TMI Blog2020 (12) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... t order. Since the FCCBs were raised to use the proceeds for setting-up of new project and this fact is admitted by the A.O. in the assessment order, therefore, assessee used the loan to purchase the capital asset for the company. ITAT, Delhi E-Bench, Delhi in the case of M/s. OK Play India Ltd., [ 2020 (2) TMI 416 - ITAT DELHI] considering the Judgment of the jurisdictional Delhi High Court in the case of Logitronics P. Ltd., vs., CIT ( 2011 (2) TMI 12 - DELHI HIGH COURT] and Judgment of Hon ble Supreme Court in the case of CIT vs.Mahindra Mahindra Ltd., (supra), decided the identical issue in favour of the assessee [ 2003 (1) TMI 71 - BOMBAY HIGH COURT] . Disallowance of depreciation - enhanced cost on account of exchange fluctuation in respect of assets acquired in India - HELD THAT:- Assessee purchased the machinery in India from the foreign funds through FCCBs which fact is not disputed by the authorities below. It is, therefore, clear that though Section 43A apply to the assets acquired from Abroad, still the A.O. without justification applied Section 43A for making the disallowance of depreciation against the assessee. Section 43A thus could not apply in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure incurred by assessee in relation to the tax exempt income. This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case. It is, therefore, well settled Law that disallowance cannot exceed the exempt income. We, therefore, set aside the Orders of the authorities below and direct the A.O. to restrict the disallowance to ₹ 2,37,896/- only. - C.O.No.200/Del./2017, 34/Del./2019, ITA.No.1433/Del./2014, 3564/Del./2015, 528/Del./2016 (Assessment Year 2009-2010, 2011-2012, 2012-2013) - - - Dated:- 3-12-2020 - SHRI BHAVNESH SAINI, J.M. AND SHRI ANIL CHATURVEDI, A.M. For Revenue: Ms. Parul Singh, Sr. D.R. For Assessee: Shri Satyan Sethi, Advocate And Shri Arti Panda, Advocate ORDER PER BHAVNESH SAINI, J.M. : This Order shall dispose of all the above appeals as well as cross objections since issues are related. 2. We have heard the Learned Representative of both the parties through video conferencing and perused the material availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y US$34,560,000, which we intend to use for setting up of new project for manufacturing of existing range of products, that is, HT LT power cable, rubber cable, house wire, etc.; expansion/backward integration of existing facilities and the use permitted as per the ECB Guidelines, as amended from time to time. Reference in this regard is made to the summary of terms and conditions of FCCB, which are at vases 1 to 29 of the paper book. 5. As at the expiry of first previous year after issuance of bonds in November 2006 i.e. year ended on 31.3.2007, the aggregate amount of FCCBs was ₹ 1,56,34,80,000/- (156.34 Cr.). 6. In the financial year 2008-09, on account of global financial crisis, globally the investors were keen to safeguard their investments. Some of bondholders of FCCBs issued by the Appellant were also eager to encash their bonds. 7. RBI with a view to allow Indian companies to buy hack FCCBs. allowed buyback of FCCB both under automatic route and approval route [Circular No. 39 (DIR Series) dated 8.12.2008, refer vases 30 to 33 of the paper bookl. Under the automatic route, buyback of FCCB was subject to following conditions: (i) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,13,22,854 1,17,72,58,454 Total 20,13,22,854 1,17,72,58,454 1,60,74,00,000 *Unitized balance of ₹ 5,94,84,801/- was utilized towards capital expenditure in the assessment year 2010-11. Balance sheet of the Appellant for the financial years 2006-07, 2008-09 2009-10 (printed) are at vases 54. 55 56 of the paper book. 10. It is submitted that there is no dispute as to the facts leading to repurchase of FCCBs or as to the quantum of discount on buyback. The facts have been set out for proper appreciation of issue. 5.2. On going through the assessment order, it is discernable that the addition of ₹ 26,35,58,122/- was made for the following two reasons : (i) Buyback of FCCBs was a business transaction having all the elements of business, inasmuch as, the assessee was not duty bound to buy-back FCCBs. The same were bought back on account of profit inherent in buyback of FCCBs at discount. Sensing the profit the assessee made conscious effort to realize the profit. (ii) FCCBs proceeds were utilized to acquire depreciable-ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 261 ITR 501 (Bom); (ii) CIT v. Chetan Chemicals Pvt. Ltd. (2004) 267 ITR 770 (Guj); (iii) CIT v. Tosha International Ltd (2011) 331 ITR 440 (Del); (iv) CIT v. Jindal Equipments Leasing Consultancy Services Ltd (2004) 325 ITR 57(Del); (v) Iskraemeo Regent Ltd v. CIT (2011) 331 TR 317(Mad). 