TMI Blog2019 (2) TMI 1612X X X X Extracts X X X X X X X X Extracts X X X X ..... ertainly some expenditure should have been incurred by the assessee for its regular business activities apart from earning exempt income which the assessee has submitted to have been incurred at ₹ 65,025/- towards salary disallowance and ₹ 63,483/- on account of Statutory Auditors Remuneration. After giving the set off to the above referred expenses remaining amount is ₹ 7,22,648/-(Rs. 851156-65025-63483). Therefore, in the given facts and circumstances of the case the disallowance u/s 14A under the 3rd limb of Rule 8D(2)(iii) of the I.T. Rules stands confirmed at ₹ 7,22,648/- for A.Y. 2008-09. In the result against the total addition made by the assessing officer at ₹ 1,76,09,474/-, we sustain the addition u/s 14A of the Act at ₹ 7,22,648/- of the Act and partly allow the revenue s appeal for A.Y. 2008-09. Disallowance of administrative expenses - Taking consistent view as taken for A.Y. 2008-09 observe that for A.Y. 2011-12 against the administrative expenses of ₹ 8,51,156/-, assessee has contended that disallowance if any to be made for administrative expenses should be restricted to ₹ 7,22,648/-. We find that for A.Y. 2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) erred in deleting the addition of ₹ 65,73,689/- on account of disallowance u/s 14A of the IT Act. 2. As issues raised in both these appeals are common relating to disallowance u/s 14A of the Act deleted by the Ld. CIT(A), for the purpose of adjudication we will take the facts for A.Y. 2008-09. 3. Brief facts as culled out from the records are that the assessee is a non-banking financial company registered with Reserve Bank of India and is engaged in the activity of long term investments in shares, securities etc. and giving/taking loans from/to body corporate, and is in the category of a company not accepting/not holding public deposits. In pursuance to order of CIT-Ujjain u/s 263 of the Act dated 28.03.2013, the assessment order u/s 143(3) of the Act was completed on 15.12.2010 was set aside for afresh examination on limited issue relating to disallowance u/s 14A of the Act. In set aside proceeding Ld. Assessing Officer carried out the assessment proceedings u/s 143(3) r.w.s 263 of the Act and after considering the submissions of the assessee computed disallowance u/s 14A of the Act at ₹ 1,76,09,474/- and after adding this disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SMENT YEAR 2004-05) ~ DCIT Vs Trade Apartment Ltd. ITAT, Kolkata [ITA NO. 1277/ Kol/ 2011 dated 30.03.2012 (ASSESSMENT YEAR 2008-09) ~ ACIT Vs KESHA V SHARES STOCKS LTD, ITAT, Delhi [ITA NO. 4394/Del/2011 dated 26.04.2013 (ASSESSMENT YEAR 2008-09) ~ ITO Vs KARNAVATI PERTOCHEM PRIVATE LIMITED, ITAT, Ahmedabad [ITA NO. 2228/Ahdl/2012 dated 05.07.2013 (ASSESSMENT YEAR 2008-09) ~ SAFAL REALITY PVT LTD. Vs A CIT, ITAT, Ahmedabad [ITA NO. 2334 1842/Ahdl/2012 dated 29.11.2013 (ASSESSMENT YEAR 2009-10 2010-11) In the appellant's own case the AO while completing the assessment pertaining to the assessment year 2004-05, the AO made the disallowance of net interest as adopted by the appellant. The CIT(A), Ujjain while deciding the appeal of the appellant pertaining to the assessment year 2004-05 upheld this method while deciding the appeal no. U-734/2006-07, dated 20- 03-2007. The same has also been upheld by Hon'ble ITAT while deciding the appeal of the appellant vide ITA No.372/Ind.l2007, dated 25-06-2013. Assessment Year 2001-02 In this year, the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce u/s 14A of the Act. 6. Ld. Departmental Representative (DR) vehemently argued supporting the order of the Ld. Assessing Officer. 7. Per contra Ld. counsel for the assessee relied on the finding of the Ld. CIT(A) as well as various decisions held in assessee own case in the preceding years. He also referred and relied following judgments taking the plea that Rule 8D of the IT Rules is not automatic and the assessing officer has to record objective satisfaction before invoking the Rule 8D and also pleaded that only net interest expenses should be considered while computing disallowance u/s 14A r.w.r. 8D: 1. Maxop Investment Ltd. vs. CIT (2018) 91 taxmann.com 154 (SC) 2. Godrej Boyce Mfg. Co. ltd. vs. DCIT (328 ITR 81) (Bom) 3. Affirmed by Hon'ble Supreme Court in the case of Godrej Boyce Mfg. Co. ltd. vs. DCIT (2017) 81 Taxmann.com 111 4. H.T. Media Ltd. vs. PCIT (2017) 85 Taxmann.com 113 (Del. HC) 5. CIT vs. I.P. Support Services Indid(P.) Ltd. (378 ITR 240) Del. HC) 6. Shapoorji Pallonji Co. Ltd. vs. DCIT (2017) 164 ITD 42 (Mum. Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds to be satisfied: i. it is an expenditure ii. such expenditure is incurred iii. such incurring of expenditure is in relation to such income which does not form part of the total income under this Act. 9. If the above conditions are satisfying the quantum disallowance shall be determined by the assessing officer in accordance with the provisions of sub-section (2) and sub-section (3) of section 14A of the Act. In sub-section (2) (3) of section 14A of the Act reference is given to the method provided in Rule 8D of the IT Rules which has following three limbs: ( i) the amount of expenditure directly relating to income which does not form part of total income; ( ii) Computing of disallowance of interest expenditure incurred during the year which is not directly attributable to any particular income or receipts; ( iii) An amount equal to 0.5% of the annual average of the value of investment. 10. From perusal of the assessment order, we find that Ld. AO had not made any disallowance for the first limb (Rule 8D (2)(i)) of the IT, Rules. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses of ₹ 92,70,856/- debited in the P L account the assessee has suo moto added back an amount of ₹ 83,93,017/-.On perusal of the submissions made by the assessee before lower authorities find that against the total expenditure debited in the profit and loss account of ₹ 92,70,856/- an amount of ₹ 83,93,690/- has been disallowed/added back to the assessee in the computation of income and further disallowance of ₹ 26,010/- was made u/s 14A vide order u/s 143(3) dated 15.12.2010, leaving behind an amount of ₹ 8,51,156/-. Certainly some expenditure should have been incurred by the assessee for its regular business activities apart from earning exempt income which the assessee has submitted to have been incurred at ₹ 65,025/- towards salary disallowance and ₹ 63,483/- on account of Statutory Auditors Remuneration. After giving the set off to the above referred expenses remaining amount is ₹ 7,22,648/-(Rs. 851156-65025-63483). Therefore, in the given facts and circumstances of the case the disallowance u/s 14A under the 3rd limb of Rule 8D(2)(iii) of the I.T. Rules stands confirmed at ₹ 7,22,648/- for A.Y. 2008-09. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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