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Pr. Commissioner of Income Tax Versus M/s. Oricon Enterprises Ltd.

2017 (9) TMI 974 - BOMBAY HIGH COURT

Disallowance under Section 14A - rule 8D applicability - allocation of interest expenditure towards earning of exempt income - Held that:- Once the Tribunal has approached the matter on the basis that the First Appellate Authority could have applied the provision, namely, Section 14A as also Rule 8D with effect from the Assessment Year 2008-09, but yet restricted the disallowance to ₹ 2,10,756/on facts, then, we do not think that any of the questions proposed are substantial questions of l .....

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resent for the Respondent ORDER P.C. 1. This appeal of the Revenue challenges the order passed by the Income Tax Appellate Tribunal, Bench at Mumbai, dated 1292014 in Income Tax Appeal No.1145/Mum/2013. The two appeals - one of the Revenue and another of the assessee for the Assessment Year 2009-10 - were disposed of by this common order. 2. The assessee is absent, though duly served. With the assistance of Mr. Malhotra, we have perused that part of the Tribunal's order which disposes of the .....

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iny. During the assessment proceedings, the Assessing Officer noticed that the assessee has both exempt income yielding investment as well as business assets in the balancesheet. The assessee maintains consolidated accounts. The assessee offered an amount of ₹ 21,708/under Section 14A of the Income Tax Act, 1961 ( the Act for short) r/w Rule 8D of the Income Tax Rules, 1962 ( the Rules for short). The Assessing Officer did not accept the allocation of expenditure and made disallowance of & .....

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ee filed appeals to the Tribunal. The grievance of the Revenue is that the First Appellate Authority erred in law and on facts in deleting the addition of ₹ 1,52,97,867/made by the Assessing Officer, while in the crossobjection the ground of the assessee was that the First Appellate Authority ought to have made no disallowance and he erred in confirming the disallowance to the extent of ₹ 9,52,147/. 5. A common order has been passed by the Tribunal. It noted that the balance-sheet of .....

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crores as on 31-3-2008 which has come down to ₹ 15.61 crores as on 31-3-2009. Thus, there are no fresh borrowings during the year under consideration. 6. In the circumstances, the order of the Commissioner has not been maintained in its entirety. The Tribunal held that there is no reason for allocation of any interest expenditure towards earning of exempt income. The Tribunal, therefore, has found, on facts, that the Commissioner could not have maintained the disallowance at ₹ 9,52,1 .....

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concerned. 7. Similarly, as far as disallowance under Rule 8D(2) of the Rules is concerned, the Tribunal has maintained that the allocation of administrative and other expenses cannot be ruled out. It has, therefore, brought down the disallowance from the figure of ₹ 9,52,147/to ₹ 2,10,756/. Thus, what we find is that in para 9.1 the Tribunal has bifurcated the disallowance. Firstly, it has found that there is no reason for allocation of interest expenditure towards earning of exemp .....

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We should not proceed on the footing that the Revenue or the tax impact is meagre and refuse to entertain the appeal, all the more when it involves substantial questions of law. 9. With the assistance Mr. Malhotra, we have perused the order of the Assessing Officer. The Assessing Officer had observed that the working of the disallowance is incorrect. He has worked out the disallowance not only by application of Section 14A of the Act but by Rule 8D of the Rules. In doing so, he has held that th .....

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+ 0.005% and for that purpose he has arrived at this figure. He has then computed the total income of the assessee and rounded it off. This working is to be found at page 16 of the paper-book. 10. The First Appellate Authority came to the conclusion that once the company has a total investment of ₹ 69,08,43,639/in shares and securities, it has its sufficient own funds. The sufficient own funds are ₹ 101.31 crores, as against the investment of ₹ 69.08 crores only in shares and .....

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siness activities and since the same is utilised for business, the interest paid of ₹ 2,58,19,005/is allowable under Section 37(1)(iii) of the Act. As held by the Tribunal and agreeing with the First Appellate Authority, out of total investments major amounts are invested in shares of subsidiary/associate companies. They were acquired/allotted for consideration other than cash. 11. Therefore, no disallowance could have been made was the argument before the First Appellate Authority as well .....

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