15. Moreover, liability to repay FCCBs was not a trading liability, therefore, in any case, section 41(1) was not attracted. Since the legal position on this aspect was clear beyond doubt, therefore, the Assessing Officer while making the addition did not refer to section 41(1) of the Act. Proposition (ii): - Section 28(iv) did not apply to buyback of F CBs. 16. Section 28(iv) of the Act provides that value of any benefit or perquisite arising from business shall be chargeable to tax under the head profit gains of business or profession. Bombay High Court in Mahindra Mahindra Ltd. (Supra) has held that: The value of any benefit or prerequisite arising from business, as contemplated by section 28(iv), could accrue in numerous ways. The income which can be taxed under section 28(iv) must not only be referable to a benefit or perquisite, but it must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s such from the very beginning in the books of account the waiver thereof may result in income more so when it was transferred to the profit and loss account (page 402) 22. Applying the ratio of the judgment, the addition was uncalled for because the Appellant not only raised the FCCBs for acquiring capital assets but actually utilized the FCCB proceeds for acquiring capital assets. This factual position has been admitted by the Assessing Officer in paragraph 3.3 (page-5) of assessment order, wherein, it was observed that FCCBs were utilized in increasing assets of the company, most of them being depreciable assets . Utilization of FCCBs certified by the auditors in the balance sheet of the Appellant has not been doubted by The Assessing Officer. Therefore, decision in Logironics P. Ltd. (supra) is on all fours of the present case. 23. It is submitted that by judgment dated 18.2.2011 in Logitronics P. Ltd (supra), the case of CIT v. Jubilant Securities P. Ltd. was also disposed off. The Assessing Officer has read the facts of CIT v. Jubilant Securities P. Ltd. as that of Logitronics P. Ltd. Facts of Jubilant Securities P. Ltd. were mixed up with Logitronics P. Ltd. Deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Order are reproduced as under : 8. I have carefully considered the facts of the case, the submissions made and the case laws relied upon. At the outset, it may be noted that the stand of the Appellant that FCCBs proceeds were for setting up new project to manufacture wires has not been controverted by the AO. In fact, one of the reasons to make the addition is that FCCBs were utilized in increasing the depreciable assets of the assessee company. I have also verified the balance sheets of the Appellant. Submissions as to the utilization of FCCBs proceeds towards capital account were found to be correct. I also find substance in the submission that the conditions prescribed by RBI to buyback FCCBs were met. The fact that the Appellant was allowed to buyback FCCBs itself shows that conditions were complied with. 9. On going through the submissions, I agree with the Appellant that addition of ₹ 26,35,58,122/- cannot be sustained under section 41(1) of the IT Act because the amount of FCCBs was not allowed as expenditure or trading liability in the earlier years, therefore, the precondition of section 41(1) was not met. Similarly, the addition cannot be sustained u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, the addition of ₹ 26,35,58,122/- made by the AO is directed to be deleted and ground of appeal is allowed. 6. The Ld. D.R. relied upon the Order of the A.O. and submitted that assessee company has profit motive to earn income which were not offered for taxation, therefore, A.O. was justified in making the addition. 7. