TMI Blog2014 (12) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... asis to the assessee's claim, the same, it was explained, would not even qualify to be one - The matter is factual, so that where, the initial onus has not been discharged by the assessee, the disallowance u/s. 14A(1) cannot be impugned for non-compliance of the procedure laid down u/s. 14A(2) – relying upon GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - the disallowance u/s.14A(1) is upheld. - ITA No. 6839/Mum/2013 - - - Dated:- 1-8-2014 - Sanjay Arora, AM And Amit Shukla, JM,JJ. For the Petitioner : Shri Haresh G Buch Shri Ravi Sarvana For the Respondent : Ms. Neerja Pradhan ORDER Per: Sanjay Arora,AM. This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-18, Mumbai ('CIT(A)' for short) dated 13.09.2013, dismissing the assessee's appeal contesting its assessment u/s.143(3) r/w s. 254 of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2005-06 vide order dated 28.03.2013. 2. The sole issue arising in the instant appeal is the quantification of the disallowance u/s. 14A(1); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thevcase of Maxopp Investment Ltd. vs. CIT [2012] 347 ITR 272 (Del), since followed by the Mumbai Bench of the tribunal, as in the case of Raj Shipping Agencies Ltd vs. Addl. CIT [2013] 38 taxmann.com 345 (Mum). Similar view had been taken by the tribunal independently in Garware Wall Ropes Limited (in ITA Nos. 5408 4957/Mum(G)/2012 dated 15.01.2014). The A.O. in fact proceeded in the matter without application of mind, including the entire dividend earned (Rs.499.31 lacs), as against only that claimed exempt; the dividend income received from foreign companies being taxable and duly returned by the assessee as a part of its total income. Again, he considered the entire expenditure incurred by the assessee, including that not claimed by it in computing its business income assessable u/s.28, viz. depreciation; loss on sale of fixed assets; and provision for bad and doubtful debts. Though the assessee has moved an application u/s.154 of the Act for rectification of these mistakes, the same remains undisposed of to date. The ld. CIT(A) has, again, decided the matter on the basis of generalizations, without examining the assessee's case and addressing the issues involved, merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined, is an altogether different matter. The method adopted for the allocation of the expenses, i.e., in the ratio of the volume of the two income streams taxable and non-taxable, is thus a natural, logical and common sense method to determine the expenses attributable to such income, necessitated for the reason of it being tax-exempt, toward determining the net, i.e., the quantum of such, operating income, which could be accorded the tax-exempt status. Not surprisingly then, both the sides arrived at, and we suppose independently, at the same method, which is itself very rare emphasizing, as afore-noted, the validity thereof. This also explains our considering the issue arising in this appeal in terms of the validity of the estimation, or as one of quantification, as stated at para 2 above. No doubt the A.O. has committed some 'mistakes' in applying the method, but that does not in any manner detract from the merit thereof; the errors being in the nature of apparent mistakes, rightly perceived as so by the assessee, moving a rectification application u/s. 154 in its respect. That the same remains undisposed, which is definitely unfortunate, and which the A.O. is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating expenditure incurred on salary (and other related costs), vehicle maintenance, communication, rent, bank charges, etc., aggregating to ₹ 201.09 lacs, is incurred on or toward both sets of income - taxable and non-taxable, that on the afore-referred heads, of the same species, being toward general administration, and incurred in the ordinary course, of its business by the assessee, is not? The assessee is in effect undertaking a single undivisible activity of promoting businesses of, by investment in equity and by way of advances to, group companies, yielding dividend and interest income. Surplus funds for the time being are invested in bank instruments (FDR), yielding interest, which portfolio in fact we find to have been liquidated during the current year (Schedule 5 to the balance-sheet). The same, in any case, defines the principal activity of the appellant-company. On what basis, then, can it isolate some expenses; the same being solely toward assets or its principal activity yielding revenue, which assets represent one class and one composite activity respectively. The assessee's explanation and method of apportionment is to that extent arbitrary and de hors it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed an identity or unity, i.e., in principle, between the working of the assessee and the A.O., so that what remains is to eliminate the errors inflicting their respective workings, doing which would lead to the same result. The assessee's charge is not valid even in principle, i.e., on purely legal basis, even as law can only be applied in a given set of facts. The assessee's claim, made without showing any basis or reason for excluding certain expenses; rather, claimed through its operating statement or through the computation of income (forming part of its return), in the allocation statement (PB pg.11), even as it pursues a single, composite business activity and toward which the entire operating expenditure is admittedly incurred, though also yielding income not forming part of the total income, is not a valid claim in law, which only would discharge the initial onus on it with regard to the expenditure, including at nil, attributable to income not forming part of the total income, in terms of section 14A(2) or section 14A(3) of the Act. It is only on a discharge of this initial onus on the assessee, made with reference to its accounts, or some objective criter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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