Private Limited Vs. Addl.CIT in I.T.A. no.4875/Del./2011; Maxopp Investment Ltd. vs.CIT, I.T.A. No.687/2009 and M/s Balrampur Chini Mills Ltd. vs.DCIT,140 TTJ73(Kol.), the ld. AR argued that in absence of any nexus between borrowed funds and impugned investments, disallowance u/s 14A could not be made. Since the AO did not record any findings that he was not satisfied with the method followed by the assessee, Rule 8D did not come into play, the ld. AR added. 5. On the other hand, the ld. DR supported the findings of the ld. CIT(A) while contending that in the decisions relied upon by the ld. AR in Relaxo Footwears Ltd (supra).Moral Trading & Investment Ltd.(supra) & Technopack Advisors Private Limited(supra), matter had been restored back to the file of AO for re-computation of disallowance u/s 14A of the Act read with Rule 8D of the IT Rules,1962. The ld. DR added that in terms of provisions of section 14A of the Act, disallowance has to be worked out in terms of Rule 8D of the I.T. Rules, 1962. 6. We have heard both the parties and gone through the facts of the case as also the decisions relied upon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective of the fact whether any income is earned by the assessee or not and the provisions of sec. 14A of the Act do not envisage any such exception. 6.5 Hon'ble jurisdictional High Court in a recent decision dated 18.11.2011 in Maxopp Investment Ltd. vs. CIT,[2011] 15 taxmann.com 390 (Delhi) held as under: "41. Sub-section (2) of section 14A, as we have seen, stipulates that the Assessing Officer shall determine the amount of expenditure incurred in relation to income which does not form part of the total income "in accordance with such method as may be prescribed". Of course, this determination can only be undertaken if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. This part of section 14A(2) which explicitly requires the fulfillment of a condition precedent is also implicit in section 14A(1) [as it now stands] as also in its initial avatar as section 14A. It is only the prescription with regard to the method of determining such expenditure which is new and which will operate prospectively. In other words, section 14A, even prior to the introduction of sub-sections (2) & (3) would require the assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing officer is not, on the basis of objective criteria and after giving the assessee a reasonable opportunity, satisfied with the correctness of the claim of the assessee, he shall have to reject the claim and state the reasons for doing so. Having done so, the assessing officer will have to determine the amount 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." 6.6 As already observed, in the instant case, the assessee denied incurring any expenditure for earning income, which does not form total income during the course of assessment proceedings even when huge investments of Rs.114,72,12,000/- were made by the assessee in shares and securities.. In terms of the aforesaid decision of the Hon'ble jurisdictional High Court, even where the assessee claims that no expenditure has been incurred in relation to income which does not form part of total income, the AO is required to verify the correctness of such claim. In case, the AO is not, on the basis of objective criteria and after giving the assessee a reasonable opportu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nexus of the said donation with the business of the assessee nor established as to how the said expenditure was incurred wholly and exclusively for the purpose of business. Accordingly, the AO disallowed the claim. 8. On appeal, the ld. CIT(A) upheld the findings of the AO in the following terms:-: ""5. Ground NO.3 relates to the disallowance of donation of Rs 4,30,000/-. According to the appellant this donation was made for the purpose of business. The AO, as per the assessment order, had requested the appellant vide order sheet entry dated 27.12.2010 to explain as to how this expenditure is allowable as being incurred for the purpose of their business. Since no explanation was furnished, the AO disallowed this expense towards donation to its sister/parent concern. Even during the appellate proceedings, the appellant had not furnished any explanation as to how these donation paid to its sister/parent concern is an allowable deduction. Section 37(1) of the Act clearly states that 'any expenditure laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head profits and gains of business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to establish the nexus of the aforesaid amount with the business of the assessee, apparently the claim is not admissible. The ld. AR relied on decisions in Hindustan Petroleum Corporation Ltd.(supra) & Rajasthan Spinning & Weaving Mills Ltd.(supra).In both these decisions, it was concluded that expenditure was incurred for promoting the business of the assessee. However, in the instant case before us ,the assessee did not produce any evidence before the lower authorities and even before us, evidencing that expenditure was incurred wholly & exclusively for the purpose of business of the assessee or was towards advertisement. In the absence of any basis, ground no.2 in the appeal is dismissed. 12.. Ground no.3 in the appeal relates to disallowance of Rs.16,09,215/- provision for leave encashment. Since the assessee did not place any evidence before the AO that an amount of Rs.16,09,215/- on account of provision for leave encashment was actually paid, the AO showcaused the assessee as to why the amount be not disallowed in terms of provisions of sec. 43B(f) of the Act. To a query by the AO, the assessee relied upon the decision of Hon'ble Calcutta High Court in Exide Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... frastructure Ltd. to allow Leave encashment on provision basis is not in conformity with the above Supreme Court's decision. Since the Supreme Court has held that M/s Exide Industries Ltd. is to pay tax as if Section 43B (f) is on the Statute Book, I also decide the issue against the appellant following the above Supreme Court's decision. However, the appellant can move a rectification petition, if the final decision in the Supreme Court is in favour of M/s Exide Industries Ltd. Therefore, this ground of appeal also stands rejected." 14. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. AR on behalf of the assessee while referring to decision in Exide Industries Ltd. Vs. Union of India (2007) 292 ITR 470 (Cal); Universal Cables Ltd. vs. DCIT in ITA no.954/Kol./2010;DCIT Vs. Indraprastha Gas Ltd. in ITA nos 2213 & 5875/Del./2011contended that claim is admissible, decision of co-ordinate Bench being binding. 15. On the other hand, the ld. DR while inviting our attention to the findings of the AO, quoting the observations of the Hon'ble Supreme Court in their directions dated 8th May, 2009 while granting stay of demand until disposal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deductors are involved in deducting taxin the case of the appellant. However, as per as the present provisions of the Income Tax Act, there is no recourse available to the deductee to get credit regarding TDS for any mismatch in the departmental computer system. As per section 199(2) of the I.T. Act credit for tax deducted is automatic and there is no provision in the Income Tax Act for appeal before the CIT (A) against the non-granting of TDS credit u/s 199(2). The appellate authorities are not provided with any access to the departmental computer system to verify any of the details regarding TDS credit. Therefore, the recourse available to the appellant is to approach the concerned administrative authorities with grievance petition. Since the credit for TDS u/s 199(2) of the Income-tax Act, 1961 is not appealable u/s 246A of the Income-tax Act, 1961, this ground of the appeal is also stands rejected." 18. The assessee is now in appeal before us against the aforesaid findings of the ld. learned CIT(A).The ld. AR on behalf of the assessee did not make any submissions before us on this ground. 19. We find that the ld. CIT(A) while rejecting the ground of appeal directed the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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