Feedback   New User   Login      
Tax Management India. Com TMI - Tax Management India. Com
Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles SMS News Highlights
        Home        
Extracts
Home List
← Previous Next →

ITO, Wd-12 (1) , Kolkata Versus M/s Bonanza Trading Company (P) Ltd.

2018 (1) TMI 600 - ITAT KOLKATA

Disallowance made u/s 14A r.w.r. 8D(2)(ii) and Rule 8D (2) (iii) - Held that:- Under sub-clause (iii), what is disallowed is percentage of the numerator B in rule 8D(2)(ii). Again this is to be calculated in the same line as mentioned earlier in respect of Numerator B in rule 8D(2)(ii). Therefore, not all investments become the subject-matter of consideration when computing disallowance u/s 14A r.w.r 8D. The disallowance u/s 14A r.w.r. 8D is to be in consideration to the income which does not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essee under consideration because the assessee had its own funds to invest in shares and securities and some of the investments were made by the assessee in subsidiary companies for strategies purpose. - Hence, we confirm the order passed by the ld CIT(A), so far the disallowance under Rule 8D (2) (ii) is concerned. - For disallowance under Rule 8D(2)(iii), the assessee had suo-moto disallowed ₹ 1,05,100/-, however, we note that in order to compute the disallowance under Rule 8D (2 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rtly in favour of revenue - ITA No.172, 173 And 174/Kol/2016 - Dated:- 10-1-2018 - SHRI A. T. VARKEY, JM AND DR. A.L.SAINI, AM For The Appellant : ShriSaurabh Kumar, Addl. CIT(DR) For The Respondent : Shri Asim Choudhury, Advocate ORDER Per Dr. Arjun Lal Saini, AM: The captioned three appeals filed by the Revenue, pertaining to assessment years2008-09, 2009-10 & 2010-11, are directed against the orders passed by the ld. Commissioner of Income Tax (Appeals)-9, Kolkata, in Appeal Nos. 588/589/ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r 2008-09, is taken as the lead case. 3. The Revenue has raised the following grounds of appeal (in lead case in ITA No.172/Kol/2016, Assessment Year, 2008-09) are as follows: 1. That in the facts & circumstances of the case and in law, the ld. CIT(A) has erred by allowing relief to the assessee in respect of the disallowance made u/s 14A of the I.T. Act r.w.r 8D(2)(ii) of I.T. Rule whereas, the assessee failed to establish the fact in course of assessment that its interest being funds were .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to yield dividend income and should not be considered to be included in computation of average value of investments for disallowance under the said Rule. 3. That the appellant craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing. 4. In this appeal, the main grievance of the Revenue is that the ld. CIT(A) has erred by allowing relief to the assessee in respect of the disallowance made u/s 14A of the I.T. Act and r.w.r. 8D(2)(ii) and Rule 8D (2) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e a detail of disallowable expenditure in terms of section 14A r.w.r 8D of I.T. Rules. During the assessment proceedings the assessee submitted before the AO that he earned dividend income amounting to ₹ 13,81,618/- and also earned income from long term capital gain amounting to ₹ 48,41,068/-. It was clarified to AO that no expenditure was incurred by the assessee which is directly related to earning of these incomes. However, the assessee himself disallowed ₹ 6,43,032/- relate .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r ₹ 2,76,037/- and ₹ 100/- relating to Dematcharges. Now, this may be mentioned that STT payment is expressly disallowable u/s. 40(a)(ib) of the l.T.Act, 1961 and hence it is not a disallowance u/s14A of the Act, but 40(a)(ib) of the Act. The paymentsrelated to portfolio manager is also not an allowable deduction under the head capital gain and soit is also not allowable otherwise. Hence, it was noted by AO that in true sense, the assessee has disallowed only ₹ 1,05,100/-u/s 14 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

