TMI Blog2014 (7) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... nd is applicable only from Assessment year 2008-09 - it cannot be said that no expenditure is required to be incurred for making investments and receiving dividends - All the activities require involvement of various management and finance personnel which involves expenditure - Rule 8D has been rightly invoked by the AO – Decided partly in favour of Assessee. - ITA No.599 & 600,644,645/Chd/2013 - - - Dated:- 20-5-2014 - T R Sood And Sushma Chowla, JJ. For the Appellant : Smt Jyoti Kumari For the Respondent : Shri Sumeet Khurana ORDER:- PER : Bench These are cross appeals directed against the order dated 22.3.2013 of the Ld CIT(A), Patiala. Some issues are common in these appeals which were heard together and are being disposedoff by this consolidated order for the sake of convenience. ITAs No.599 600/Chd/2013 - Revenue Appeals 2. In both these appeals identical grounds have been raised by the Revenue in Assessment year 2008-09 which are as under: 1 In the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of ₹ 80,81,719/- made by the A.O on account of disallowance of expenditure incurred interalia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other hand, the Ld. Counsel for the assessee submitted that the issues are covered by the order of the Tribunal for earlier years and in this regard he referred to various issues filed in books of accounts for Assessment year 2002-03, 2003-04 and 2006-07. However, certain items like purchase of wooden almirah were confronted to him and he had no specific reply. 7. We have gone through the rival submissions carefully and find force in the submissions of the Ld. D.R. for the Revenue that in such matters the issues cannot be said to be covered by earlier order of the Tribunal because it would depend on the nature of the items and depending on the nature of each item the same has to be treated as capital expenditure or Revenue expenditure. The Assessing officer has mentioned various items and no doubt the wooden paneling, wooden partition, some small items of steel or purchase of cement etc. may fall under repair but at the same time purchase of almirah in Assessment year 2008-09 amounting to ₹ 102600/-, installation of board etc. can not be termed as repair and maintenance. Similarly the assessee has shown purchase of Orissa type W.C along with G.I. Flush bend, C.I Pee Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis. Further to inform you that Hon'ble ITAT, Chandigarh Bench 'A', vide its order dated 20th November 2009 pertaining to A.Y. 2004-05, has decided the issue in the favour of the assessee company and allowed the disallowance of ₹ 25 lacs made by the Ld. CIT(A). The Assessing officer after examining the submissions observed that even earning of dividend would require some monitoring of investment and other funds and therefore he invoked rule 8D. Thereafter the Assessing officer made disallowance amounting to ₹ 144.03 lakhs. 11. On appeal it was mainly submitted that issue is covered by the order of the Tribunal in earlier years. However, it was noticed by the Ld. CIT(A) that the assessee has made fresh investments, it was admitted during the course of appellate proceedings that the facts are different, therefore the issue is not covered. It was further contended before the Ld. CIT(A) that the investments were made as per the Board resolution and since the share holding was kept in demat account and the dividend has been received through ECS therefore no direct expenses were involved. Further it was submitted that Assessing officer has not pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable only from Assessment year 2008-09. Further we find no force in the submissions that the Assessing officer has not given any reason or pointed which expenditure is allocable to the exempt income before invocation of Rule 8D. In fact the Assessing officer has observed in the assessment order as under: (i) The assessee has contended that it received the dividend by ECS credit and deposited into bank account of the company and there was no expenditure incurred for earning dividend income. This plea of the assessee is not correct because when the assessee has invested 6 Crores approx. in different securities and the securities are of such a volatile nature that one has to keep constant vigil on the moments of prices as well as financial group viability of the company, moment of company, its share price etc. how the company remains confident without employing a single person for the job. ii) Secondly, in a corporate entity, the company has to remain vigilant and has to keep track of each activity undertaken so that staff responsible have to answer any negligence found by the management. iii) Thirdly, it has to keep separate records, filing correspondence wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income even from debt fund would be exempt. Now some income may arise at the time of sale of such debt but if the assessee does not sell such debt and simply redeem the same then that would be treated as redemption income and no taxable income would be there. Therefore in our opinion, income from debt fund is exempt and provisions of section 14A are Rule 8D would be applicable. 18. However, as far as the issue regarding disallowance under Rule 8D(iii) is concerned, we agree with the contention of the Ld. Counsel for the assessee. Since % disallowance is based on the investment and it has to be treated disallowance for the full year. If an organization has operated only for four months then disallowance has to be restricted proportionately and accordingly we direct the Assessing officer to restrict disallowance u/s 8D(ii)(iii) proportionately. 19. We also agree that if no interest expenditure has been incurred in Assessment year 2009-10 then no proportionate disallowance can be made out of interest and accordingly we direct the Assessing officer to verify this aspect and then if no interest expenditure has been incurred then no disallowance should be made. 20. In the resul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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