TMI Blog2018 (8) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... me under the provisions of section 43B, hence, the disallowance is hereby deleted. Accordingly ground No. 3 is allowed. - ITA No. 1541/Hyd/2017 - - - Dated:- 31-7-2018 - SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Assessee : Shri V. Siva Kumar For The Revenue : Smt. B.K. Vishnu Priya ORDER PER S. RIFAUR RAHMAN, A.M.: This appeal filed by the assessee is directed against the order dated 28/06/2017 of CIT(A) 5, Hyderabad for AY 2013-14. 2. Briefly the facts of the case are, the Assessee is a Company engaged in the business of manufacture and sale of Ferro Alloys, having its factory at Rudraram village, Patancheru Mandal, Medak District. The assessee filed its return of income for the AY 2013-14 originally on 15.09.2013 declaring loss of ₹ 8,77,20,449/-. Later a revised return was filed declaring loss of ₹ 8,35,36,788/- on 30-09-13, the same was again revised on 25-09-2014 by declaring loss at ₹ 8,38,14,180-. The case was taken up for scrutiny by issue of notices u/s.143(2) and 142(1). The AO completed the assessment u/s 143(3) on 31/03/2016 determining the assessee s loss at S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation. 5. As regards ground No. 2 with regard to disallowance u/s 14A of the Act, the AO observed that from the information filed by the assessee, the company made non-current investments amounting to ₹ 157,49,93,744/- and according to him, the assessee company must have incurred some sort of administrative/managerial expenditure to manage the investments, especially since there is no set up in this regard. He therefore applying the provisions of section 14A r.w.r. 8D, worked out the disallowance at ₹ 78,74,9658/- (Rs. 157,49,93,744/- x 0.5% ) 6. Before the CIT(A), the assessee submitted that investments held by it as at 31/03/2012 at ₹ 157,49,93,744/- continued till 31/03/2013, thus, during the year, neither any fresh investments were made nor there were any sale of investments. Hence, no activity was there in the investments portfolio during the year. It was argued that since no expenditure was incurred during the year, AO was not justified in disallowing ₹ 78,74,968/- u/s 14A r.w.r. 8D(2)(iii) of the Act. 7. The CIT(A) confirmed the disallowance on the ground that the disallowance made is in conformity with rule 8D(2)(iii), hence, do not call fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no indication even that the above expenditure is expended for earning dividend income. AO without giving any satisfactory reason, just invoked Rule 8D(iii) and disallowed the amount. 9. The Co-ordinate Bench in the case of Sahara India Financial Corpn. Ltd., Vs. DCIT (supra) has held in para 81 as under: We have heard the rival contentions and perused the material available on record. It has not been disputed that the administration, expenses and books of account of investment division are separately carried out and maintained by the assessee. No infirmity has been found by the department in this behalf. One of the main issue is on whom lies the onus to establish nexus of available funds with free and taxable income. Similarly courts have held that a finding in objective terms about assessee working being unsatisfactory is to be recorded by AO in the order. Chandigarh Bench of the Tribunal in the case of Punjab State Co-op. Marketing Fed. Ltd. (supra) has held that in any case the disallowance u/s 14A cannot exceed tax free income of the assessee. If mechanical method of rule 8D is applied, it leads to manifestly absurd results in as much as for tax free income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s partly allowed. As the issue under consideration is materially identical to the said decision, following the conclusions drawn therein, we direct the AO to delete the disallowance made u/s 14A r.w.r. 8D(2)(iii) as the disallowance u/s 14A cannot exceed the exempt income. Ground No. 2 is allowed. 11. As regards ground No. 3 with regard to disallowance of ₹ 1,76,564/- u/s 43B, during the course of assessment proceedings, on verification of information furnished by the assessee, AO noticed that statutory payments of ₹ 11,05,393/- were not paid. When AO asked the assessee as to why the said payments shall not be disallowed u/s 43B, the AR of the assessee submitted that out of such unpaid statutory liabilities the following amounts represents interest paid either to a bank or on late payment of service tax, excise duty and employees state insurance contribution, the details of which are as under: 1. Hire Purchase interest paid to HDFC Bank Ltd. 15,692 2. Interest paid on service tax 44,929 3. Interest paid on excise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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