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that FCCBs profits were utilised for setting-up new project which has not been controverted by the A.O. The buy-back of FCCBs was made in terms of RBI Circular. The amount of FCCBs were neither claimed as allowed deduction in computing the income of any year. Therefore, neither Section 28(iv) nor Section 41(1) of the Act are applicable. He has relied upon Judgment of Hon ble Supreme Court in the case of CIT vs., Mahindra Mahindra Ltd., 404 ITR 1 (SC) and Order of Mumbai Bench in the case of DCIT vs., Pidilite Industries Ltd., 177 ITD 472, Judgment of Delhi High Court in the case of Logitronics P. Ltd., vs., CIT [2011] 333 ITR 386 (Del.) and Order of ITAT, Delhi E-Bench, Delhi in the case of M/s. OK Play India Ltd., Roz-Ka- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord. The assessee raised FCCB in the earlier year and during the year repaid with discount of ₹ 9,46,73,015/- received. According to the assessee, the discount received is in the nature of capital receipt but according to the Revenue the discount is in the nature of trading receipt. The Assessing Officer has alleged the activity of raising FCCB as an adventure in the nature of trade. This finding of the Assessing officer is without any basis. The assessee is not engaged in raising the FCCB with motive of any trading and discounting and thereby earning profit on the same. The allegation by the Assessing Officer of motive and intent of earning profit by the assessee are unsubstantiated with any evidences. On the contrary, the assessee has substantiated that it raised the FCCB for funding its acquisition of assets. Further, the Ld. CIT(A) has relied on the decision of the Hon ble Delhi High Court in the case of Logitrinics (P) Ltd (supra), wherein it is held as under: 27..... We, therefore, restore this issue back to the file of the Assessing Officer for his fresh adjudication with a direction to the assessee to furnish all the details and particulars of loan, and the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of waiver of loan as capital or trading receipt. If the amount of the loan has been utilized for capital expenditure, then the waiver amount is in the nature of the capital receipt and if the amount of the loan has been utilized for trading purposes then the waiver amount received would be in the nature of trading receipt. 3.9 Before us, the assessee has demonstrated how the FCCB amount has been utilized towards capital expenditure. The assessee submitted entire list of capital asset acquired through the funds of FCCB, which is available on page 235 to 241 of the paper book. The assesse has shown capital expenditure of more than ₹ 21 Crores upto March, 2008. The Ld. DR could not controvert this factual aspect of utilization of the FCCB toward capital expend ture. In instant case, once it is undisputed that FCCB amount has been utilized toward capital expenditure, in view of the decision of the Hon ble Delhi High Court in the case of Logotronics (P) Ltd (supra), the discount on FCCB falls in the nature of capital receipt not exigible to tax. The Ld. CIT(A) has given his finding on wrong assumption of the fact that FCCB funds were utilized for trading or revenue e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt due to the waiver of loan. Therefore, the very first condition of Section 28 (iv) of the IT Act which says any benefit or perquisite arising from the business shall be in the form of benefit or perquisite other than in the shape of money, is not satisfied in the present case. Hence, in our view, in no circumstances, it can be said that the amount of ₹ 57,74,064/- can be taxed under the provisions of Section 28 (iv) of the IT Act. [Emphasis supplied] 3.11. In the instant case, the benefit has been received in the shape of the money and thus, the said benefit cannot be held as taxable even under section 28(iv) of the Act. 3.12. In view of the discussion above, we set aside the finding of the Ld. CIT(A) on the issue in dispute and hold that the discount received on FCCB is not taxable in the hands of the assessee. The Ground No. 1 of the appeal of the assessee is accordingly allowed. 8.1. Thus the issue is covered by the aforesaid decision of the Tribunal as well as by Judgment of Hon ble Delhi High Court in the case of Logitronics P. Ltd., vs., CIT (supra). No material is produced before us to contradict the findings of fact recorded by the Ld. CIT(A) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 992) 193 ITR 255, Hon ble Supreme Court considered the issue of additional liability on account of exchange currency fluctuations on the actual cost off fixed assets. Considering the issue, the Hon ble Apex Court made following observations: on strict accountancy principles, the increase or decrease in liability towards the actual cost of an asset arising from exchange fluctuation can be adjusted in the accounts of the earlier year in which the asset was acquired (if necessary, by reopening the said accounts)-. In that event, the accounts of that earlier year as well as subsequent years will have to be modified