TMI Blog2020 (12) TMI 612X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowed only if Assessee had actually earned Dividend income in excess of such amount of disallownace, that too after recording reasons for rejecting the apportionment of expenditure so incurred or claim that no such expenditure was incurred to earn that much of Dividend income was validly rejected by the Assessing Authority. We do not find any such reasons even recorded by the Assessing Authority in the present case. Thus issue is set aside and the appeals are restored on the file of the learned Tribunal to decide the appeals de novo afresh, in accordance with the law laid down by this Court in the judgment in M/s.Marg (cited supra). - Tax Case (Appeal) Nos. 777 to 779 of 2017 And CMP Nos. 19684 And 19685 of 2017 - - - Dated:- 24- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals filed by the Assessee is covered by a recent Division Bench judgment of this Court, to which one of us [Dr.Vineet Kothari, J.] is a Party in the case of M/S. MARG LIMITED VS. COMMISSIONER OF INCOME TAX, CHENNAI [TCA NOS.41 TO 43 OF 2017 DECIDED ON 30.09.2020]. The issue is with regard to disallowance under Section 14A of the Income Tax Act, 1961, read with Rule 8(D) of the Income Tax Rules, 1962. The Division Bench of this Court, in the aforesaid judgment, has held as under: 13. The provisions of Section 14A themselves are very clear and without recording satisfaction by the Assessing Authority that the expenditure incurred to earn exempted income, as computed by the Assessee is not acceptable for the specified reasons, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 8D can be invoked as a legislative way out to compute the quantum of disallowance. Unfortunatley, the Revenue Authority and the Tribunal have read Rule 8D without context and as an independent provision of disallowance, as if it was an island provision of law and the disallowance computed as per Rule 8D of the Rules can go beyond the exempted income itself and can be added as a taxable income in the hands of the Assessee. Such an interpretation put by Revenue Authorities is pathetic, to say the least. 14. It is well settled that the Rule cannot go beyond the main parent provision. Therefore, what has been provided as computation method in Rule 8D cannot go beyond the roof limit of Section 14A itself under any circumstances. The Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 14A has been introduced not to allow expenditure incurred to earn such exempted income in the form of dividend as an allowable expenditure against the exempted income of the Assessee and therefore, obviously the disallowance too cannot exceed the extent of dividend itself. The Tribunal itself in many such cases has upheld the disallowance under Section 14A only to the extent of 2% of the Dividend income or other exempted income even if Assessee claimed that no expenditure was incurred to earn such Dividend income and even appeals filed by the Assessee against such 2% disallowance have been dismissed by this Court. Therefore, such an inconsistent approach on the part of the Tribunal cannot be sustained. 16. The contention raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Rule 8D of the Rules and compute such disallowance with a caveat that under no circumstances, the disallowance can exceed the amount of dividend income earned, received or accrued to the Assessee in the present year, which was taxable but for the exemption as per the provisions of the Act. If no dividend income is declared by the investee company or subsidiary company as the case may be, the disallowance computed under Rule 8D cannot be taxed as a hypothetical income of the Assessee, by providing a negative figure beyond the dividend income earned during that year, to be added to the taxable income of the Assessee. That will make the mockery of the concept of real income of the Assessee being taxed and it is the bedrock of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,96,32,20,750/- 2010-11 ₹ 3,39,69,83,166/- 2011-12 ₹ 4,78,02,04,127/- The AO disallowed 0.5% of the average investment as follows: 2009-10 ₹ 98,16,104/- 2010-11 ₹ 1,69,84,915/- 2011-12 ₹ 2,39,01,020/- The assessee divident income received and claimed as exempt for these assessment years are as follows: 2009-10 ₹ 41,024/- 2010-11 NIL 2009-10 ₹ 41,024 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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