TMI Blog2022 (8) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had not allocated any expenditure for earning interest free dividend income, reasonable disallowance was justified. The Ahmedabad in the case of Sun Pharmaceutical Industries Ltd.[ 2017 (6) TMI 1323 - ITAT AHMEDABAD ] directed the A.O. to compute the disallowance for administrative expenditure as per the formula given under Rule 8D We are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in confirming disallowance in respect of administrative expenditures and directing the A.O. to compute the disallowance for administrative expenditure made by the AO as per the formula given under Rule 8D. - ITA No. 788 / Ahd / 2015 - - - Dated:- 27-7-2022 - Shri P. M. Jagtap , Vice President And Shri Siddhartha Nautiyal , Judicial Member Assessee by : Shri Ketan Shah , A. R. Shri Aman Shah , A. R. Revenue by : Shri Purshottam Kumar , Sr. D. R. ORDER Per Siddhartha Nautiyal , Judicial Member This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-III, Ahmedabad in Appeal no. CIT(A)-III/369/ACIT(OSD).R-1/13-14 vide order dated 31/10/2013 passed for the assessment year 2009-10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 80) that where assessee had not allocated any expenditure for earning tax free dividend income, reasonable disallowance was justified. 7. It was further field in. the case of Techitopak Advisors. P. Ltd. by Hon'ble IT AT Delhi Bench (18 taxman.com 146) that disallowance under 1.44 is justified even if no dividend income was earned during the year. 8. In the case, of Visual Graphics Computing Service (I) Pvt. Ltd. reported in (21 taxman.com 145) it was held by Hon'ble ITAT Chennai Bench that even if there may not be my direct visible expenditure to earn dividend income, a reasonable portion of top 'management time/expenditure could be attributed to earning of that income. 9. When the case of the appellant is examined in view of this legal and factual position, then it is found that the appellant company raised share capital and share premium through IPO in the month of August 2006 and September 2006. Therefore the claim that investment during the year was made out of IPO funds is not acceptable due to large time gap between the date of IPO and investment during the year. I therefore hold that AO has rightly made disallowance u/s. 14A and his action is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... happen is that a cause would be decided on merits after hearing the parties. The Apex Court further held that when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so. The Apex Court in N. Balakrishnan v. M. Krishnamurthy 2008 (228) ELT 162, the Apex Court, while condoning the delay of 883 days in filing an application for setting aside the ex parte decree held That the purpose of Limitation Act was not to destroy the rights. It is founded on public policy fixing a life span for the legal remedy for the general welfare. The primary function of a Court is to adjudicate disputes between the parties and to advance substantial justice. The time limit fixed for approaching the Court in different situations is not because on the expiry of such time a bad cause would transform into a good cause. The object of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e counsel for the assessee further submitted that even the current year profit of the assessee is ₹ 19,84,18,766/- which is sufficient to take care of investment of ₹ 14,78,73,373/-. Accordingly, the counsel for the assessee submitted that in the instant set of facts, since the assessee is having sufficient interest-free funds at its disposal, no disallowance under section 14A of the Act is called for. In response, the Ld. DR relied upon the observations of the Ld. CIT(Appeals) order. 6. We have heard the rival contentions and perusal the material on record. The Gujarat High Court in numerous decisions has consistently taken the position that if interest-free funds available with the assessee exceed the investments made in funds yielding exempt income, then no disallowance is called for under section 14A of the Act. In the case of Hitachi Home and Life Solutions (I) Ltd. [2014] 41 taxmann.com 540 (Gujarat), the Gujarat High Court held that where assessee's interest free funds exceeded investment made for earning exempted dividend income, disallowance under section 14A was not justified. Again, in the case of UTI Bank Ltd [2018] 99 taxmann.com 392 (Gujarat), the G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show that no expenditure was incurred in relation to income not forming part of total income lies squarely on assessee. The Ahmedabad Tribunal in the case of Axis Bank Ltd. [2017] 79 taxmann.com 187 (Ahmedabad - Trib.) held that administrative expenses need to be disallowed under section 14A of the Act. The Kolkata Bench of the ITAT in the case of Coal India [I.T.A No. 1032/Kol/2012 decided on 13-5-2015 held that the term 'expenditure' as per section 14A would include expenditures that are related to the investment made i.e. administration, capital expenditure, travelling expenses, operating expenses, etc. That such investment decisions are highly strategic in nature and are required to be made by highly qualified and experienced professionals, require research and analysis, need to attend board meetings and make policy decisions. By no stretch of imagination it can be assumed that such activities are done without incurring any expenditure. The disallowance of administrative expenditure under section 14A of the Act was again affirmed by the Mumbai ITAT in the case of Zee Entertainment Enterprises Ltd. [2017] 81 taxmann.com 379 (Mumbai). In the case of Visual Graphics Comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rival contentions and perused the materials available on record. In the instant case, the assessee has earned dividend income which was exempted u/s. 10(34) of the Act. No disallowance was made by the assessee in relation to such dividend income. The assessee claims that it has not incurred any expenses in relation to such dividend income. However, on perusal of its Financial Statement, we note that there were sale and purchase of investment as evident from schedule 6 of the Financial Statement, placed on page 37 of the PB. The relevant extract of schedule 6 is reproduced as under: ...... From the above schedule, it can be seen that there was investment in mutual funds amounting to Rs. 240,061,953/- which has been sold during the year. Similarly, the investment has been made by the assessee in the mutual fund for Rs. 80,000,000/-. Therefore, the plea of the assessee that it has not spent any time and energy on such investment does not appear to be correct. It is because the top management is certainly involved in the process of purchase and sale of investment. Therefore, we note that the AO has derived the satisfaction by issuing show-cause notice dated 15-10-2013 as re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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