TMI Blog2018 (10) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... e first day and the last day of the previous year has to be taken for computing disallowance under sub clause (ii) of clause (2) of Rule 8D. So far ground related to directing for not considering the interest paid on term loan of ₹ 1,68,50,925/- for computation as per Rule 8D without appreciating the fact that as per Rule 8D(ii)A amount of expenditure by way of interest other than amount of interest included in clause (i) incurred during the previous year is to be taken for working out disallowance under sub clause (ii) of clause (2) of Rule 8D. There is no provision in Rule 8D to exclude part of the interest for working out the disallowance u/s 14A. Ld. A.O. has discussed the issue at page no. 2 to 4 and ld. CIT(A) has discussed the issue at page no. 2 to 13. Since in assessee’s own case for assessment year 2008-09 and 2009-10, disallowance u/s. 14A restricted to ₹ 20,000/- on lump sum basis and ld. CIT(A) in impugned year follows appellate order for assessment year 2008-09 & 2009-10 and accordingly disallowance in quantum appeals are restricted to ₹ 20,000/- by the ITAT . Accordingly, this became infructuous. - ITA. Nos: 77 & 3317/AHD/2014, ITA. Nos: 3318 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 14 A of the Act as prescribed in Rule 8D of the I T Rules, 1962. As per the provisions of section 14A of the Income-tax Act, 1961, no deduction shall be allowed in respect of expenditure incurred by the assessee in respect to income which does not form part of the total income. The method of computing the expenditure relating to exempted income has been prescribed under Rule 8D. Therefore vide notice u/s 142(1) dated 14.9.2012, the assessee was asked to furnish the details of expenses w.r.t. income claimed as exempt and also to explain the deduction inadmissible in terms of sec.!4A r.w rule 8D of the Act. 5. In reply, assessee stated that no expenditure has been incurred to earn tax free income and hence, no disallowance can be made U/S.14A. And in support of its contention, assessee filed detail paper book before the A.O. and he was not agreed with the contention of the assessee as there were no expenses towards exempted incomes could not be accepted. The assessee was using the funds for investment, office premises, infrastructure, man power, etc. in exempted income earning activities, apart from using them for other income earning activities. The assessee has not proved t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act,1961. In our case, it is not a loan to given to the subsidiary company, Dinesh Remedies Ltd. but it is an investment in equity share capital to the subsidiary company. . 8. But contention of the assessee was not acceptable to the A.O. and ld. A.O. made an addition of ₹ 1,04,67,285/- u/s. 40A(2)(b). 9. During the course of assessment proceedings, it was seen that the assessee has debited the expenditure of ₹ 5,26,80,876/- on account of Discount under the head Selling and other Expenses in the Profit Loss Account. The assessee was asked to furnish the details of Discount and assessee has furnished the following details: Particulars Rs. Rs. A. Cash Discount Cash Discount Felt 1,18,67,989/- 1,63,88,983/- Cash Discount Filter Fabrics 1,28,738/- Cash Discount Suiting 43,92,256/- B. Discount Discount Suiting 1,54,60,327/- 3,62,91,858/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the dealers and from their Accounts statement, it was seen that such amounts were shown as Yearly Incentive, Yearly Winter Incentive etc. and not shown as Cash Discount or Trade Discount. Therefore, it was noticed that these incentives were liable for TDS u/s 194 H of the Act. And further assessee was asked to show cause as to why the provision of section 40(a)(ia) of the Act should not be applied with regard to incentive of ₹ 3,15,78,873/-. In view of the above, assessee stated that The assessee company has paid discount of ₹ 154.60 lacs to its various wholesalers/dealers. The amount paid to dealer is not in the nature of commission. The company has its Textile Division manufacturing Suiting and other clothes. The same textiles are sold by various indenting agents, who are appointed in various territories and various States. Such indenting agents are procuring orders from various dealers and retailers spread over across the country in various cities. Based on the orders procured by such agents, the commission is paid to them and on such commission T.D.S. is deducted and paid to Government in time. However, no commission or any other payment in nature of commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales: We supply the felt to various paper mills which are our corporate clients and Government companies. We allow rebate / discount on the felt sold to clients directly and we do not have any agents and/or brokers for booking of the orders for Felt sales and therefore the rebate rebate / discount allowed to customers is nothing but reduction in the sales price only. The Felts so supplied by us is totally consumed by our customers in their manufacturing process/activities of Paper Industries. These transactions are purely on the basis of principle to principle and no agent or third party service is involved in this. We again reiterate that the rebate / discount allowed is only a reduction in the sale price and nothing else. 11. But ld. A.O. was not agreed with the contention of the A.O. and made addition of ₹ 3,15,78,873/-. 