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DATE: September 2, 2015 (Date of pronouncement)
DATE: September 9, 2015 (Date of publication)
AY: 2004-05
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CITATION:
No disallowance u/s 14A can be made in a year in which no exempt income has been earned or received by the assessee. S. 14A also does not apply to shares bought for strategic purposes

The expression “does not form part of the total income” in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year

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DATE: August 19, 2015 (Date of pronouncement)
DATE: August 22, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 115JB: (i) Even if an amount is credited to the P&L A/c, the assessee can seek exclusion of that amount for purposes of “book profits” if a note to that effect is inserted in the A/cs (ii) The exemption conferred by S. 115JB to sums exempt u/s 10 should be extended to all sums which are not chargeable to tax

The profit arising on transfer of capital asset to its wholly owned Indian subsidiary company is liable to be excluded from the Net profit., i.e., the Net profit disclosed in the Profit and Loss account should be reduced by the amount of profit arising on transfer of capital asset and the amount so arrived at shall be taken as “Net profit as shown in the profit and loss account” for the purpose of computation of book profit under Explanation 1 to sec. 115JB of the Act. Alternatively, since the said profit does not fall under the definition of “income” at all and since it does not enter into the computation provisions at all, there is no question of including the same in the Book Profit as per the scheme of the provisions of sec. 115JB of the Act

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DATE: January 23, 2015 (Date of pronouncement)
DATE: July 8, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 14A & Rule 8D: (i) Investments in subsidiaries & joint ventures are for strategic purposes and not for earning dividend and so the expenditure cannot be disallowed, (ii) If the AO does not deal with the assessee's submissions and merely says "not acceptable" it means he has not recorded proper satisfaction

Investment in subsidiary companies and joint venture companies are long term investment and no decision is required in making the investment or disinvestment on regular basis because these investments are strategic in nature and no direct or indirect expenditure is incurred for maintaining the portfolio on these investments or for holding the same. The department has not disputed that the purpose of investment is not for earning the dividend income but having control and business purpose and consideration

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DATE: June 10, 2015 (Date of pronouncement)
DATE: June 19, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 10(38), 70(3): Though the LTCG on sale of equity shares (subject to STT) is exempt from tax u/s 10(38), the long-term capital loss on sale of such shares can be set-off against the taxable LTCG on sale of another asset

Section 10(38) excludes in expressed terms only the income arising from transfer of Long term capital asset being equity share or equity fund which is chargeable to STT and not entire source of income from capital gains arising from transfer of shares. It does not lead to exclusion of computation of capital gain of Long term capital asset or Short term capital asset being shares. Accordingly, Long term capital loss on sale of shares would be allowed to be set off against Long term capital gain on sale of land in accordance with section 70(3)

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DATE: May 13, 2015 (Date of pronouncement)
DATE: May 26, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A Rule 8D(2)(iii): Even strategic investment in group concerns for purposes of control & not for earning dividend attracts disallowance. Plea that no expenditure is incurred to earn dividend is not acceptable because earning dividend is not an automatic process.

The term ‘expenditure’ as per section 14A would include the expenditures that are related to investments made i.e. expenditures on administration, capital expenses, travelling expenses, operating expenses etc. It is difficult to accept that the assessee company was making investments decisions to the tune of Rs.6,31,637 lakhs of public money without incurring a single penny out of its pocket. Such decisions are highly strategic in nature and are required to be made by highly qualified and experienced professionals. The same would also require market research and analysis. The assessee company by acquiring controlling interest in the subsidiary companies would also be required to attend board meetings and make policy decisions with regard to the aforesaid huge amount of investments made. By no stretch of imagination, it can be assumed that such activities were done without incurring any expenditure

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DATE: April 14, 2015 (Date of pronouncement)
DATE: May 5, 2015 (Date of publication)
AY: 2008-09
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CITATION:
No s. 14A and Rule 8D disallowance can be made for shares held as stock-in-trade

One can at best disallow the expenses which are incurred for earning dividend income. For that purpose, the figures under the head “Investment” could be taken and some charges apportioned for the purpose of computing the expenses

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DATE: April 30, 2015 (Date of pronouncement)
DATE: May 2, 2015 (Date of publication)
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CITATION:
S. 80-IB(10): Law on availability of deduction for "housing projects" explained

There was much debate on the answer given in para (b) above. It was argued by Mr. Gurukrishna Kumar, learned senior counsel, that a project which is cleared as “residential plus commercial” project cannot be treated as housing project and therefore, this direction is contrary to the provisions of Section 80(I)(B)(10) of the Act. However, reading the direction in its entirety and particularly the first sentence thereof, we find that commercial user which is permitted is in the residential units and that too, as per DCR. Examples given before us by the learned counsel for the assessee was that such commercial user to some extent is permitted to the professionals like Doctors, Chartered Accountants, Advocates, etc., in the DCRs itself. Therefore, we clarify that direction (b) is to be read in that context where the project is predominantly housing/ residential project but the commercial activity in the residential units is permitted

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DATE: April 1, 2015 (Date of pronouncement)
DATE: April 8, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 10 & 11: In computing the income of charitable institutions exempt u/s 11, income exempt u/s 10 has to be excluded. The requirement in s. 11 with regard to application of income for charitable purposes does not apply to income exempt u/s 10

There is nothing in the language of sections 10 or 11 which says that what is provided by section 10 or dealt with is not to be taken into consideration or omitted from the purview of section 11. If we accept the argument of the Revenue, the same would amount to reading into the provisions something which is expressly not there. In such circumstances, the Tribunal was right in its conclusion that the income which in this case the assessee trust has not included by virtue of section 10, then, that cannot be considered under section 11

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DATE: March 24, 2015 (Date of pronouncement)
DATE: April 8, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A & Rule 8D(2)(iii): In computing the “average value of investment”, only the investments yielding non-taxable income have to be considered and not all investments

The first condition for application of Section 14A was fulfilled as the AO expressed the opinion that a disallowance was warranted. In such eventuality the AO is required by the mandate of Rule 8D to follow Rule 8D(2). Clauses 1, 2 and 3 detail the methodology to be adopted. The AO, instead of adopting the average value of investment of which income is not part of the total income i.e. the value of tax exempt investment, chose to factor in the total investment itself

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DATE: March 25, 2015 (Date of pronouncement)
DATE: March 27, 2015 (Date of publication)
AY: 2008-09
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CITATION:
(i) Growth mutual funds do not yield dividend and so s. 14A/ Rule 8D does not apply, (ii) S. 14A/Rule 8D disallowance for admin exp cannot exceed allocable exp debited to P&L A/c, (iii) ALP of funds lent to AE should be as per LIBOR, (iv) ALP of corporate guarantee to be at 0.5%

Growth mutual fund does not yield any dividend/exempt income, therefore, the provisions of section 14A would not apply on the investment in growth mutual funds

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