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2015 (10) TMI 21 - ITAT DELHI

2015 (10) TMI 21 - ITAT DELHI - TMI - Disallowance u/s 14A read with Rule 8D - Held that:- CIT(A) has given a finding that there was no expenditure incurred by the assessee for increase in investment and when the expenses in respect of exempt income have not been incurred by the assessee, the question of disallowance u/s. 14A does not arise. In assessee’s case, increase in investment was from the funds available with the assessee and no interest has been paid, but there are certain expenditures .....

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o the Assessing Officer to verify the expenditure incurred while earning the dividend income. Thus finding of the CIT(A) that the disallowance of ₹ 16,00,583 against dividend income of ₹ 96,622/- was not proper. In view of the above the matter is remanded back to the Assessing Officer for examining the expenditure incurred against the investment as against the dividend income earned by the assessee. - I.T.A. No. 6652/Del/2013 - Dated:- 23-9-2015 - Shri S. V. Mehrotra, Accountant Memb .....

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Rule 8D. 2. On the facts and in the circumstances of the case, the CIT(A) has erred in holding the disallowance u/s14A, read with Rule 8D cannot be made in this case. 3. On the facts and in the circumstances of the case, the CIT(A) has erred in holding that Rule 8D applied only in a case where the assessee has paid interest on investment. 4. The order of the CIT(A) is erroneous and is not tenable on facts and in law. 3. The assessee company is engaged in business of manufacture and sale of Spir .....

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x Act, 1961. In reply to this query, the assessee replied as under: In respect of income not forming part of total income under Section 14A of the Income Tax Act wherein it was specifically provided that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which do not form part of total income under the Act. Hence the income from property of ₹ 48,000/- disclosed in computation of income shall not fall under part of total income of the comp .....

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isallowance under this section, explanation by way of Rule 8D of the Income Tax Rules has been provided wherein a clear formula has been given to calculate the expenses which are relatable to the tax free income i.e., the investments of the assessee. In view of these reasons, the disallowance under Section 14A of the Income Tax Act calculated by AO as under:- 1 Amount of expenditure directly relating to the exempt income NIL 2 Interest Expenditure, which is not directly related to the exempt inc .....

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4 Total amount as per Rule 8D (u/s 14A) 16,00,583 5. The CIT(A) held that the investment at the beginning of the year was ₹ 5,03,41,498/- and at the end of the year it was ₹ 5,34,94,339/-. Thus, there was increase in the investment to the tune of ₹ 31,52,841/-. This increase in investment was stated to be made out of the funds available with the assessee and therefore, no component of interest on this amount was involved which could warrant applicability of Section 14A of the I .....

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ncurred on these investment during the year. 8. We have perused the records and proceedings as well as the submissions made by both the parties. In this particular case the investment at the beginning of the year was ₹ 5,03,41,498/- and at the end of the year, it was ₹ 5,34,94,339/-. There was increase in the investment to the extent of ₹ 31,52,841/-. This increase in investment was stated to be made out of the funds available with the assessee, and, therefore, no component of .....

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A read with Rule 8D is not just and proper as there is no expenditure incurred by the assessee for increase in the investment. Though the Assessing Officer has given the finding that as making investment is not the business of the assessee accordingly the proportionate expenditure on the amounts spent on these investments needs to be disallowed he has not stated any specific satisfaction while applying Section 14A read with Rule 8D in this particular case. The provision of Section 14A of the Act .....

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Act. The expenditure incurred was not clearly stated in the Assessment Order by the Assessing Officers as well as neither the assessee has given any substantial evidence in respect of his claim that he has not incurred any expenditure for investment. Though CIT(A) held that provisions of Rule 8D for determining such expenses applies only in case where the assessee pays interest on the investment. But in this case there are certain expenses which any assessee can incur during the processw of inve .....

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d in case of Maxopp Investment Ltd. V. Commissioner of Income-tax, New Delhi [2011] 15 taxmann.Com 390 (Delhi HC). The Hon ble Supreme Court in case of CIT vs. Walfort Share and Stock Brokers (P) Ltd. 326 ITR 1 (SC) wherein it was held that For attracting Section 14A, there has to be proximate cause for disallowance, which is its relationship with the tax exempt income. In case of CIT-II vs. Hero Cycles Ltd. (ITA No. 331/2009 (O&M): decided on 04.11.2009) the Punjab and Haryana High Court he .....

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