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TMI Blog2020 (6) TMI 780X X X X Extracts X X X X X X X X Extracts X X X X ..... A)-11, Bengaluru. The grounds of appeal urged by the assessee read as under: 1. The learned CIT(A) has erred in passing the order in the manner which she did. 2. The learned CIT(A) is wrong in law by confirming the additions of the Assessing Officer and passing the order without considering the submissions of the appellant. 3. The learned CIT(A) is wrong in law in confirming the addition made by the Assessing Officer u/s 14A r.w. Rule 8D of the Act. 4. The learned CIT(A) has erred in not recording the satisfaction before proceeding to invoke the provisions of s.14A r.w. Rule 8D of the Act. 5. The learned CIT(A) ought to have appreciated that no expenditure is incurred to invoke S.14A since most of the investments are carried forward fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he investments have been brought forward from earlier year; that the investments in equity and preference shares have been made out of own funds and that the investments made in associate and subsidiary companies are strategic investments in the nature of equity and preference shares. The assessee also contended that, according its own workings, the disallowance u/s 14A of the Act works out to Rs. 7,54,468/- only. 3. The A.O. did not accept the contentions of the assessee However, he computed the disallowance at Rs. 19.95 crores; which consisted of interest disallowance of Rs. 18.65 crores under rule 8D(2)(ii) and disallowance of Rs. 1.28 crores out of administrative expenses under rule 8D(2)(iii). The AO completed the assessment by making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the AO has issued show cause notice to the assessee on due examination of financial statements of the assessee, since the assessee did not make any disallowance u/s 14A of the Act, even though it had earned exempt income. Hence the dissatisfaction of the AO has been demonstrated in the assessment order and it is not a case of mechanical invoking of provisions of Rule 8D. Accordingly we reject ground no.4 of the assessee. 7. In ground no.6, the assessee is contending that the assessee has got sufficient own funds and hence disallowance u/s 14A is not warranted. Before us, the Ld. A.R. submitted that the own funds available with the assessee is in excess of the value of investment made in shares and hence the A.O. should not have disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l bench of ITAT in the case of Shri Vishnu Anand Mahajan (ITA No.3002/Ahd/2009 dated 25-05-2012) and identical contentions made by the assessee were rejected by holding that, once the share income is excluded from the total income u/s 10(2A) of the Act, the provisions of section 14A of the Act would apply to it. Hence, this contention of the assessee would fail. 9. The next contention urged by the assessee is a partner in many firms. Some firms have earned profit and other firms have incurred loss. She submitted that the A.O. has considered only "share of profit received from partnership firm" for the purposes of sec.14A and did not consider "share of loss divided to the assessee". The Ld A.R submitted that the share of profit/loss from pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court of Delhi in the case of Joint Investment Private Limited Vs. CIT 372 ITR 694 and also the decision rendered by Mumbai bench of Tribunal in the case of Future Corporate Resources Limited Vs. DCIT (ITA No.4658/Mum/2015 dated 26.7.2017). 11. The Hon'ble Delhi High Court has considered an identical issue in the case of PCIT vs. Caraf Builders & Construction (P) Ltd (2019)(101 taxmann.com 167) and has held as under:- "25. Total exempt income earned by the respondent-assessee in this year was Rs. 19 lakhs. In these circumstances, we are not required to consider the case of the Revenue that the disallowance should be enhanced from Rs. 75.89 crores to Rs. 144.52 crores. Upper disallowance as held in Pr. CIT v. McDonalds India (P.) Ltd. IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed exempt income of Rs. 24,138, whereas the assessing officer disallowed an amount of Rs. 3,36,28,000. Therefore, considering the facts and circumstances of the case and also following the ratios of the case laws discussed above, we are of the view that dis allowance under section 14A cannot exceed the exempt income. Hence, we direct the assessing officer to restrict dis allowance under section 14A to the extent of exempt income earned by the assessee." The above said decisions would support the contention of the assessee on this point. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance u/a 14A to the amount of exempt income. 12. Since appeal itself is disposed of, the stay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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