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DATE: October 7, 2015 (Date of pronouncement)
DATE: November 17, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 50C should not be invoked if difference between stamp value and declared consideration is nominal, S. 14A/ Rule 8D does not apply to share application money, Pure foreign exchange hedging transactions cannot be treated as speculative transactions

Though section 50C of the Act does not speak of any such variation in terms of percentage between value adopted for the purpose of stamp duty and the registration and the actual consideration received on transfer, keeping in view of the decision of the Hon’ble ITAT, Hyderabad Bench and keeping in view of the fact that the difference between the valuation for the stamp duty and the actual consideration received by the assessee is less than 2% we are of the view that addition sustained by CIT(A) should be deleted

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DATE: October 14, 2015 (Date of pronouncement)
DATE: October 20, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A Rule 8D does not apply to shares held as stock-in-trade. AO cannot apply Rule 8D to make a disallowance without showing how the assessee's disallowance is wrong

The AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO about the correctness of the claim of the assessee and without the same he invoked Rule 8D of the Rules. While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value

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DATE: September 23, 2015 (Date of pronouncement)
DATE: October 8, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A/ Rule 8D: (i) Presumption laid down in HDFC Bank 366 ITR 505 (Bom) and Reliance Utilities 313 ITR 340 (Bom) that investments in tax-free securities must be deemed to have come out of own funds and (ii) Law laid down in India Advantage (Bom) that s. 14A and Rule 8D does not apply to securities held as stock-in-trade cannot be applied as both propositions are contrary to Godrej & Boyce 328 ITR 81 (Bom)

In our view, it was incumbent on the parties to have brought its’ decision in the case of Godrej & Boyce to the notice of the Hon’ble Court in HDFC Bank Ltd.. We are conscious that we are deciding an appeal in the case of the same assessee. So, however, we are deciding a purely legal issue, i.e., whether, in view of the statutory presumption cast by section 14A, a non obstante provision, a presumption on facts could obtain, or that the assessee shall have to establish the same with reference to its accounts, in terms of section 14A(2) r/w s. 14A(3), leading to a satisfaction or otherwise of the assessing authority, arrived at objectively, only to find the earlier decision in Godrej & Boyce (supra) as having addressed the said issue. Further, that the facts in Reliance Utilities and Power Ltd., which was even otherwise in respect of allowance of expenditure u/s.36(1)(iii) – a provision which does not mandate any apportionment per se, stood established, with in fact the said decision having been considered in Godrej & Boyce. As such, there being no estoppel against law, we consider ourselves as legally justified in following the said decision by the Hon’ble jurisdictional High Court, address as it does, in our opinion, the issue at hand, and is thus squarely applicable, even as found in Dhanuka & Sons (supra), D. H. Securities (P) Ltd. (supra); and Damani Estates & Finance (P.) Ltd. (supra). These also constitute the binding reasons for not following the decision by the tribunal in Dy. CIT (OSD) vs. Shri Durga Capital Ltd. (in ITA No. 7405/Mum/2011 dated 03.08.2015/copy on record), also relied upon before us, in-as-much as we find no statement of law ascribed to India Advantage Securities Ltd. (supra); the Hon’ble Court therein holding the appeal before it to not raise any substantial question of law. Further, there is, no reference to the binding decision by the Hon’ble jurisdictional High Court in Godrej & Boyce (supra), or by the tribunal in D. H. Securities (P) Ltd. (supra) as well as Damani Estates & Finance (P.) Ltd. (supra), explaining the said decision, as well as its bearing on the decision by the larger bench of the tribunal in Daga Capital Management Pvt. Ltd. (infra), in Shri Dura Capital Ltd

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DATE: September 24, 2015 (Date of pronouncement)
DATE: October 8, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 14A/ Rule 8D cannot be automatically invoked. It cannot be invoked if the AO does not record satisfaction as to why the assessee’s voluntary disallowance is not proper

The Court disapproves of the AO invoking Section 14A read with Rule 8D (2) of the Rules without recording his satisfaction. The recording of satisfaction as to why “the voluntary disallowance made by the assessee was unreasonable and unsatisfactory” is a mandatory re-quirement of the law

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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: 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: 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: 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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