12. Against the said addition, assessee preferred first statutory appeal before the ld. CIT(A) who partly allowed the appeal of the Assessee. 13. Now appeal is before us. 14. So far ground with regard to deleting the addition of ₹ 21,301/- made u/s. 14 A read with Rule 8D is concerned, the assessee has claimed exempt dividend income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the fact that as per Rule 8D(ii)B the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year has to be taken for computing the disallowance under sub clause clause(ii) of clause (2) of Rule 8D. 2.2 On the facts and circumstances of the case, and in law, learned CIT(A) erred in directing for not considering the interest paid on term loan of ₹ 1,68,50,925/- for computation as per Rule 8D without appreciating the fact that as per Rule 8D(ii)A amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year is to be taken for working out disallowance under sub-clause (ii) of Clause (2) of Rule 8D. Clause (i) pertains to the amount of expenditure Directly relating to income which does not form part of total income. There is no provision in Rule 8D to exclude part of the interest for working out the disallowance U/S.14A. 19. Facts have been narrated in ITA No. 77/Ahd/2014 and so far ground related to deleting addition of ₹ 82,13,693/- made u/s 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infructuous. ITA No. 3318/Ahd/2014 for A.Y. 2011-12 Revenue s appeal 23. In this case, Revenue has taken following grounds: 1. On the facts and in the circumstances of the case and in law, Ld. C.I.T. (A) erred in deleting the addition of ^ 89,82,597/- made U/S.14A r.w. rule 8D without considering the facts that in a mixed system of accounting the identification of money employed towards exempted and non-exempted incomes cannot be made. 2.1. On the facts and in the circumstances of the case, and in law, learned GIT(A) erred in directing not to consider the investment made in HDFC Fixed mutual fund and HDFC cash management fund for computation of disallowance out of interest paid as per subclause (ii) to clause 2 of Rule 8D, but to consider these investments for making disallowances as per clause (Hi) to clause 2 of Rule 8D without appreciating the fact that as per Rule 8D(ii)B the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year has to be taken for computing the disallowance under sub clause clause(ii) of cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, we dismiss this ground of appeal. 26. So far ground relating to deleting addition of ₹ 1,21,14,015/- being interest on the investment made in subsidiary company by invoking provisions of section 40A(2)(b)of the Act is concerned, ld. A.O. has discussed the issue at page nos.7 8 and ld. CIT(A) has discussed the issue at page nos. 19 to 23. In this case, ld. CIT(A) follows assessment years 2008-09 A 2009-10 and Coordinate Bench decided the issue in favour of assessee in ITA No. 2313 2504/Ahd/2011 for Assessment Year 2008-09. Therefore we dismiss this ground of appeal. 27. So far ground related to deleting addition of ₹ 3,821,04,858/- by invoking provisions of Section 40(a)(ia) of the Act is concerned, ld. A.O. discussed the issue at page nos. 8 to 11 and ld. CIT(A) has discussed the issue at page nos. 24 to 28. In this case, ld. CIT(A) follows assessment years 2008-09 A 2009-10 and Co-ordinate Bench decided the issue in favour of assessee in ITA No. 2313 2504/Ahd/2011 for Assessment Year 2008-09. Therefore we dismiss this ground of appeal. 28. In the result, the appeal filed by the Revenue is dismissed. ITA No. 3218/Ahd/2014 for A.Y. 2011-12 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. ITA No. 2993/Ahd/2013 for A.Y. 2010-11 Assessee s appeal. 31. In this case, Assessee has taken following grounds: (1) The Learned Commissioner of Income Tax (Appeals) has erred in confirming disallowance U/S.14A of the I.T. Act read with Rule 8D. It is submitted that on the facts and circumstances of the case the details filed before you and CIT(A) it is, absolutely evident that the assessee has not invested any borrowed funds in any asset. The yield is exempted and not taxable income. In view of this it is submitted that there is no justification in confirming the disallowance u/s. 14A. (2) Without prejudice to the above, it is submitted that the Ld.CIT(A) has erred in confirming the disallowance u/s/.14A only on the basis of the order passed by the CIT(A) immediately preceding A.Y. 2009-10. It is submitted that on the basis of the balance sheet and material it is absolutely clear that the assessee has not invested or incurred any expenditure to earn income not liable to tax. In view of this, the addition confirmed U/S.14A by CIT(A) be deleted. (3) The order passed by the Ld CIT (A) is bad in law and contrary to the provisions of law and facts. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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