to give effect to variations in depreciation allowances consequent on the re-determination of the actual cost. ... ... .... However, though this is a course which is theoretically advisable or precise, its adoption may create a lot of practical difficulties. That is why the institute of Chartered Accountants gave an option to business people to make a mention of the effect of devaluation by way of a note on the accounts for the earlier year in case the balance-sheet in respect thereof has not yet been finalised but actually to give effect to the necessary adjustme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / report the transactions involving foreign exchange in enterprise's reporting currency i.e. in rupee. It may be noted that AS-11 was revised w.e.f. 1.4.2004 and revised AS-11 required that exchange differences be recognized in the profit loss account. 35. In reporting the effect of loss/profit due to exchange fluctuation as on 31 st March, the AS-11 makes no distinction, whether the acquired asset was imported or indigenous i.e. produced or manufactured in India. The Appellant in maintaining its books has been regularly following AS-11. The salient features of AS-11 are regarding foreign currency transaction, which clearly states as under: Foreign Currency Transactions - Initial Recognition 36. A foreign currency transaction is a transaction which is denominated or requires settlement in a foreign currency, including transactions arising when an enterprise either: (a) .. (b) Borrows or lends funds when the amounts payable or receivable are denominated in a foreign currency; (c) .. (d) Otherwise acquires or disposes of assets, or incurs or settles liabilities, denominated in a foreign currency. 37. A foreign currency trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the cost of the asset and Exchange difference in other cases was allowed to be accumulated in a Foreign Currency Monetary Item Translation Difference Account and amortized over the balance period of such long term asset / liability but not beyond 31st March 2011. Copy of the Notification dated 31.3.2009 notifying the Rules is enclosed at pages 10 11 of the submissions. 43. Due to exceptional and sudden depreciation of Indian Rupee against US Dollar, the Central Government amended Companies (Accounting Standards) Rules. 44. The amended Rules called Companies (Accounting Standards) Amendment Rules, 2009, provided that on or after 7.12.2006, an enterprise at its option, which option shall be irrevocable and exercised retrospectively shall account for the foreign exchange fluctuations on long term foreign currency monetary items (FCCB) as under: (i) where the long term foreign currency monetary items relates to acquisition of depreciable capital asset, the same shall be added / deducted from the cost of the asset and shall be depreciated accordingly over the balance life of the asset. 45. The Appellant exercised the option allowed by Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not allowable, then enhanced liability (loss) deserves to be allowed under Section 37 of the Act as held by Hon ble Supreme Court in Maruti Udyog Ltd., wherein, referring to Woodward Governor India (P) Ltd., it was held that depreciation due to fluctuation in foreign exchange rate was admissible for deduction under Section 37 of the Act. 9.4. The Ld. CIT(A) considering the submissions of the assessee and material on record directed to allow depreciation of the impugned amount on the enhanced cost. This ground was allowed. The findings of the Ld. CIT(A) in paras 15 and 16 of the Order are reproduced as under : 15. I have examined the ground which is legal in nature. On going through the submissions made and the case laws relied upon, it is held that the issue is fairly settled by the judgments of Hon ble Supreme Court in CIT v. Arvind Mills Ltd. 193 ITR 255 and Maruti Udyog Ltd. 320 ITR 729. The decision of ITAT, Mumbai Bench in DDIT v. Staubil A.G. India Branch Office (ITA No. 3703/Mum/2005), a copy of which was filed squarely covers the ground in favour of the Appellant. In that case also out of foreign currency loans, assessee had acquired premises in India. Since the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 and 2011-2012 though WDV was reduced by the exchange gain, however, incremental depreciation attributable to exchange loss of ₹ 27,37,21,941/- for A.Y. 2009-2010 under appeal was allowed. In A.Y. 2012- 2013 following the earlier Orders, depreciation of enhanced cost was not allowed. The Ld. CIT(A) has correctly followed