9911796707
TMI Blog2018 (5) TMI 1748X X X X Extracts X X X X X X X X Extracts X X X X ..... its return of income for the AY. 2013-14 on 27-09-2013 declaring loss of Rs. 2,37,95,774/- under normal provisions and a book profit of Rs. 1,68,23,934/-. The case was completed u/s. 143(3) of the Act by making a disallowance of Rs. 11,82,310/- u/s. 14 A of the Act. AO has disallowed 0.5% of the average investments u/s. 8D(iii) to an extent of Rs. 11,82,310/-. 3. Ld. CIT(A) has confirmed the same by stating as under: "(VII). Ground No.2(a) and 2(b) relates to disallowance of Rs. 11,82,310/- u/s.14A read with Rule 8D(2)(iii). Keeping in view the facts, issue and circumstances, the instant case was seen. From the balance sheet of the appellant it is seen that the appellant had made investments and treated the dividend income as exempt. Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof or Section 11 or Section 12). As per this aforesaid clause, expenditure relatable to earning of exempt income as per Section 10 (say if that provided in Section 10(38)) requires to be added to the book profit. In the appellant's case the appellant made investments in equity shares wherein the dividend income was exempt u/s.10(34). Therefore, the expenditure considered f or disallowance u/s.14A r.w.r 8D(2)(iii) is to be added back for the purpose of determination of tax liability u/s. 115JB. The findings of the Assessing Officer on this count holds merit and is accordingly upheld. Hence, Ground Nos.2(a) and 2(b) in appeal are dismissed". 4. It was the contention that investment was made in group concern and no expenditure was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was only under Rule 8D(2)(iii). 6.1. Coming to the disallowance of ½% of average value of investment, some proportionate expenditure can be disallowed but in no case, it should exceed the amount earned claiming exemption. The Hon'ble High Court of Punjab & Haryana in the case of Pr. Commissioner of Income Tax Vs. Empire Package Pvt. Ltd., (supra), answered the question raised by Revenue in negative, wherein the Revenue has raised 'whether in the facts and circumstances of the case, the Hon'ble Tribunal is justified in law to hold the disallowance made u/s. 14A r.w. Rule 8D cannot exceed the exempt income in the absence of any such restriction being there in the relevant section or rule'. Similar opinion was also expressed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Co-op. & Marketing Fed. Lt d. (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 Rs. 68,37,583/- disallowance of Rs. 2,16,51,917 (enhanced by CIT(A) at Rs. 2,19,47,772) is made u/s 14A which is way too much than the exempt income. As the interpretation of provisions of sec. 14A r/w rule 8D is leading to unanticipated absurdities which cannot be the intention of legislature. Under these circumstances help of external aids of construction for interpretation of statute is called for. Looking at the varying interpretation offered by various courts and benches of trib ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
