TMI Blog2018 (11) TMI 1865X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) in accordance with law and thereafter adjudicate on the issue of disallowance u/s.14A of the Act. The grounds of appeal are treated as allowed for statistical purposes. - ITA No.790/Bang/2018 - - - Dated:- 16-11-2018 - SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER Appellant by : Shri Sharath Rao, C.A Respondent by : Dr. P.V Pradeep Kumar, Addl. CIT ORDER Per N.V. Vasudevan, Vice President This is an appeal filed by the assessee against the order dated 1.9.2017 of the CIT(A)-6, Bangalore relating to asst. year 2011-12. 2. The assessee is a company engaged in the business of trading in Aviation Turbine Fuel (ATF). It supplies ATF to domestic as well as international airlines. The assessee came into existence pursuant to joint venture between Mangalore Refinery and Petro Chemical Ltd., (MERPL) and Shell MRPL. In the course of asst. proceedings for asst. year 2011-12, the AO noticed that the assessee had earned dividend income of ₹ 2,07,61,748/- (dividend on mutual funds) which was exempt under Chapter III of the Income-tax Act 1961 ( the Act ). In view of the provisions of sec. 14A of the Act, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loan was used for investing in UTI Mutual Funds. During the year, the Appellant has received working capital loans from Corporation and Kotak Mahindra bank (ING Vysya). Please find attached (as Annexure 1) details of the receipt of working capital loan and utilization towards business operating expenses during FY 2010-11. As a supporting documents, we have enclosed the extract of Corporation bank statements and Kotak Mahindra Bank (ING Vysya) as Annexure 2A and Annexure 2113 respectively. Hence, It cannot be said that loan fund was used for making investments. Given the above, it cannot be said that this loan was used for earning any exempt income (i.e., dividend income from investment in UTI Mutual Funds) and therefore, any interest paid on such loan cannot be disallowed under section 14A. Considering the above facts, the company submits that the Investments were made in UTI Mutual funds are made by utilising its own funds and not from working capital loan and hence disallowance of interest under section 14A is not tenable. 4. The assessee also enclosed detailed workings and supporting documents along with submission dated 23/8/2017 and those are placed at pages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the principles emerged from various judicial precedents, that disallowance under section 14A of the Act would be restricted to an amount of exempt income earned during the year under consideration. A.2 Wrong computation of disallowance under section 14A 1. Notwithstanding and without prejudice to the above, the learned AG has wrongly disallowed an amount of ₹ 20,762,657 instead of ₹ 9,861,700 while computing disallowance under section 14A. 2. The learned AG has erred in considering the average of the total assets as ₹ 32,96,00,000 instead of ₹ 86,07,70,000 while applying the formula prescribed under Rule 8D. B. Non-grant of set off of brought forward losses 1. The learned AO and Hon'ble CIT(A) has erred in not granting set-off of brought forward losses of AY 2009-10 amounting to ₹ 1,816,502 claimed by the appellant in the return of income. C. Levy of Interest under section 234B and 234C of the Act 1. The Ld. AO has erred in levying interest under section 234B at ₹ 2,803,510 instead of ₹ 1,109,472. 2. The interest under section 234B is consequential in nature. 3. The Ld. AO has erred in levying interest u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 234B at ₹ 2,803,510 instead of ₹ 1,109,472. 3.2 The interest under section 234B is consequential in nature. 3.3 The Ld. AO has erred in levying interest under section 234C of the Act at ₹ 727,845 without appreciating the law that, interest under section 234C is levied only on returned income and not on assessed income. 7. We may mention that as far as ground No.2 raised by the assessee is concerned, it would be appropriate to direct the AO to verify the claim of the assessee for set off of brought forward losses and allow set off in accordance with law. In this regard, we also observe that assessee has in the grounds of appeal raised before the CIT(A) had raised a specific ground regarding the action of the AO in not allowing set off of brought forward losses but the same has not been adjudicated by the CIT(A). 8. As far as ground No.3 is concerned, the facts are similar, in as much as despite specific ground raised by the Assessee regarding wrong computation of interest u/s.234B and 234C of the Act, the same was not adjudicated by the CIT(A). It would be just appropriate for CIT(A) if the AO is directed to charge interest u/s 234B and 234C in acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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