TMI Blog2015 (8) TMI 1151X X X X Extracts X X X X X X X X Extracts X X X X ..... )(b) - CIT(A) deleted addition - Held that:- Similar issue was considered in the case of M/s. AIG Home Finance India Ltd. [2011 (5) TMI 408 - ITAT, Chennai] wherein held 0.5% of guarantee fee paid by the assessee is not excessive or unreasonable but is well within the range as paid by the assessee to third parties and much lower than the percentage fixed by National Housing Board, which itself is an undertaking promoted by Reserve Bank of India. Therefore, we are of the view that the findings of the ld. CIT(Appeals) on this issue in deleting the disallowance is on right footing. - Decided against revenue. Disallowance under sec.36(1)(viii) - processing and other administrative charges - CIT(A) deleted addition - Held that:- Similar issue was considered in the case of M/s. AIG Home Finance India Ltd. [2011 (5) TMI 408 - ITAT, Chennai] wherein held that securitization amount is nothing but the interest on the housing loan which is discounted to the present net value. This amount would obviously be the income of the assessee from the long term housing loan disbursed by the assessee. In the circumstances, we are of the view that the securitization income is an income from business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the funds for the assessee came in a common kitty and he could show incurrence of excess interest after identifying the interest. However, the Id.AR, has stated that the assessee had made investment in equity shares of various companies including its subsidiary and in the mutual funds totalling to ₹ 4,05,01 , 000/- as on 31.3.2007. The funds were not required immediately during the year for the business and hence the same were invested in cash management funds. The Bombay High Court in the case of M/s. Godrej Boyce Manufacturing Co. Ltd, v. DCIT, 328 ITR 81 (Bom.) has clearly held that the provisions of Rule 8D have been notified w.e.f. 24.03.2008 and hence shall apply from AY 2008-09 onwards. Since the year under consideration is AY. 2007-08, provisions of Rule 8D cannot be applied. Hence, the action of the AO to this extent is not correct. Having held as above, the High Court further held that prior to AY 2008-09, when Rule 8D was not applicable, the AO has to enforce provisions of Section 14A(1). For that purpose, the AO is obliged to ascertain the expenditure which had been incurred to earn the tax-free income. He must adopt a reasonable basis consistent with the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification of income which does not form part of total income, amount so identified has to be disallowed. The interest expenses of the assessee during the year are ₹ 25,28,91,275/- .Increase in the value of investments yielding exempt income is about ₹ 2 crores. Keeping in view the facts and circumstances of the case and legal position as discussed above, the CIT(Appeals) observed that a sum of ₹ 20,00,000/ - is held as reasonable as the amount of expenditure which had been incurred to earn the exempt income. Accordingly, the CIT(Appeals) has given a relief of ₹ 5,36,790/- on this account and partly allowed the appeal. Against this, the assessee as well as the Revenue is in appeal before us. 5. We have heard both the parties and perused the material on record. The AO disallowed ₹ 25,36,790/- by invoking the provisions of sec.14A read with Rule 8D. Rule 8D was inserted by the IT (Fifth Amdt.) Rules, 2008, w.e.f. 24.3.2008. Since, Rule 8D has no retrospective effect, it cannot be applied for the assessment year 2007-08. Further, there is every chance of incurring expenditure towards maintaining of investment which yields exempt income and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order passed for assessment year 2005-06, the AO disallowed a sum of ₹ 58,49,022/- u/s 40A(2)(b) being syndication charges paid to the holding company. Against this, the assessee went in appeal before the CIT(Appeals). 6.3. On appeal, the CIT(Appeals) observed that the issue in this case is whether the payments made to a related party, viz., the erstwhile promoter, M/s. Weizmann Ltd. can be disallowed considering the facts of the case. He further observed that the provisions of sec.40A(2)(b) are applicable to a case where excessive or unreasonable payments are made to related party and the same has been explained in the CBDT Circular No.6P(LXXVI-66) of 1968, which was relied on by the ld. AR of the assessee. Further, the CIT(Appeals) has gone through the predecessor s order in assessee s own case, which was allowed by him vide order dated 30.9.2010 in ITA No.4/2010-11A.III and the matter was carried by the Revenue before the Tribunal. The Tribunal vide its order dated 5.5.2011 in ITA No.2167/Mds/2010, upheld the order of the CIT(A)-III dated 30.9.2010 and held that the syndication charges paid to Weizmann Ltd. are not excessive or unreasonable but is well within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The facts of this issue are that the assessee is engaged in the business of providing long term housing finance and is accordingly eligible for deduction u/s.36(1)(viii). As per sec.36(1)(viii), deduction upto 40% of the profits from long term housing finance business is allowable subject to transfer of the said profits to a special reserve account. The assessee had credited an amount of ₹ 41,00,000/- (being 40% of the pro0fits derived from the business of providing long term housing finance) to a special reserve and claimed the same as a deduction u/s.36(1)(viii). The AO held that the processing and other administrative charges amounting to ₹ 1,79,06,298/- were not part of income attributable to the business of providing long term housing finance and accordingly cannot be considered for the purpose of computing the deduction u/s.36(1)(viii). Accordingly, the AO restricted the deduction u/s.36(1)(viii) to ₹ 31,87,536/- disallowing a sum of ₹ 9,14,264/- as not eligible for deduction u/s.36(1)(viii). Against this, the assessee went in appeal before the CIT(Appeals). 8.2. On appeal, the CIT(Appeals) observed that the Tribunal, Bangalore Bench in assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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