those stated above have not been considered for thepurpose of average investment u/s. 14A as the same had been offered for short term capital gainin assessment year 2008-09 and 2009-10. Moreover, the unquoted investment shall be offeredfor taxation in the year of sale. Regarding details of use of borrowed fund, the assessee has submitted that the borrowed fund during the year increased by ₹ 12,72,95,212/-. Lt was submitted that the fund was used for business purpose only. The borrowed fun .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

her expenses incurred by the assessee, so was the case withexpenditures incurred as interest. The AO noted that in the case of S.G. Investment & industries Ltd, Vs. DCIT 89 ITD 44, Hon'ble ITAT, Kolkata had opined that the word " in relationto" is of much wider import and not only encompasses direct & indirect expenditure but alsothose expenditures which are proximate to any income not chargeable to tax. Hence, expenditures relating to exempt income are liable to be disallo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

me that part ofadministrative as well as interest expenses attributable to exempt income, the provisions of section14(2) read with rules 8D would be applicable to the assessee. The AO also, relied on the judgment ofHon'ble ITAT "Special Bench" Mumbai in the case of M/s. Daga Capital Management Pvt. Ltd. Vs. ITO 6(2)(2), Mumbai in ITA No. 8057/Mum/03, ratio of which is mostly approved by the Hon'ble High Court Bombay (except retrospective application of rule 8D), therefore, Rule .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

01/04/2007 and ₹ 21,72,67,379/- as on 31/03/2008. As far as use of most of the fund for purchase of assets areconcerned, it is true for the loan fund pertaining to loans taken during the relevant previous yearbut such loans were taken in the fag end of the year and does not bears much interest, therefore, AO held that interest attributes to investments as well as business and hence, the same should also be considered for computation of disallowance. The assessee was also not correct in ta .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e meaning as assigned to them under Rule 8D) As per Rule 8D(2)(iii): Investment in Shares as on 01/04/2007: Rs.6,52,43,631/- Investment in Shares as on 31/03/2008: Rs.13,47,01,434/- Average value of investment : Rs.9,99,72,533/- ½ of above: : Rs.4,99,863/- The AO disallowed ₹ 48,84,173/- (Rs.43,84210 + 4,99,863 + 100). Since the assessee had already disallowed ₹ 1,05,100/-, therefore net disallowance was made by AO at ₹ 47,79,073/- (Rs.48,84,173 - ₹ 1,05,100). 6. A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

res. The assessee had also invested in their subsidiary company, as strategic investment to expand their real estate business. The ld CIT(A) after going through the month-wise sale and purchase details of investments, observed that there was surplus funds for investment from which exempt income was being earned. The ld CIT(A) also noted thatthere was no disallowance of interest in the earlier years and perusal of the month-wise details of purchase and sale of investment for FY 2006-07 also showe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ase is covered by the decision of the Punjab & Haryana High Court in the case of CIT vs. Hero Cycle Limited 323 ITR 518, wherein it was held that if sale proceeds from investment is enough to be used for the purpose of purchase of investment then it is clear that the assessee has surplus fund and no disallowance under 14A can be made. This way, the ld. CIT(A) allowed the appeal of the assessee and deleted the addition made by AO. 7. Not being satisfied with the order of the CIT(A), the Reven .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Revenue had submitted that under Rule 8D(2)(ii), the assessee had failed to establish the fact that interest bearing funds were not utilized for investment which yielded exempt income. 8. On the other hand, the ld. Counsel for the assessee submitted that assessee is engaged in real estate investment and investment in share and securities. The assessee company has its own surplus funds to invest in share and security. Therefore, disallowance under Rule 8D(2)(ii) should not be made. Apart from t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

count for disallowance. 9. Having heard the rival submissions and perused the materials available on record, we note that under Rule 8D(2)(iii), it is not the total investment at the beginning of the year and at the end of the year, which is to be considered but it is the average of the value of investments which has given rise to the income which does not form part of the total income, is to be considered. In respect of the provisions of rule 8D(2)(iii), which is the subject-matter of the appea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Discussion Forum
what is new what is new
 


Share:            

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version