TMI Blog2017 (12) TMI 1328X X X X Extracts X X X X X X X X Extracts X X X X ..... ricultural income - Held that:- The assessee engaged in cultivation of agriculture for which it maintains separate set of books of accounts.The said books are duly audited by Chartered Accountants. The gross receipts from agriculture was ₹ 4,09,95,906/-. The expenses incurred in this division was ₹ 3,19,13,917/- and depreciation was ₹ 2,41,902/-. Accordingly thenet agricultural income was computed at ₹ 88,40,897/- by the assessee which was claimed as exempt under the Act. It is therefore evidently clear that the assessee has already disallowed the expenses incurred in relation to earning of agricultural income. That is, all expenses, interest and depreciation pertaining to the agricultural income were already disallowed by the assessee and only the "net" amount was claimed as exempt under the Act, therefore, considering the factual position explained above, no further disallowance is required. We note that the AO has not rejected the books of accounts, he has also not pointed out any infirmity or defect in the separate divisional accounts maintained by the assessee. The separate divisional accounts were duly audited by a firm of Chartered Accountants. - ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y. 2008-09. The return of income was processed u/s.143(1) on 05.10.2009. The assessee s case was selected for scrutiny u/s 143(2) of the Act, and AO had completed the assessment by making addition u/s 14A r.w.r 8D of the I.T Act. The assessee company was engaged in the business of cultivation of sugar cane, manufacturing of sugar and trading in fans and other electrical appliances during the previous year. The Assessing officer noted that during the assessment year under consideration, the assessee earned dividend income of ₹ 33,62,011/-which is exempt from tax u/s.10(34). In the return of income the assessee had offered a disallowance u/s.14A amounting to ₹ 7,74,043/- in respect of expenditure incurred in relation to such dividend income. The quantum of exemption was claimed to have been determined by applying rule 8D of the I.T. Rules. On scrutiny of the computation of disallowance made by the assessee u/s. 14A, the AO found that the average value of investment as well as the average value of total assets has not been correctly taken. Having regard to the accounts of the assessee and also in view of the assessee's own admission of incurring expenses disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of sugar and trading in fans other electrical appliances. The assessee maintains separate set of brooks of its three business divisions: (i) Agricultural Division, (ii) Sugar Division (iii) Market Division. The assessee also maintains separate accounts for its corporate head office. The CIT(A) noted thatall the separate set of books of accounts are duly audited by Chartered Accountants. During the year the assessee had earned exempt income of ₹ 33,62,201/- from investment in shares. From the details furnished on record, the CIT(A) noted that the assessee had invoked Rule 8D and disallowed a sum of ₹ 7,74,703/- under Section 14A ofthe Act. The AO however disagreed with the calculation of the assessee and computed a further disallowance of ₹ 25,51,838/- under Section 14A of the Act. The assessee had objected to the manner of invocation of Rule 8D and the further disallowance made by the AO both on legal as well as factual grounds. The assessee's case was that without specifying reasons for his dissatisfaction, the AO's application of Rule 8D was unjustified. After perusing the details furnished by the assessee and the impugned order, the CIT(A) noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A No. 1733/Pn/2012. Following the binding precedent of the Hon'ble Calcutta High Court and the foregoing decisions of the Hon'ble Tribunal, the CIT(A) held that the further disallowance of ₹ 25,51,838/- made by the AO under Section 14A of theAct was bad in law and deserves to be deleted and therefore, CIT(A) deleted the addition. 5.3 Not being satisfied with the order of the ld. CIT(A), the Revenue is in appeal before us. The ld DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. On the other hand, the ld. Counsel for the assessee has defended the order of the ld. CTI(A). The ld. Counsel also relied on the submissions which he made during the appellate proceedings before the ld. CTI(A). 5.4 We have given a careful consideration to the rival submissions. We are of the view that the AO has not recorded any reasons for rejecting the calculation of the assessee. Although the AO has held that Rule 8D is applicable in the relevant assessment year 2008-09, but he has not recorded any satisfaction nor has pointed out any specific infirmity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,03,67,798/- and ₹ 20,20,841/- respectively. 6.1The brief facts qua the issue are that during the assessment proceedings, the AO noted, in the computation of total income, that the assessee has claimed exemption u/s. 10(1) on account of agricultural income. However, no expenditure incurred in relation to agricultural income had been offered as disallowance u/s.14A. The assessee was asked to show cause why the expenditure incurred in relation to such agricultural income should not be disallowed in computing the total income. In response, the assessee, submitted before the AO that they were computing the agricultural income as per the Audited divisional accounts and had not claimed gross agricultural receipts but had deducted the expenditure in relation to the agricultural income and accordingly the agricultural income had been taken to be exempt under the provisions of law. The assessee submitted that he had computed income with the figure of net profit as per audited profit and loss account, which includes the net profit before tax of all the divisions, as given below: Amount (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.39,94,11,260/- Investment in agriculture division as on 31.03.2008 Rs.40,89,25,106/- Total - Rs.80,83,36,366/- Average value of investment Rs.40,41,68,183/- ..... (B) Value of assets (as per B/S) as on 01.04.2007 ₹ 86,02,71,056/- Value of assets (as per B/S) as on 31.03.2008 ₹ 94,65,06,232/- Total - Rs.180,67,77,288/- Average value of total assets Rs.90,33,88,644/- ..... (C) Thus, disallowance as per rule 8D(2)(ii) = (A) x (B)/ (C) = Rs.1,03,67,793/- .(b) Disallowance as per rule 8D(2)(iii) 0.5% of Average Value of Investment = 0.5% of ₹ 40,41,68,183/- = Rs.20,20,841/-........... (c) Thus total disallowance computed by AO, u/s. 14A read with rule 8D[(a) + (b) + (c)]was at ₹ 4,43,02,551/-. 6.2Aggrieved by the order of the AO, the assessee filed an appeal before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral income was computed as per the debited divisional account and that after deducting expenses, the net agricultural income had been claimed as exempt under the provisions of law. The income of ₹ 78,24,364/- was computed which included the net profit before tax of all the divisions, which is given below for ready reference. i. Corporate Office : ₹ 9,06,975/- ii. Sugar Division (Loss) : Rs.5,94,93,867/- iii. Agricultural Division : ₹ 88,40,807/- iv. Marketing Division : Rs.4,24,17,170/- : ₹ 78,24,364/- As per audited Divisional Profit Loss Account, the net profit of the Agricultural Division of ₹ 88,40,807/- is after deducting the total expenses of ₹ 3,19,13,917/-and depreciation of ₹ 2,41,902/- from the gross receipts of ₹ 4,09,95,906/- of the said Division. While computing the income from business, the said net profit from the Agricultural Division has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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