the decision of ITAT, Mumbai Bench in the case of DDIT vs., Staubil A.G. India Branch Office (supra) to allow the depreciation of exchange loss observing that Section 43A was not applicable. In A.Ys. 2010-2011 and 2011-2012 following the Order for the A.Y. 2009-2010, disallowance of depreciation was deleted. In A.Y. 2012-2013, the Ld. CIT(A) did not follow the appellate orders for earlier years and upheld the disallowance of depreciation on the reasons (1) The A.O. rightly applied Section 43A and (2) In the absence of recognition of amended AS-11, assessee was not entitled to change the actual cost. He has submitted that Revenue is in appeal in A.Y. 2009-2010 on this issue, whereas assessee is in appeal for the A.Y. 2012-2013. For the A.Y. 2010-2011 the Revenue did not file any appeal for allowing depreciation. For the A.Y. 2011-2012 though the Revenue f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y loans which is not applicable to the indigenous assets acquired out of foreign currency loans. Hence, the Assessing Officer has to bifurcate the foreign exchange fluctuation in respect of foreign currency loan used for assets acquired outside India and the indigenous assets and apply provisions of sec. 43A or AS-11(2003) accordingly. 9.6.3. Order of ITAT, Visakhapatnam Bench in the case of DCIT vs., Maddi Lakshmaiah CO. Ltd., [2017] 166 ITD 69 (Vizag) in which it was held as under : 14. The provisions of section 43A of the Act, deals with treatment of changes in rate of exchange of currency, where an assessee has acquired any asset, in any previous year from a country outside India for the purpose of business or profession, and in consequence of a change in the rate of exchange during any previous year after the acquisition of such asset, there is an increase or decrease in the liability of the assessee as expressed in Indian currency at the time of making payment towards the whole or a part of the cost of the asset or towards repayment of the whole or a part of the monies borrowed by him from any person, directly or indirectly in any foreign currency specifically for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l asset, the same shall be added/deducted from the cost of the asset and shall be depreciated accordingly over the balance life of the asset. . It is not in dispute that assessee followed AS-11 regularly. In A.Y. 2010-2011 the Ld. CIT(A) allowed similar claim of the assessee, but, the Department did not file any appeal against the same Order. In A.Y. 2011-2012 though the Department filed appeal before the Tribunal on this issue on allowing depreciation, but, the same has been dismissed vide Order Dated 21.10.2019 (supra). Thus, the Ld. CIT(A) was bound to follow rule of consistency and should not have taken a contrary view in A.Y. 2012- 2013. We rely upon the Judgments of the Hon ble Supreme Court in the case of Radhasoami Satsung 193 ITR 321 (SC) and Excel Industries Ltd., 358 ITR 295 (SC). The assessee has also followed Companies Rules, 2009 because it has given option to the assessee to do so. The decision of Mumbai Bench in the case of DDIT v. Staubil A.G. India Branch Office (supra), relied upon by the Ld. CIT(A) is on identical facts. Therefore, there is no infirmity in the Order of the Ld. CIT(A) in following the same. It may also be noted here that wherever there was an exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -09, the AO is directed to allow carry forward of loss of ₹ 2,45,32,014/- of Chopanki unit as business loss. It is not a case, where losses of non eligible unit or units are being set off against the profit of eligible unit. The issue whether section 10A is exemption provision deduction provision is of no relevance. Insofar as, carry forward of loss of unit eligible to deduction under section 10B is concerned the amendment made by the Finance Act, 2003 to subsection (6) with retrospective effect from 01.04.2001 specifically provide for carry forward of losses of 100% EOU. There is no merit in the reason that since section 10B is in the nature of exemption, therefore, benefit of carry forward is not available. The specific mandate of the law, as amended by Finance Act, 2003 which specifically provide for carry forward of losses of unit eligible for deduction u/s 10B cannot be overlooked. The reason of the AO would nullify the amendment of sub-section (6) of section 10B of the Act, which is not permissible. Assessing Officer had only reduced returned loss by ₹ 56,28,605/- being the loss of Chopanki Unit eligible for deduction u/s 10B after excluding