TMI Blog2023 (7) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance made under Section 14A of the Act could not be added in assessee company s income for the purpose of computation of income u/s 115JB. Revenue appeal dismissed. - I.T.A. No. 267/Ahd/2022 - - - Dated:- 5-7-2023 - Smt. Annapurna Gupta, Accountant Member And Ms. Madhumita Roy, Judicial Member For the Appellant : Shri Dileep Kumar, Sr. DR For the Respondent : Shri M. K. Patel, A.R. ORDER PER MS. MADHUMITA ROY - JM: The instant appeal filed by the Revenue is directed against the order dated 02.05.2022 passed by the National Faceless Appeal Centre (NFAC), Delhi, arising out of the order dated 27.12.2019 passed by the DCIT, Circle- 1(1)(1), Vadodara under section 143(3) r.w.s. 263 of the Income Tax Act, 1961 (hereinafter referred as to the Act ) for Assessment Year 2011-12. 2. We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on record. 3. The deletion of addition of Rs. 11,09,333/- made on account of disallowance under Section 14A of the Act is subject matter before us. 4. The brief facts leading to the case is this that the assessee filed its return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has incurred various expenditures including maintaining of accounts, bank charges, administrative charges, interest expenses etc. It is also held that even if the investment is made in earlier years, since the assessee does not have own sufficient funds with it, the interest expenditure has also been incurred by the assessee to derive exempt income. As held supra, since, the assessee is held to have been incurring expenditures to derive exempt income, disallowance is required to be determined and made u/s 14A r.w. Rule 8D. 6. The total disallowance was computed at Rs. 11,75,047/-. Since, the assessee has already disallowed Rs. 65,714/-, the further disallowance made by the Ld. AO was of Rs. 11,09,333/-, which stood deleted by the Ld. CIT(A) in the appeal preferred by the assessee. Hence, the instant appeal before us. 7. The submission of the assessee before the Ld. CIT(A) and before us is this that the appellant company has not made any investments, thus, not used any interest bearing funds of investment, the income of which does not form a part of the total income. Further that, the balance in capital account of the partnership firm comprises of share of profits earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of Investments the income of which does not form a part of the total income. The balance in capital account of the partnership firm comprises of share of Profits earned and interest on capital account earned. The entire balance comprises of these items only as can be seen from the capital accounts furnished with this submission. Appellant has not made ANY INVESTMENT of funds on which interest is paid by your appellant and therefore no interest can be attributed to the investing activity the income of which does not form a part of the total income. There is no utilization of funds on which interest is paid by your appellant company and therefore there cannot be any disallowance on account of interest. Appellant had sufficient own funds to make the investments as can be seen from the financial statements. uploaded with this communication. Share-holders funds at the beginning of the year. were to the tune of Rs. 1.31 crores and Rs. 226 crores at the end the financial year. Investments at the beginning of the financial year were Rs. 90.86 lakhs and were Rs. 1.71 crores at the end of the year. The learned AO was furnished the movement in investments during the year whereb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee s own capital and hence, there is no question of disallowance of interest expenditure, so far as interest expenditure is concerned since no interest bearing funds were used to make the investment. The counsel for the assessee further drew our attention to page 20 of the paper book to point out that no fresh investment was made during the year under consideration. Therefore, the assessee s main contention is that since the assessee s own capital far exceeds the investment in funds bearing exempt income, coupled with the fact that no fresh investments were made during the year under consideration, there is no case for disallowance so far as the disallowance relatable to interest expenditure is concerned. Further, regarding the disallowance so far as administrative expenditure is concerned, the counsel for the assessee submitted that the assessee has itself disallowed a sum of ₹ 1.78 lakhs in it s return of income and accordingly, no further disallowance is called for in respect of administrative expenditure as well. In response, DR relied upon the observations made by Ld. CIT(Appeals) in the appellate order. 6. We have heard the rival contentions and perused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inistration, 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). The Ahmedabad ITAT in the case of Sun Pharmaceutical Industries Ltd.[2017] 84 taxmann.com 217 (Ahmedabad - Trib.) directed the A.O. to compute the disallowance for administrative expenditure as per the formula given under Rule 8D. In our view, the law is unanimous on the point that administrative expenses need to be disallowed as per Rule 8D. However, since in the instant facts, the assessee has suo moto disallowed a sum of ₹ 1.78 lakhs in its return of income while making disallowance under section 14A read with Rule 8D, no further disallowance is called for on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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