UNDERSTANDING SECTION 14A IMPACT WITH CASE LAWS PART - III.

 

We had earlier discuss in detail about the concepts of disallowance under section 14A read with rule 8D  along with various case laws earlier in two different articles. In case you want to refer, the same, please click on the link below:

http://taxbymanish.blogspot.com/2012/07/understanding-section-14a-impact-with.html

&

http://taxbymanish.blogspot.com/2012/03/understanding-section-14a-impact-with.html

Over a period of time, there are number of judgements comes from various levels of courts from different locations of India and hence it is very important to know the same for the correct treatment of section 14A disallowance.

SN	Facts	Name of the parties	Reference
1	When no expenditure in fact incurred in earning dividend income, no disallowance permissible	CIT v. Reliance Industries Ltd.	339 ITR 632
		Sino Securities P. Ltd. v. ITO	part 15 Pg 137
		ACIT v.  Tarun Chandmal Jain	Income tax review –Sept.90(Mum.)(Trib.)(ITA No. 6310/Mum/2011, Bench “E” dated  10-8-2012)
2	In computing book profits u/s 115JA/JB, if actual expenditure to earn tax-free income not debited in P&L A/c, s. 14A cannot apply	Quippo Telecom Infrastructure Ltd vs. ACIT	ITAT Delhi
3	In remand, s. 14A disallowance cannot exceed original disallowance	CIT vs. Machino Plastic Ltd	Delhi High Court
		Gillette Group India Pvt.Ltd. v. ACIT	Delhi ITAT
4	when the income is computed in accordance with the provisions of Chapter XII-G, no separate disallowance can be made under section 14A	Varun Shipping Company Ltd. v. Addl. CIT	134 ITD 339
5	Key man insurance policy are taxable under section 28(vi) hence  expenditure  incurred relating to same can not be disallowed under section 14A.	Deputy CIT v. Noble Enclave & Towers (P) Ltd	50 SOT 5 (Kol) (Trib)
6	Stock in trade-Disallowance under section 14A, does not apply to shares held as stock-in-trade. Disallowance on notional basis is invalid	CCI Ltd v. JCIT	Karn HC.
		Esquire Pvt Ltd  v. DCIT	(A.Y.2008-09) ( ITA no 5688/Mum/ 2011 Bench “E” dated 29-08-2012)
		DCIT v. India Advantage Securities Ltd	Mumbai ITAT
7	None of the investments made by the assessee has generated any dividend income which has been claimed as not forming part of total income. Thus, once there is no claim of income which does not  form part of the total income under Act, there cannot be any disallowance in relation to an such investment	Siva Industries & Holdings Ltd. v. Asst. CIT	145 TTJ497 (Chennai)
		Avshesh Merantile P. Ltd. & Others v. DCIT	ITAT ‘F’ Bench, Mumbai, ITA No. 5779, 5780/Mum./2006, dated 13-06-2012, BCAJ Pg. 33, Vol. 44-A Part 6, September 2012.(Mum.)(Trib.)
8	Burden is on Assessing Officer to show expenditure is incurred to earn tax-free income.(Rule 8D )	ACIT v. SIL Investment Ltd	Delhi ITAT
9	Disallowance of expenditure without showing  how assessee’s method is wrong is to be deleted	Auchtel Products Ltd v. ACIT	Mumbai ITAT
10	Rule 8D prospective from AY 2008‐09	Dy. CIT v. Philips Carbon Black Ltd.	146 TTJ 175( TM )(Kol)(Trib))
		Fenner (India) Ltd. v. Additional CIT (Chennai)	Vol 20 Pg 48
11	Section 14A should not be applied where income are not taxable due to deductions under chapter VIA.	CIT v. Kribhco	75 DTR 265 (Delhi) (High Court)
12	Dividend income earned from the investment made from own funds and thus no disallowance to be made	BNP Paribas SA v. Dy. DIT	137 ITD 322 (Mum.)(Trib.)
		ACIT v. Mohan Exports (P.) Ltd.	) 138 ITD 108 (Delhi) (Trib.)
13	Disallowance under section 14A cannot be made  in absence of “live nexus” between expenditure & tax-free income.	Justice Sam P Bharucha v. ACIT	Mumbai ITAT

 

Hope the above small summary on section 14A will help you in getting some relief from the hardship from the ITD. In case you have any further clarification please mail me at taxbymanish@yahoo.com or else visit my blog at http://taxbymanish.blogspot.in/

 

Thank you.