TMI Blog2013 (8) TMI 1020X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to be taxed under the head profits and gains of business or profession '. Decision in the case of - NARAIN SWADESHI WEAVING MILLS VERSUS COMMISSIONER OF EXCESS PROFITS TAX [ 1954 (10) TMI 11 - SUPREME COURT] , relied upon. - I.T.A. No.4005/M/2012 - - - Dated:- 2-8-2013 - I.P. BANSAL, AND KARUNAKARA RAO For the Appellant by: Shri Paresh Johri, DR For the Respondent by: Shri S. Venkataraman ORDER PER D. KARUNAKARA RAO, AM: This appeal filed by the Revenue on 7.6.2012 is against the order of CIT (A)5, Mumbai dated 16.3.2012 for the assessment year 2008-2009. 2. In this appeal, Revenue raised the following grounds which read as under: 1. On the facts and in the circumstances of the case and in law, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny assessment u/s 143(3) of the Act, total income of assessee was determined at (-) ₹ 4,81,056/- against (-) ₹ 98,36,081/- as per the assessee. During assessment proceedings, AO invoked the provisions of section 14A of the Act and disallowed ₹ 67,33,850/- on account of interest expenses u/r 8D(2)(ii) and ₹ 26,21,175/- on account of administrative expenses U/r 8D(2)(iii). Total disallowance works out to ₹ 93,55,025/-. Regarding interest expenses, AO observed that the assessee has received loans from the shareholders and in turn, extended said loan to three of the companies, of which two of them are group concerns. When the said investments yields the exempt income, the interest liability falls with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the maximum amount of loan for each individual purpose did not exceed ₹ 100 Crs. The analysis of the bank account for the period October, 2007 to March, 2008 also indicates that monies were borrowed and advanced in a systematic and organized manner. The frequency of money lending transactions under taken and the amounts borrowed and lent during the previous year also indicate that the activity of money lending was a real and substantive activity. The rates of interest at which monies were borrowed in comparison to the rates of interest at which monies were lent indicate that the activity was carried on with a motive of making profit. In these circumstances, the decisions of the Hon ble Supreme Court in Narain Swadesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowances u/s 14A r.w. Rule-8D of IT Rules, 1962. During the assessment proceedings, on finding the claim of exempt income, AO made a disallowance amounting to ₹ 67,33,850/- in respect of interest expenditure and ₹ 26,21,175/- in respect of administrative expenses. AO has not strictly followed the jurisdictional High Court judgment in the case of Godrej Boyce Mfg. Co. Ltd vs. DCIT, 328 ITR 82 (Bom) and computed the disallowance in accordance with Rule-8D of the IT Rules. 9. During the proceedings before the first appellate authority, assessee made various submissions about the need for computing the disallowance for the AY 20082009 and as per Rule-8D of the IT Rules read with judgment of the jurisdictional High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remanding the matter to the files of the AO. 12. We have heard both the parties on this issue and perused the orders of the Revenue Authorities. The limited issue raised before us is restricted to the correctness of the calculation of disallowance as per Rule-8D of the Act. After discussion of the parties in the open court, we are of the opinion that the disallowance confirmed by the CIT (A) is proper but the same is subjected to the correctness of the calculations as per clause-(ii) (iii) of Rule-8D(2). AO may examine the correctness before restricting the disallowance as held by the CIT (A). In this regard, we confirm the order of the CIT (A) in substance and therefore, it does not call for any interference. Accordingly, ground no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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