TMI Blog2016 (12) TMI 1748X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(A) is confirmed. - I.T.A. No.1281/Ahd/2012, C.O. No.158/Ahd/2012 (In I.T.A. No.1281/Ahd/2012) - - - Dated:- 7-12-2016 - Pramod Kumar and Mahavir Prasad, JJ. Kamlesh Makwana for the Revenue Manish J. Shah for the assessee ORDER Pramod Kumar, 1. By way of this appeal, the Assessing Officer has challenged correctness of the order dated 26.03.2012, passed by the learned CIT(A), in the matter of assessment under section 143(3) of the Income Tax Act, 1961 for the assessment year 2008-09. The assessee has also filed a Cross Objection against the same order passed by the learned CIT(A). 2. Grievances raised in the appeal by the Assessing Officer are as follows :- 1. The Ld. CIT(A) has erred in law and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er pointed out as to how the Appellant has made the investments from the borrowed funds which is required as per the section 14A of the IT Act 1961. On the contrary the appellant has demonstrated before the AO regarding the flow of funds invested with the sister concern. The above facts point that appellant s interest expenses are attributable to construction business as the investments are for the purpose of business of the appellant-company, hence, no disallowance under Rule 8D(2)(ii) r.w.s. 14A of the Act is required. However, disallowance for administrative expenses etc. incurred for such investments under Rule 8D(2)(iii) r.w.s. 14A of the Act requires, the same is already computed by AO in order u/s 154 dated 13.02.2012 at ₹ 20,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om going through the assessment order we observe that assessee has earned dividend income at ₹ 2,07,300/- and it is also undisputed fact that assessee is engaged in the business of trading of shares and securities. From going through the decision of the co-ordinate bench referred and relied on by ld. AR in the case of M/s K. Ratanchand Co. vs. ITO (supra), we find that the issue raised in the appeal before us is fully covered by the decision of the co-ordinate bench wherein similar issues came up before the Tribunal and it has been have held that in such cases disallowance u/s 14A should not exceed exempt income earned by the assessee. While deciding so co-ordinate bench has observed as under :- 6. We have heard rival contentions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f units are in dispute. The AO also held that assessee is in the business of purchase/sale of shares and while framing assessment under section 143(3) the loss of ₹ 1,51,21196 incurred on the sale/purchase of units has been treated as business loss. In view of the aforesaid facts, it can be stated that assessee is in the business of purchase and sale of shares. Once the purchase and sale of shares is held to be a business activity, the interest paid thereon has to be treated as business expenses in view of the Hon ble High Court decision in the case of Addl. CIT vs. Laxmi Agents (supra). Thus following the decision of the Co-ordinate Bench and the Hon ble High Court, we are of the view that in the present facts of the case, the intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of balance-sheet was ₹ 17,86,69,501/- and the investments at the end of the year was at ₹ 1,26,00,538/- only. Therefore, in view of the decision of the Hon ble Gujarat High Court in the case of Hitachi Home and Life Solutions (I) Ltd. (supra) and Torrent Power Ltd. (Supra), no disallowance towards interest expenditure incurred for earning exempt income can be made. Regarding the disallowance of administrative expenses of ₹ 12,750/-, we find that the Chandigarh Bench of the Tribunal in the case of A.C.I.T. Vs. Punjab State Coop Marketing Fed. Ltd. in ITA No. ITA No.548/Chd/2011 for AY 2007- 08 has held that disallowance u/s. 14A read with Rule 8D cannot exceed the exempt dividend income. Therefore, we restrict the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 4,04,204/- whereas the assessee has earned exempt income in the form of dividend of ₹ 58,963/-. Even assuming that some expenditure is required to be disallowed but such disallowance should not exceed the quantum of exempt income. Therefore, in view of the decision of the Co-ordinate Benches we hereby hold that the addition under section 14A cannot be more than the exempt income and should therefore be restricted to ₹ 58,963/-. This ground of the assessee is partly allowed. Respectfully following the above decision of the co-ordinate bench in the case of M/s K. Ratanchand Co. vs. ITO (supra), we are of the view that on the given facts and circumstances of the case, disallowance u/s 14A of the Act should be restricte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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