Case Law Details
On perusal of assessment records it is observed that the assessee had made certain investments, and it had received dividend income of Rs. 60,088/- during the year under consideration which was claimed as exempt u/s 10(34) of the Act. The assessee in its computation of income had suo moto disallowed an amount of Rs. 10,23,000/- as per Rule 8D, calculations of the same has been submitted by the assessee before ld. AO. The AO worked out the disallowance at Rs. 166.18 lacs u/s 14A of the Act. The AO had made the disallowances u/s 14A as under:
It is argued that out of 751.21 lacs, interest expenditure to an extent of 681.25 lacs is directly attributable to loans, which was taken for the purposes of business of the company, namely Textile Division and I.T. Division. This amount cannot be proportionately attributed in terms of Rule 8D. The AO has further included value of shares amounting to Rs. 42 crores which are allotted by DCM Engineering , pursuant to transfer of business to that company under the scheme of arrangement approved by the Delhi High Court. Therefore, the amount of Rs. 42 crores cannot be included in the value of assets as well as investments, as no funds had been invested by the appellant for the allotment of above shares.
In respect of disallowance of administrative expenses the appellant submits that it had received dividend income during the year to an extent of Rs. 60,088/- only, and that there has been no transaction of purchase and sale of shares during the relevant year under consideration. Therefore, no disallowance on account of administrative expenses is warranted. In any case, it noticed that the appellant has offered a disallowance of Rs. 2 lacs over and above the interest expenses.
On the other hand, the ld. DR present supported the stand of the CIT (A) on the issue. The Ld. D.R. placed reliance on the decision of coordinate bench in the case of T&T Motors Ltd., in ITA no. 6490/Del/2010 for assessment year 2009-10.
We have verified the above submissions and perused the Statement of accounts submitted by the assessee in paper book. As per the computation the assessee has offered disallowance on account of interest amounting to Rs. 8.23 lacs and has further offered disallowance on account of administrative expenses to an extent of Rs. 2 lacs. Thus, the total disallowance u/s 14A as offered by the assessee amount to Rs. 10.23 lacs.
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