TMI Blog2017 (6) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee towards consultancy charges. We are in complete agreement with the view taken by the learned Tribunal.- Decided in favour of assessee. - Tax Appeal No. 291 of 2017 - - - Dated:- 4-5-2017 - M. R. Shah And B. N. Karia, JJ. Mr Nitin K Mehta, Advocate for the Appellant Mr Manish J Shah, Advocate for the Opponent JUDGMENT ( Per : Honourable Mr. Justice M. R. Shah ) 1. Feeling aggrieved and dissatisfied with the impugned common Order passed by the Income Tax Appellate Tribunal, C Bench, Ahmedabad dated 18th March 2016 passed in ITA No. 851/Ahd/2011 [for A.Y 2009-2010] by which the learned Tribunal has dismissed the appeal preferred by the Revenue [ITA No. 851/Ahd/2011] for A.Y 2009-2010, the Revenue has preferred the present Tax Appeal with the following proposed questions of law : [A] Whether the Tribunal erred in law and on facts in deleting the disallowance of expenditure in respect of interest and administrative expenses of ₹ 90,97,470/- under Section 14A of the Act? [B] Whether the Tribunal erred in law and on facts in deleting the disallowance of expenditure of ₹ 24,37,500/- incurred towards consultancy charges ? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J.P Shah, learned Senior Advocate appearing on behalf of the respondent-assessee. 8. At the outset, it is required to be noted that the Assessing Officer made disallowance in respect of interest and administrative expenses of ₹ 90,97,470/- under Section 14A of the Act read with Rule 8D of the I.T Rules. However, it is required to be noted and it does not seem to be in dispute that in the A.Y 2009-2010, the assessee was having reserve fund of ₹ 1981.55 Crores and made investment of ₹ 144.51 Crores. Thus, the assessee was already having surplus interest free reserve fund of ₹ 1981.55 Crores against which investment was made of ₹ 144.51 Crores only. It is also required to be noted that in the A.Y 2009-2010, a sum of ₹ 19.22 Crores was offered for taxation as short/long term capital gain. Thus, the investment made by the assessee was not out of interest bearing fund. As observed hereinabove, the assessee was already having its own surplus fund, out of which investment was made. Considering the aforesaid facts and circumstances, the Assessing Officer was not justified in making the disallowance under Section 14A of the Act and thereafter to determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer entering upon a determination of the amount of the expenditure incurred in relation to exempt income is that the Assessing Officer must record that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Sub-section (3) applies to cases where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the said Act. In other words, sub-section (2) deals with cases where the assessee specified a positive amount of expenditure in relation to income which does not form part of the total income under the said Act. In other words, sub-section (2) deals with cases where the assessee specifies a positive amount of expenditure in relation to income which does not form part of the total income under the said Act and sub-section (3) applies to cases where the assessee asserts that no expenditure had been incurred in relation to exempt income. In both cases, the Assessing Officer, if satisfied with the correctness of the claim of the assessee in respect of such expenditure or no expenditure, as the case may be, cannot embark upon a determination of the amount of expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not out of interest bearing fund. It has its own surplus fund out of which investment has been made. The assessee has demonstrated that it had own funds of ₹ 1981.55 Crores in the A.Y 2009-10 and investment in the mutual fund was only 144.51 Crores. The assessee had also submitted that its investment in earning exempt income has reduced during the year from 78.45 crores to ₹ 18.09. The assessee has submitted these details in its submissions reproduced by the AO. Similarly, in the A.Y 2010-11, it has reserve fund of ₹ 2319.17 Crores and made investment of ₹ 111.09 crores. The learned AO has not given any heed to these submission or figures submitted by the assessee. The assessee has further made disallowance of ₹ 5.12 lacs in the A.Y 2009-10. This was mainly for management of investment. He simply discussed the background for bringing section 14A as well as Rule 8D on the statute book. He has specifically not worked out the amounts even on the basis of Rule 8D. He called for a working from the assessee and made a lumpsum addition in both the years. The learned AO has not recorded any finding that amounts added back by the assessee are not commensurate w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee towards Consultancy charges was purely revenue in nature and therefore was allowable expenditure. The aforesaid finding and observation has been confirmed by the learned Tribunal by making observations in par-42, as under :- 42. We have duly considered rival contentions and gone through the record carefully. No doubt, the expenses were incurred by the assessee towards consultancy charges for making investment. On sale of investment, capital gain would arise to the assessee, but the expenses incurred by the assessee are not directly linked to the purchase of investment. These are paid for consultancy. If the expenses are not to be capitalized in the investment, then how the assessee will get this set off. Therefore, the learned CIT [A] has rightly observed that the expenses were not incurred towards purchase of investment, rather, these were incurred towards consultancy charges in order to keep track on the investment. Therefore, we do not see any error in the order of the learned CIT [A]. This ground of appeal is rejected. 11. Considering the aforesaid facts and circumstances of the case when the assessee incurred expenses towards consultancy charges in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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