9911796707
TMI Blog2020 (7) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Rules, 1962 ('the Rules'). 1.1 That the CIT(A) erred on facts and in law in upholding the action of the assessing officer in making disallowance under section 14A of the Act read with Rule 80 of the Rules by merely following the directions issued by the Dispute Resolution Panel for the assessment years 2010-11 and 2011-12. 1.2 That the CIT(A)/ AO erred on facts and in law in holding that investment activity was not passive activity but was well informed and co-ordinated activity involving input from the various sources and acumen of senior management functionary and hence there was cost in-built into such investment activity. 1.3 That the CIT(A)/ AO erred on facts and in law in holding that the appropriate cost of composite funds needed to be allocated towards earning of exempt income. 1.4 That the CIT(A) erred on facts and in law in not appreciating that under section 14A of the Act and only expenses having direct! proximate nexus with earning of the dividend income could be disallowed. 1.5 That the CIT(A) erred on facts and in law in not appreciating that only expenses to the extent of Rs. 4,86,374 were incurred for earning the aforesaid dividend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirement in law. 2.3 That the CIT(A) erred on facts and in law in arbitrarily holding that the auditor has not taken responsibility of correctness of the claim of the appellant on the ground that the audited financial statements consisted only Trial Balance, Balance Sheet and Profit and Loss account without any notes to accounts or any remarking regarding the maintenance of accounts, revenue recognition, etc." 2. Briefly stated the facts necessary for adjudication of the issue at hand are : Assessee company is in the business of manufacturing and selling of float glass. During the year under assessment, assessee earned dividend income of Rs. 15,44,59,467/-. Assessing Officer (AO) by invoking the provisions contained under section 14A the Income-tax Act, 1961 (for short 'the Act') read with Rule 8D of the Income-tax Rules, 1962 (for short 'the Rules') made a disallowance of Rs. 1,18,86,898/- minus Rs. 4,86,374/- suo motu disallowance made by the assessee = Rs. 1,14,00,524/- and added the same to the income of the assessee on the ground that earning of exempt income is not in the nature of passive activity having no input; that investment made being a cautions decision and hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earning of exempt income is not in the nature of passive activity having no input; that investment being a conscious decision and having deployment of funds clearly brings into picture expenditure by way of cost of funds and that assessee's claim that he has not incurred any expenditure to earn dividend income is not acceptable. 9. Hon'ble Delhi High Court in case of Maxopp Investment Ltd. vs. CIT - (2012) 347 ITR 272 (Del.) held that AO in order to invoke provisions contained u/s 14A read with Rule 8D is required to return a finding that, "he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure". Even otherwise "expenditure incurred does not include imagined expenditure". 10. Furthermore, when assessee is having its own huge interest free surplus funds of Rs. 4,54,99,30,057/-, there is no question of incurring expenditure by way of interest. 11. The assessee has come up with specific argument that its entire investment on which exempt dividend income of Rs. 15,44,59,467/- has been earned is in the debt mutual fund and the investment activity only requires filling of 'Mutual Fund Standard Printed Forms' and issue of cheque or debi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied the disallowance u/s 14A of the Act at Rs. 4,86,374/-. Apart from this, the assessee has suo motu reasonably apportioned the salary part of the employee and Finance Director looking after investment made for earning dividend income. 15. We have perused the order passed by the coordinate Bench of the Tribunal in assessee's own case for AYs 2009-10 & 2010-11, available at pages 2.1 to 2.29 and 3 to 46 respectively of the paper book, having identical facts deleting similar addition made by the AO/CIT(A), which order has been affirmed by the Hon'ble Delhi High Court vide order dated 05.12.2017 passed in ITA 1106/2017, available at pages 1 & 2 of the paper book. 16. We are further of the considered view that since there is no change in the suo motu disallowance by the assessee as has been made in AYs 2010-11 & 2011-12, which has been confirmed by the Hon'ble Delhi High Court, making disallowance by the AO without recording satisfaction mandatory u/s 14A(2), is not sustainable. 17. So, in view of what has been discussed above and following the orders passed by the coordinate Bench of the Tribunal for AYs 2010-11 & 2011-12, affirmed by the Hon'ble Delhi High Court, we are of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o windmills for its captive consumption. On the same assessee claimed deduction under section 80 IA. Before the assessing officer the assessee submitted the audit report in form No. 10 CCB. The assessee started generating power from assessment year 2004 -05 onwards. For both the windmills the assessee entered into a power purchase agreement, such power generated at the windmill wheeled by that agreement to the manufacturing unit of the assessee, and number of units generated after deduction of the billing charges is granted as set-off in the electricity bill of the assessee. Based on this assessee booked the revenue and burnout profit thereon to derive at the profit generated from the industrial undertaking. During the course of assessment proceedings, the assessee was directed to produce the books of accounts maintained in respect of windmill units, which was produced by the assessee along with the methodology by which the income is booked and expenditure incurred of the windmill. The Ld. assessing officer rejected it on the ground that the appellant is computing sales based on the credit notes and the appellant failed to produce any document vouchers, which could have asserted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaking or not. If the assessing officer finds that such working is not proper then only he can say that that the audited accounts of the assessee are not reliable. In the present case the revenue has been recorded by the assessee by deriving the units generated based on the credit notes issued by the transmission company, the assessee multiplied those units generated with the power rates for which the manufacturing unit buys the power from an outside agency, reduced the proper expenditure therefrom to derive at the profits of the industrial undertaking. It is further stated that this is not the 1styear of the claim of the assessee under section 80 IA of the act. In the past years, also the assessee was granted deduction on the similar facts and circumstances by the Ld. assessing officer. The principle of consistency also demands the assessee may be treated as eligible for deduction and it may not be rejected merely based on non-maintenance of books of accounts. Same is also not found as the mandatory conditions for deduction. Therefore, we do not approve the approach of the assessing officer in rejecting the claim of the assessee at the threshold merely on the basis that no separa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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