TMI Blog2014 (6) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred by the assessee are much more than the disallowance and the incurring of expenses for earning exempt income is very much there - the disallowance as per the mandate of rule 8D(2)(iii) is held to have been rightly made and confirmed – Decided partly in favour of Assessee. Deletion of disallowance u/s 40(a)(ia) of the Act – Held that:- The ACIT authorized the assessee to make payment to M/s Vikson Finance & Investment Pvt. Ltd. without deduction tax at source only during the period 23.1.2008 to 31.3.2008 - The assessee was regularly deducting tax at source from brokerage payment up to 30.11.2007 - How the assessee presumed for not deducting tax at source for the period 1.12.2007 to 22.1.2008 is not understandable - there can be no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no expenditure was incurred for earning such exempt income. Rejecting the assessee s contention, the Assessing Officer invoked the provisions of sec. 14A and worked out disallowance of Rs. 7,25,956/- u/s 14A of the Act, comprising of two amounts, viz., Rs. 5,42,970/- towards proportionate interest and Rs. 1,82,986/- towards expenses @ 0.5%. No relief was allowed in the first appeal. 4. Having heard the rival submissions and perused the relevant material on record, we find that there is a clear application of section 14A r.w.r. 8D to the facts as are obtaining before us as per the judgment of the Hon ble jurisdictional High Court in Maxopp Investments Ltd. and others Vs. CIT (2012) 247 CTR (Del). It has also been held in this case that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t advanced to the sister concern, disallowance of part of interest out of the total interest paid by the assessee to bank was not justified. The Hon ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bombay) has held that if there are interest free funds available with the assessee sufficient to meet its investment and at the same time loan has been raised, it can be presumed that the investments were from interest free funds and resultantly, no disallowance of interest can be made. In reaching this conclusion, the Hon ble Bombay High Court relied on the judgment of the Hon ble Supreme Court in the case of East India Pharmaceutical Works Ltd. Vs. CIT (1997) 224 ITR 627 (SC). In the light of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The grounds taken by the assessee on this issue are therefore, partly allowed. 11. The only issue raised by the Revenue in its appeal through various grounds is against the deletion of disallowance of Rs. 1,19,05,785/- made by the A.O u/s 40(a)(ia) of the Act. The facts apropos this issue are that the assessee made payment of sub-brokerage to M/s Vikson Finance Investment Pvt. Ltd. Out of total sub-brokerage paid at Rs. 5.68 crore during the year, the assessee deducted tax at source only on a sum of Rs. 4.14 crore. On being called upon to explain the reason for not deducting tax at source on the remaining amount, the assessee submitted that M/s Vikson Finance Investment Pvt. Ltd. had intimated to the assessee that it had applied for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is disallowance by inter alia observing that there was no motive for the assessee company to indulge in manipulation of accounts as there was no credit for such sub-brokerage in the accounts for the year. He further emphasized on the point that the Department collects tax from the taxpayer through certain modes and TDS is only one of such modes. He noticed that when the ACIT, Chandigarh was satisfied that the tax liability in the hands of M/s Vikson Finance and Investment Pvt. Ltd. was not such as requiring any deduction tax at source, the assessee was obliged not to make deduction of tax at source from the payments made to it. That is how the disallowance came to be deleted. The Revenue is aggrieved against such deletion. 12. Having hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en adjudicated by the ld. CIT(A). The ld. AR submitted that this argument should be considered and decided in the present proceedings in favour of the assessee. We find that there is no reference to section 194H in the assessment order and further in the absence of any finding on this issue by the ld. CIT(A), we are unable to take it up for decision straightway. In our considered opinion, it would be in the interest of justice if this issue is sent back to the ld. CIT(A) for rendering decision on it after considering the correct factual and legal position. We, therefore, set aside the impugned order on this issue and remit the matter to the file of the ld. CIT(A) for rendering decision on this contention raised by the assessee. 14. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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