TMI Blog2017 (5) TMI 1784X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment in tax free funds was to be computed under provisions of Rule 8D (2)(ii). In CIT vs. HDFC Bank Ltd [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] it is held that the presumption laid down in CIT vs. Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] with regard to investment in tax-free securities coming out of the assessee s own funds in case they are in excess of the investments made in securities (notwithstanding the fact that the assessee concerned may also have taken some funds on interest) applies, when applying section 14A of the Act. It is reiterated again in HDFC Bank Ltd. [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] The order of the Ld. CIT(A) on the above issue is set aside and the same is restored to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2007-08. The Tribunal observed that (i) the Ld. CIT(A) has rightly held that the A.O. has not demonstrated that the expenditure incurred was excessive, (ii) the directors have declared the commission in their return of income and are being assessed to tax at maximum marginal rate. Therefore, the Tribunal dismissed the appeal filed by the revenue on the above issue. - ITA No. 3357/MUM/2012 - - - Dated:- 31-5-2017 - SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) Assessee by: Shri Nitesh Joshi, AR Revenue by: Shri B.S. Bist, DR ORDER PER N.K. PRADHAN, AM This is an appeal filed by the assessee. The relevant assessment year is 2008-09. The appeal is directed against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al on record. Rule 8D was notified by CBDT by the IT (Fifth Amendment) Rules, 2008 with effect from 24.03.2008. Rule 8D has three sub-rules as under: Rule 8D(1) provides when the method stipulated by Rule 8D(2) is to be applied by A.O. for computing the disallowance under section 14A. Rule 8D(2) sets out the presumptive artificial method to compute disallowance. Rule 8D(3) defines total assets for the purpose of Rule 8D(1). 2.5 In Avon Cycles Ld. vs. CIT (2015) 53 taxmann.com 297 (P H), it is held that where funds utilized by assessee were mixed funds and part of it was invested in earning tax free dividend income, it was held that the interest paid on borrowed fund was also relatable to interest on investment made in tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee filed an appeal before the Ld. CIT(A). We find that the assessee filed additional evidences before the Ld. CIT(A), who sent a copy of it to the A.O. to make enquiry and send a remand report. In the remand proceedings, the A.O. issued fresh notices u/s 133(6) to the said seven parties. The A.O. then after verification sent a remand report vide letter dated 12.03.2012 and a supplementary report vide letter dated 09.04.2012 to the Ld. CIT(A). The assessee in the proceedings before the Ld. CIT(A) filed confirmation in respect of Ashirwad Broker, Lalitbhai Dalal, Madhav Broker and also enclosed the letter filed on 18.04.2012 in response to A.O.s remand report. The assessee submitted before the Ld. CIT(A) that the A.O. should not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that the opportunity to prove the correctness or completeness of the return of income necessarily carries with it the right to examine witness and that includes equally the right to cross-examine witness. Thus, the order of the Ld. CIT(A) on the above issue is set aside and the same is restored to the file of the A.O. to pass an order after examining the above three parties and allowing the assessee to cross-examine them. The assessee is directed to file the relevant details before the A.O. Thus, the 2nd ground of appeal is allowed for statistical purposes. 4. The 3rd ground raised in this appeal is that the Ld. CIT(A) erred in confirming the disallowance of commission of Rs.94,59,161/- paid to the managing director and the executiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Ms. R.U. Thakkar dividend of Rs.96.36 lacs. The Ld. CIT(A) thus held that the so-called working of commission was nothing but percentage of some sales by the company. There was nothing to suggest that the sales were due to personal efforts of Mr.U.B. Thakkar and Ms. R.U. Thakkar and not on behalf of working of the directors of the company. Therefore, the Ld. CIT(A) confirmed the addition of Rs.94,59,161/- made by the A.O. 4.3. Before us, the Ld. Counsel of the assessee submits that by merely becoming a share holder, someone does not become entitled to dividend. It is only if the company declares dividend then all the share holders become entitled to the same and not merely the director. As per him the commission was paid to the direc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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