depreciation on capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended, is a provision for deduction, the stage of deduction would be while computing the gross^ total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly. 12.3.2. In view of the above facts and that when the Tribunal has allowed similar claim of assessee in preceding A.Y. 2008-2009 and ultimately in group appeals, the Hon ble Supreme Court has allowed the claim of assessee, the issue is covered by the aforesaid decisions in favour of the assessee which fact is also accepted by the Ld. D.R. Therefore, there is no infirmity in the Order of the Ld. CIT(A) in allowing the claim of assessee. Ground No.3 of the appeal of the Revenue stand dismissed. 12.4. There is no other issue involved in the Departmental Appeal. The Departmental Appeal stands dismissed. 13. In the result, ITA.No.1433/Del./2014 for the A.Y. 2009-2010 of the Department dismissed. C.O.No.200/Del./2017 in ITA.No.1433/Del./2014 A.Y. 2009-2010 [M/s. K.E.I. Industries Ltd., New Delhi]. 14. The assessee in the cross objection has raised the following ground : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alternative claim and is depending upon the issue raised in the Departmental appeal for A.Y. 2009-2010 on Ground No.2. 16.2. Since we have dismissed the Departmental Appeal for the A.Y. 2009-2010, therefore, cross objection of the assessee becomes infructuous. The delay in filing the cross objection is however condoned. 17. In the result, C.O.No.34/Del./2019 of the Assessee dismissed. ITA.No.528/Del./2016 A.Y. 2012-2013 [M/s. K.E.I. Industries Ltd., New Delhi]. 18. This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-5, Delhi, Dated 23.12.2015 for the A.Y. 2012-2013. 19. Learned Counsel for the Assessee did not press Ground No.1 which is general. The same is stand dismissed as not pressed. 20. Ground Nos.2 to 2.5 reads as under : 2. That on the facts and circumstances of the case and in law, the CIT(A) has erred in upholding the disallowance of depreciation of ₹ 3,90,96,306/- on account of exchange fluctuations on the assets acquired in India from the funds raised through foreign currency convertible bonds [FCCBs]. 2.1. That on the facts and circumstances of the case and in law, the CIT(A) in upholding the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt has been made by the A.O. although the assessee has been receiving dividend regularly. The Ld. CIT(A) noted that assessee has received dividend income of ₹ 2,37,896/- during assessment year under appeal. As in the past years, the assessee offered to tax a sum of ₹ 24,48,822/- as expenditure incurred in relation to exempt income under section 14A read with Rule 8D which comprise of interest disallowance of ₹ 22,94,735/- as per Rule 8D(2)(ii) and a sum of ₹ 1,54,087/- as indirect expenditure @ 0.5% of the average disallowance as per Rule 8D(2)(iii). The disallowance offered was in accordance with the tax audit report. The return of income was filed taking this computation into account to disclose the gross business loss of ₹ 15,29,06,907/- for the impugned year. Thus the addition made by the A.O. under section 115JB of the Act was found to be correct and this ground was dismissed. The additional ground raised by the assessee with regard to addition under section 14A was also rejected. 22.2. Learned Counsel for the Assessee as regards the impugned addition made to the book profit under section 115JB of the Act submitted that the issue is covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival submissions of both the parties. It is an admitted fact that in assessment year under appeal assessee has received dividend income of ₹ 2,37,896/-. In the case of Joint Investments Pvt. Ltd., vs., CIT 372 ITR 694 (Del.) (HC) the Hon ble Delhi High Court held that by no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure incurred by assessee in relation to the tax exempt income. This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case. It is, therefore, well settled Law that disallowance cannot exceed the exempt income. We, therefore, set aside the Orders of the authorities below and direct the A.O. to restrict the disallowance to ₹ 2,37,896/- only. 25.1. In the result, Ground No.3.1 of the appeal of the Assessee is allowed. 26. In the result, ITA.No.528/Del./2016 of the Assessee partly allowed. 27. To sum-up, Departmental Appeal and both the cross objections of the Assessee are dismissed and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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