Case Law Details
This appeal is against restricting the addition to 6 lacs out of total addition Rs.44,42,330/- made u/s. 14A of the Act. The ld.Sr.DR vehemently argued that the ld.CIT(A) was not justified in restricting the addition. He placed reliance on the assessment order.
On the contrary, the ld.counsel for the assessee submitted that the AO made disallowance by invoking the provisions of section 14A of the Act and applying the Rule 8D of the IT Rules, 1962, but the assessment order is involved in this appeal is AY 2006-07 and, therefore Rule 8D in this year is not applicable. He submitted that the interest income of Rs.6.29 crores is more than the total interest outgo of Rs.4.50 crores and, thus, there is net interest income of Rs. 1.79 crores. Therefore, it cannot be said that the assessee has claimed any expenditure on interest. He submitted that this is so because in assessee’ s case there is a common pool of interest income and interest outgo. Therefore, netting of interest is required in the light of judgement of Hon’ble Apex Court in the case of Keshavji Ravji & Co. vs. CIT reported at (1990) 183 ITR 01(SC). This judgement of the Hon’ble Apex Court has been applied by the Hon’ble Jurisdictional High Court in the case of CIT vs. Wintex Mills Ltd. reported at (2000) 245 ITR 266 (Guj.). Further, ld.counsel for the assessee submitted that the dividend income earned is of Rs.3 lacs.
We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the Rule-8D is not applicable in the year under appeal. The ld.CIT(A) has decided this issue by observing as under:-
“7.2 I have carefully considered the submission made by appellant and observation made by the Assessing Officer. I follow the decision of Hon ‘ble Mumbai High Court in the case of Godrej & Boyce Mfg. Co. Ltd that Rule 8D is not applicable for AY 2007-08. However, the expenses which are incurred in relation to earning such income were still to be apportioned, as held by the Hon’ble High Court. The assessee ‘s case involves a number of facts and circumstances which makes the apportionment of interest expenses a very difficult task. The following observations Are made regarding the funds both self and borrowed available with ..
a) the assessee was given a task to establish direct nexus with his own funds or borrowed funds on the date the investments on which no income is taxable were made. The assessee could not establish this.
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The judgement has not been properly understood,as in the cross appeal of the assessee,no part of interest has been disallowed by the Hon’ble ITAT.
The judgement has not been properly,as in the cross appeal of the assessee,no part of interest has been disallowed by the Hon’ble ITAT.