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COURT:
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DATE: November 25, 2014 (Date of pronouncement)
DATE: March 9, 2015 (Date of publication)
AY: 2008-09, 2009-10
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CITATION:
S. 14A + Rule 8D: No disallowance can be made if AO does not record satisfication with reference to accounts that assessee's claim is improper. However, if Rule 8D applies, assessee's claim that interest is not disallowable on ground of "own funds" is not acceptable

The decisions relied upon by the Tribunal in the case of Tin Box Co. 260 ITR 637 (Del), Reliance Utilities and Power Ltd. 313 ITR 340 (Bom.), Suzlon Energy Ltd. 354 ITR 630 (Guj) and East India Pharmaceutical Works Ltd. 224 ITR 624 (SC) could not be now applicable, if we apply and compute the disallowance under Rule 8D of the Rules. The said Rule in sub Rule (2) specifically prescribes the mode and method for computing the disallowance under Section 14A of the Act. Thus, the interpretation of clause (ii) to sub Rule (2) to Rule 8D of the Rules by the CIT(A) and the Tribunal is not sustainable. The said clause expressly states that where the assessee has incurred expenditure by way of interest in the previous year and the interest paid is not directly attributable to any particular income or receipt then the formula prescribed would apply

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COURT:
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DATE: February 25, 2015 (Date of pronouncement)
DATE: March 9, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 14A & Rule 8D cannot be interpreted to mean that the entire tax exempt income can be disallowed

By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure “incurred by the assessee in relation to the tax exempt income”. This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case

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COURT:
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DATE: January 1, 2015 (Date of pronouncement)
DATE: February 2, 2015 (Date of publication)
AY: 2009-10
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CITATION:
Disallowance u/s 14A r.w. Rule 8D cannot exceed the exempt income

The assessee only received Rs.1,82,362 as dividend income, therefore, there is no question of disallowance of Rs.14,58.412 by invoking section 14A r.w. Rule 8D. Disallowance u/s 14A r.w. Rule 8D cannot exceed the exempt income.

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COURT:
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DATE: January 19, 2015 (Date of pronouncement)
DATE: January 22, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 14A/ Rule 8D: (i) Expenditure (like audit fees) required to be incurred irrespective of income cannot be disallowed, (ii) investments in subsidiaries are not to earn dividend income and cannot be considered for disallowance

It is also evident from the balance sheet of the Appellant Co., its investments in shares were only in two subsidiary companies. Such investments in subsidiary companies were made by the Appellant to acquire/promote the subsidiary companies which are in the media business and were not made purely for earning dividend income. Neither any dividend income has been earned since the time such investments were made in the shares of the subsidiary companies. Hence, such investments cannot be considered for disallowance u/s 14A read with Rule 8D

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DATE: January 9, 2015 (Date of pronouncement)
DATE: January 12, 2015 (Date of publication)
AY: 2009-10
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CITATION:
(i) Unabsorbed depreciation of AYs 1997-98 to 2001-02 is eligible for relief granted by amended s. 32(2) in AY 2002-03 (ii) Judgement of a non-jurisdictional High Court has to be preferred over the judgement of a Special Bench of the ITAT (iii) In the absence of exempt income, s. 14A disallowance cannot be added to s. 115JB book profits even if assessee has accepted s. 14A disallowance in the normal computation

The assessee may have accepted the disallowance under section 14A but once it is a settled legal position, in the light of the law laid down in CIT Vs Holcim India Pvt Ltd (Del) that there cannot be any disallowance under section 14A unless there is corresponding exempt income and the assessee has no such exempt income, adjustment under clause (f) of Explanation to Section 115JB (2) cannot indeed be made. The adjustment has to meet the tests of law and what cannot be considered to be ‘expenditure relatable to exempt income’ under the law, cannot be subjected to the adjustment either. There is no estoppel against the law. The mere fact that the assessee has accepted this disallowance affects that disallowance only and nothing more than that; it does not clothe such an adjustment, in computation of book profit under section 115JB, with legality

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DATE: November 17, 2014 (Date of pronouncement)
DATE: November 24, 2014 (Date of publication)
AY: 2009-10
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CITATION:
S. 14A Rule 8D: No presumption can be drawn that investment in tax-free securities has come from own funds. The amount of disallowance has to be added to the book profits u/s 115JB

(i) As regards the claim qua disallowance of interest expenditure, the argument of sufficient capital, so that the same must be presumed as having been applied toward investments yielding tax exempt income, misses the point completely. The matter has to …

Ferani Hotels Pvt. Ltd vs. ACIT (ITAT Mumbai) Read More »

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DATE: November 5, 2014 (Date of pronouncement)
DATE: November 14, 2014 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A/ Rule 8D: Interest expenditure attributable to a taxable business cannot be disallowed. Expenditure on creating assets which do not belong to the assessee is revenue expenditure

(i) Once it was duly established that no borrowed funds on which interest was paid had been invested for earning tax free income, no disallowance was permissible under Section 14A. The Tribunal has observed that under Rule 8D(2)(ii), a proportionate …

ACIT vs. Dhampur Sugar Mill Pvt. Ltd (Allahabad High Court) Read More »

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DATE: October 17, 2014 (Date of pronouncement)
DATE: October 24, 2014 (Date of publication)
AY: 2008-09
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CITATION:
Various arguments on the applicability of s. 14A & Rule 8D where the AO has not recorded satisfaction, where the shares are held in strategic/ subsidiary companies, held as stock-in-trade, where there are surplus funds and the quantum of disallowance under Explanation (f) to s. 115JA/ 115JB considered

(i) When it is said that rule 8D is mandatory (i.e., AY 2008-09 onwards), all that is meant is where the said expenditure cannot be reasonably ascertained with reference to the assessee’s accounts, toward which the AO is to issue …

HSBC Invest Direct (India) Ltd vs. DCIT (ITAT Mumbai) Read More »

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DATE: October 22, 2014 (Date of pronouncement)
DATE: October 24, 2014 (Date of publication)
AY: 2008-09
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CITATION:
No S. 14A/ Rule 8D Disallowance if accounts not examined. Consent fee paid to SEBI is not penalty for infraction of law

Re Disallowance made u/s 14A r.w. rule 8D (i) It is now settled principle that the assessing officer has to examine the disallowance made by the assessee by having regard to the accounts of the assessee and only thereafter the …

ITO vs. Reliance Share and Stock Brokers (P) Ltd (ITAT Mumbai) Read More »

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DATE: October 21, 2014 (Date of pronouncement)
DATE: October 24, 2014 (Date of publication)
AY: 2009-10
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CITATION:
Rule 8D(ii) & 8D(iii) do not apply to shares held as stock-in-trade. Loss arising out of derivatives from the income arising out of buying and selling of shares

(i) Both trading of shares and derivative transactions are not coming under the purview of Section 43(5) of the Act which provides definition of “speculative transaction” exclusively for purposes of section 28 to 41 of the Act. Again, the fact …

DCIT vs. Baljit Securities Private Limited (ITAT Kolkata) Read More »