9911796707
TMI Blog2014 (8) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to earn exempt income. (c) The appellant submits that its 99.87% investment is only in one group company viz. Colorplus Fashions Ltd. and accordingly, no expenditure had been incurred in relation to earning exempt income and therefore the Assessing Officer was not justified in disallowing a sum of Rs. 31,74,000/- being 0.5% of the average investment as per Rule 8D(iii) of the Rules. 2) Without prejudice to what is stated above, the appellant submits that the learned Commissioner of Income-tax (Appeals) ought to have restricted the disallowance under section 14A of the act to a sum of Rs. 11,663/- based on scientific and rational basis. 3) Without prejudice to what is stated above, the appellant submits that the learned Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer of including the investment in it's subsidiary company i.e. Colorplus Fashions Ltd. amounting to Rs. 6339.65 lakhs in computing disallowance under section 8D(iii). 4)The learned Commissioner of Income tax (Appeals) erred in upholding the levy of interest under section 234B of the Act. 6) The Assessing Officer be directed to: (a) delete the disallowance made under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 A were applicable. Relying upon the order of Tribunal in the case of Daga Capital Management(ITA8507/Mum/93)he made a disallowance of Rs. 213.69 lakhs u/s. 14A r.w. r.8D of the rules. 3.Aggrieved by the order of the AO the assessee filed an appeal before the First Appellate Authority (FAA).Before him, it was submitted that the Company had Equity Share Capital of Rs. 200.00 lacs and Reserves and Surplus of Rs. 8,113.67 lacs as on 31.03.2008,that it had not borrowed any amount for making investment in earning tax free income, that the Company had also not incurred any interest expenses during the year to earn tax free dividend income, that the loan funds were availed for specific purposes of acquisition of plant and machinery or for working capital as per the terms and conditions laid down by the lenders and had not and could not have been used for investment purposes, that various expenses had been incurred in the course of carrying on business activity and no specific expenses had been incurred by the Company in relation to exempt income,that the dividend distributed by the Company had already suffered tax in the hands of the Company while distributing dividend income,that it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company namely CPFL, amounting to 6339.65,lacs should be excluded from the 'Average Value of investment' for the purpose of Rule 8D(2)(iii) was found to be incorrect, that the dividend from CPFL, the subsidiary company of the appellant, would be exempt when dividend is declared and dividend distribution tax would be paid by the subsidiary company, that the investment in CPFL appeared on the first day and last day of the previous year of the balance-sheet of the assessee, that the investment in CPFL was required to be considered for the purpose of Rule 8D(2)(iii). Finally, he held that the amount of disallowance u/r. 8D was to be restricted to Rs. 31.74 lacs i.e: 0.5% of the average value of investment. He deleted addition of Rs. 181.95 lacs out of the total addition made by the AO. 4.Before us,Authorised Representative(AR)submitted that that the assessee-company had received Rs. 4517/-only as dividend,that provisions of Rule 8D were not applicable,that the AO had not recorded satisfaction about the work given by the assessee, that only after rejecting the explanation of the assessee he could have invoked the provisions of the Act, that the assessee had not incurred any expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earning the exempt income as the investment were made from its own funds and not borrowed funds. The Revenue has not been able to show how the finding of fact arrived at by the Tribunal that no expenses were incurred to earn the dividend income is either arbitrary or perverse. In view of the finding of fact, question (a) does not raise any question of law and is, therefore, dismissed."( 351ITR359) In the matter under appeal the FAA has given a finding of fact that the assessee had borrowed loans from various banks for specific purpose like purchase of plant, machinery other assets working capital for business, purchase of raw material, packing material, stores & spares,etc,that the other interest and finance charges had also been incurred towards business of manufacturing of ready made garments, that the loans were for the specific purpose of the business,that the interest expenditure was directly related towards business income which was taxable.DR could not controvert the finding given by him. Therefore, confirming his order we decide the effective ground of appeal against the AO and hold that interest expenditure incurred by the assessee was not hit by the provisions of rule 8D ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
