TMI Blog2018 (10) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... .00 is the direct expenditure incurred by the assessee in relation exempted income as specified under rule 8D(2)(i) of Income Tax Rules. Thus we direct to delete the same. Thus, the ground of appeal of the assessee is partly allowed. - I.T.A. No.708/Ahd/2016 - - - Dated:- 3-10-2018 - SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SMT MADHUMITA ROY, JUDICIAL MEMBER For The Appellant : Shri Sanjay R. Shah, A.R. For The Respondent : Shri Mudit Nagpal, Sr. D.R. ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)-7, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)-7/299/15-16 dated 09.12.2015 arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961(here-in-after referred to as the Act ) dated 04.12.2014 relevant to Assessment Year (AY) 2012-13. 2. The grounds of appeal raised by the assessee are as under:- Your appellant being aggrieved by the order passed by the Learned Commissioner of Income-tax (Appeals)-7, Ahmedabad, (hereinafter referred to learned CIT(A) ), presents this appeal agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mandate provided by the Government of Gujarat, income from which was taxable. It is submitted that it be so held now. 2.4 Without prejudice to the above, the learned CIT(A) erred in confirming the action of the A.O. disallowing expenditure under Section 14A of the Act without considering the fact that the investment made by the appellant company in its subsidiary company should be excluded while computing the amount of disallowance under section 14A read with rule 8D owing to the fact that such investment has been made on account of strategic considerations and business expediency and not for purpose of earning exempt income. It is submitted that it be so held now. 2.5 The A.O. erred in making separate disallowance of ₹ 2,19,585/- (being amount suo-moto disallowed by the appellant) in his computation of disallowance under Section 14A of the Act read with Rule 8D of the Rules and not-granting set-off of the same against the disallowance of ₹ 3,75,880/- worked out by him towards other expenses under Rule 8D of the Rules. The learned CIT(A) erred in confirming the same. It is submitted that it be so held now. 2.6 Without prejudice to the above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Funds available for making investment in tax free securities 434.85 3. Further the details of investment in tax free income yielding securities as on 31/03/2012 are summarized hereunder: Particulars Rs (In crores) In fully paid equity shares 1.63 In subsidiary company 5.00 Units of UTI balanced fund 0.83 Total investment 7.46 4.2 The assessee about the administration expenses submitted that it has not incurred any expenses for the earning of such dividend income. However, the assessee suo moto disallowed 1% of the total operating expenses which works out at ₹ 2,19,585/- only (1% of 2,19,58,496/-). 4.3 In view of above, the assessee submitted that no other disallowance can be made u/s 14A r.w.r. 8D of Income Tax Rule. However, the AO disregarded the contention of the assessee and invoked the provision of Section 14A r.w.r. 8D of the Income Tax Rule for the purpose of disallowance which works ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, it is not possible that no administrative and other expenses would have been incurred to manage the investment portfolio. Besides, it is also not possible to keep funds segregated and show with certainty that only own funds were used for investment. In addition, it is seen that the addition u/s 14A r w Rule 8D has under identical circumstances been made in the appellant's case in earlier years as well, and my learned predecessors for AY s 2008-09, 2009-10, 10-11 and 11-12, have, after detailed analysis and discussion, Confirmed the addition made by the A.O on this account. In view of the same, the dlsallowance u/s.14A is upheld. This ground of appeal is dismissed. 5.2 Being aggrieved by the order of Ld. CIT(A) assessee is in second appeal before us. 6. The Ld. AR before us filed a paper book which is running from pages 1-103 and reiterated the submission as made before the Ld. CIT(A). 6.1 The Ld AR for the assessee in respect of administrative expenses further submitted that the AO in his assessment order has disallowed administrative expenses for ₹ 3,75,880/- only. Thus, the disallowances cannot exceed more than the said sum. The ld. AR for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r book. It is also true that the assessee is having sufficient interest free funds to cover up die investments. It is equally true that the interest income of the assessee is more than the interest expenditure. The ratio laid down by the Hon'ble Bombay High Court in the case of Reliance Utilities and Power Ltd. 313 ITR 340 squarely apply on the facts of the case in hand. The A.O. has not demonstrated any nexus between the borrowed funds and the investments made by the assessee and as mentioned elsewhere, all the investments are brought forward balances from earlier years. 11. The assessee is a non banking financial company registered with Reserve Bank of India and is 100% a Government of Gujarat Company and is engaged in the business of providing financial assistance to Government of Gujarat Enterprises. Company's main source of funds are in the form of Inter Corporate Deposits from Government of Gujarat controlled enterprises. The Company also performs Treasury management of surplus funds of Government Board/Corporations and other institutions. 12. As per the directions of the Government of Gujarat, the assessee has parked its surplus funds in Government securi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., was followed by the Division Bench of the High Court of Gujarat in Fidelity Shares Securities Ltd. v. Dy. CIT [2017] 82 taxmann.com 108/390 ITR 267, wherein it was held that the Tribunal has no power under the Income Tax Act to enhance the assessment in appeal in view of the statutory provisions. Further it was held that the benefit, which was sought to be taken away by the Department, was not permissible in law and this is the infirmity in the judgment of the Tribunal as the Tribunal has no power to enhance the assessment in appeal. 6. Considering the facts and circumstances of the case, we find that there is no error in the order passed by the Tribunal in remanding the matter for fresh consideration to the Assessing Officer. But, however, the learned counsel for the appellant pointed out that the observations and directions issued by the Tribunal are incorrect. In any event, we have indicated in the preceding paragraphs that the Tribunal has no power under the Income Tax Act to enhance the assessment in an appeal. Equally, it cannot be done on an order of remand being passed by the Tribunal to the Assessing Officer. Therefore, we opine that it is sufficient to clar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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