TMI Blog2016 (2) TMI 788X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure, that could be attributable to the earning of exempt income and therefore, no disallowance could be made u/s 14A r/w 8D of the Act, cannot be accepted. Rule 8D (2)(iii) would be applicable and the disallowance u/s 14A r/w Rule 8D has to be made in accordance to sub section (iii) of section (2) of Rule 8D. We, accordingly, on the basis of the above discussion and findings, set aside this issue to the file of the Assessing Officer for re-computing the disallowance u/s 14A r/w Rule 8D(iii), with a specific direction to consider only those investments from which the assessee has earned tax free income for the year under consideration. It is specifically mentioned that the disallowance has to be made in accordance with law under Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng. 2. Brief facts as recorded by the authorities below are as under: - 2.1. The return was filed by the assessee on 30.09.2008 declaring total loss of ₹ 4,22,08,912/-. The case was selected for scrutiny and notice u/s 143(2) was issued to the assessee. The Assessing Officer during the assessment proceedings observed that the assessee is engaged in the business of owning, operating and managing hotels, motels, resorts, restaurant etc. During the year under consideration, the assessee has made various investments and, therefore, the ld. Assessing Officer computed the disallowance u/s 14A r/w Rule 8D to the extent of ₹ 1,78,71,632/-. The ld. Assessing Officer also made addition of ESOP expenses to the extent of ₹ 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue for assessment year 2008-09 vide its order dated 18.8.2015. 3.2. We, therefore, respectfully following the order of the Jurisdictional High Court in assessee s own case, dismiss these grounds of appeal filed by the Revenue. 3.3. Ground no. 4 and 5 are general in nature and, therefore, the same are not adjudicated upon. Ground No.1 4. This issue relates to the restriction of the disallowance u/s 14A r/w Rule 8D amounting to ₹ 35,10,844/-. Ld. AR submitted that the assessee had surplus interest free funds available in its cash flow statement and balance sheet, for the investment made in shares. Ld. AR submitted that the assessee had shareholders fund amounting to ₹ 279.82 crores as on 1.4.2008, and durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ohan Exports (P) Ltd. (2012) 138 ITD 108 (Delhi) d) Siva Projects Engineering Enterprises Ltd. (I.T.A.No.1896/Mds/2011) e) REI Agro Ltd. (I.T.A.No. 1331 1423/Kol/2011) f) CIT vs Metalman Auto (P) Ltd. (2011) 336 ITR 434 (P H) g) Godrej and Boyce Mfg. Co. Ltd. vs DCIT (2010) 328 ITR 81 (BOM) h) Maxopp Investment Ltd. vs CIT (2012) 247 CTR 162 (Delhi) 4.3. Without prejudice to the above submissions, the ld. AR submitted that the disallowance sustained by the ld. CIT(A) is towards the interest paid on other loans. Ld. AR submitted that the assessee is running hotels under the brand name Lemon Tree and it has made investment in shares of certain subsidiary companies that are also operating or setting up Lemon Tree hotels w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt income. 6.3. The contention of the assessee, that the term loans raised by it have been utilized for the purpose of setting up and operating the hotels and that it has no connection whatsoever with the investment in shares, could not be ignored. The sanction letters placed by the assessee at pages 83 to 135 are self-explanatory to that effect. For calculating the disallowance u/s 14A r/w Rule 8D (2) sub-section (i) and sub-section (ii) is, therefore, not applicable as there has been no direct and indirect interest expenditure incurred by the assessee that could be attributable to the earning of exempt income from the investments made by the assessee. 6.4. The third limb of Rule 8D (2), deals with disallowance an amount equal to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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