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ACIT, Circle 1 (1) , Gurgaon Versus M/s. DLF Info City Developers (Kolkata) Limited And Vice-Versa

2017 (12) TMI 408 - ITAT DELHI

Addition u/s 14A - Held that:- The AO has not pointed out any defect in the computation made by the assessee company and as such, provisions contained u/s 14A read with Rule 8D are not attracted. Because sub-section (2) & (3) of section 14A with Rule 8D of the Rules has only prescribed a formula for determination of an expenditure to earn the income which does not form part of the total income under the Act, which can only be invoked if the AO is not satisfied with the claim of the assessee. - .....

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nable. - Appeal filed by the Revenue challenging to restrict the disallowance u/s 14A read with Rule 8D from ₹ 43,67,640/- to ₹ 68,433/- is dismissed being without merit. - ITA No.969/Del./2016 And CO No.167/Del/2016 - Dated:- 7-12-2017 - SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The ASSESSEE : Shri R.S. Singhvi, CA and Shri Satyajeet Goel, CA For The REVENUE : Ms. Ashima Neb, Senior DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER : The afor .....

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grounds inter alia that :- 1. Ld. CIT(A) has erred in fact and in law by not appreciating the application of Rule 8D of the Income Tax Rules, 1961, so made by the A.O while making the disallowance u/s 14A of the Income Tax Act, 1961. 2. Ld.CIT(A) has erred in fact and in law by restricting the disallowance u/s 14A of Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962 from ₹ 43,67,640/- to ₹ 68,433/-. 3. Ld.CIT(A) has erred in fact and in law by restricting the disa .....

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confirming the disallowance to the extent of ₹ 68,433/- under section 14A read with Rule 8D of the Income Tax Act, 1961. 2. That the Ld. CIT (A0 has failed to correctly appreciate the provisions of section 14A of the Income Tax Act, 1961. 4. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessing Officer made disallowance of ₹ 43,67,640/- by invoking the provisions contained under section 14A of the Income-tax Act, 1961 (for short the Act ) rea .....

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s. 5. Assessee carried the matter by way of filing appeal before the ld. CIT (A) who has restricted the addition of ₹ 43,67,640/- made by the AO under section 14A read with Rule 8D to ₹ 68,433/-. Feeling aggrieved, the Revenue as well as assessee company has come up before the Tribunal by way of filing appeal and cross objection respectively by challenging the impugned order passed by ld. CIT (A). 6. We have heard the ld. Authorized Representatives of the parties to the appeal, gone .....

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the AO, after duly recording his dissatisfaction, which is apparent from assessment order itself, worked out the disallowance under Rule 8D as per accounts rendered by the assessee company; that section 114 of the Evidence Act, 1872 raises presumption in favour of the Revenue that there was non-satisfaction of the AO and relied upon the order of the AO. 9. Ld. AR for the assessee company to repel the arguments addressed by the ld. DR for the Revenue contended inter alia that AO proceeded to invo .....

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; 68,433/- by restricting the same to 10% of the exempt income on ad hoc basis without any basis. 10. First of all, the ld. AR for the assessee company to substantiate his contention that the assessee company has substantial reserve and surplus fund as on 31.03.2011 drew our attention towards balance sheet wherein reserve and surplus funds and shareholder s funds / share capital are shown at ₹ 61,46,85,927/- and ₹ 25,00,000/- respectively as against investment of ₹ 14,99,25,994 .....

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essment, the disallowance cannot be made u/s 14A read with Rule 8D. More particularly when no investment has been made by the assessee during the year under assessment. So, in these circumstances, the presumption has to be raised in favour of the assessee that investments, if made, were made out of interest free funds available with the assessee company. 12. Hon ble High Court of Bombay in case cited as CIT-2, Mumbai vs. HDFC Bank Ltd. - (2014) 49 taxmann.com 335 (Bombay) while dealing with the .....

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the bare language of Rule 8D. 14. Hon ble Apex Court in Godrej & Boyce Manufacture Company Ltd. vs. DCIT - 394 ITR 449 (SC) thrashed the issue in controversy as to invoking of the provisions contained under Rule 8D of the Rules by observing as under :- 37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-2003. Sub-sections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for d .....

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ced before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. 15. Hon ble Delhi High Court in HT Media Limited vs. Pr. CIT in ITA No.548/2015 dated 23.08.2017 decided the issue in controversy in favour of the assessee by returning the following f .....

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the AO of satisfaction regarding the claim of the Assessee after examining its accounts. Again, in para 34 of its order, the ITAT simply reproduced para 3.3.6 of the assessment order where, again, no reasons have been provided but only a conclusion has been reached that the AO was "satisfied that the Assessee had incurred expenses to manage its investments which may yield exempt income, and Assessee grossly failed to calculate such expenses in a reasonable manner to ascertain the true and c .....

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n ble Apex Court in Godrej & Boyce Manufacture Company Ltd. (supra) and Hon ble Delhi High Court in HT Media Ltd. (supra), we are of the considered view that the findings returned by AO that, the claim of the assessee that the amount invested in mutual funds was only out of its own funds and no part of it was invested out of borrowed funds cannot be accepted, as entire money of a company is part of a common kitty, as was held by jurisdictional High Court in CIT vs. Abhishek Industries [2006] .....

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